The Uniform Transfers to Minors Act (UTMA) provides Maryland families with a straightforward way to manage a child’s inheritance until the child becomes an adult without the cost or complexity of creating a formal trust or guardianship. The UTMA age of majority varies by state, typically ranging from 18 to 25. In Maryland, the UTMA age of majority is usually 21, but it can be as low as 18 in some circumstances.
At Apol Law LLC, we help Maryland families handle inheritance and estate planning issues with experienced guidance. Whether setting up a UTMA account, writing a will, or managing an estate for a minor, our firm can help you design a secure, compliant plan that protects your child’s financial future.
How Does the Uniform Transfers to Minors Act (UTMA) Work?
When someone dies and leaves assets to a minor, or an adult wants to give a significant financial gift to a child, they cannot give the property directly to the minor. Maryland law does not allow minors to own or manage significant assets outright. The UTMA creates a simple process that puts an adult in charge of the funds until the child becomes an adult.
Under the UTMA, the person giving the gift or inheritance, called the transferor or donor, creates a UTMA account at their preferred financial institution and names a custodian to manage it. The transferor may be the person who gave the gift or the personal representative (executor or administrator) of a deceased person’s estate.
Once the transferor transfers property into the UTMA account, the custodian invests or spends the funds solely for the child’s benefit. The child, known as the beneficiary, is the legal owner of the property, but the custodian controls its use until the child reaches the UTMA age of majority. At that time, the custodian transfers the property to the child for full ownership and control.
Maryland UTMA Age of Majority
The Maryland UTMA age of majority is typically 21, but the transferor can choose to allow the child to become the outright owner of the funds at age 18 instead. Maryland’s rule offers a middle ground when comparing the UTMA age of majority by state. Some states end custodianship at 18, while others extend it to 25.
Permitted Uses of UTMA Funds
Custodians may typically spend UTMA funds on necessary expenses for the child’s health, education, maintenance, or support. Common uses include:
- Paying tuition, tutoring, or educational costs;
- Covering medical care, therapy, or insurance;
- Funding extracurricular activities or travel; and
- Paying for basic living expenses like clothing or housing.
Custodians may not spend UTMA funds for any purpose unrelated to the child’s benefit.
Tax Considerations
UTMA accounts may provide tax benefits, but they also come with limitations. The IRS considers income a child receives from the account to be “unearned” income—income not earned through work—which has specific tax thresholds under IRS rules.
For 2025, the first $1,350 of a child’s unearned income is tax-free. The next $1,350 is taxed at the child’s rate. Once a child’s unearned income exceeds $2,700 in a year, the “kiddie tax” applies. If the parent’s tax rate is higher than the child’s rate, the excess above $2,600 is taxed at the parent’s rate.
Creating a UTMA Account in Maryland
Creating a UTMA account in Maryland begins when someone leaves or gifts assets to someone under the age of 21. The property owner or estate representative creates the account and selects a custodian to manage it.
Selecting a Custodian
Common custodians include:
- A parent or legal guardian,
- A grandparent or trusted relative, or
- A professional fiduciary or financial advisor.
The custodian acts as the minor’s fiduciary. As a fiduciary, they must act solely in the child’s best interest when managing and using funds.
Maryland law allows the transferor or a court to appoint a successor custodian if the original custodian dies or can no longer manage the account before the child reaches the age of majority.
Managing the UTMA Account
The custodian must keep detailed records, act honestly, and keep the child’s funds separate from personal money. They may have to provide a thorough accounting showing how they managed the funds.
Custodians must make reasonable, prudent investment decisions that balance safety and growth in the account, such as using mutual funds, certificates of deposit, or low-risk index funds. If a custodian misuses funds or fails to transfer assets when the child reaches the age of majority, a court can remove them as account custodian or order reimbursement of misused assets.
Alternatives to a UTMA Account under Maryland Inheritance Laws
A UTMA account works well for many families; those with larger or more complex estates may need additional options. Maryland inheritance laws offer several alternatives, including:
- Trusts. A trust lets a trustee manage property for a beneficiary. Families can set custom rules, such as releasing funds when the beneficiary reaches certain milestones, such as finishing college.
- 529 College Savings Plans. These tax-advantaged accounts fund education expenses and can provide state and federal tax benefits.
- Court-Appointed Guardianships. If no custodian exists or a dispute arises, the court may appoint a guardian of the property to manage the child’s inheritance under judicial supervision.
An experienced estate planning and UTMA attorney can help you evaluate these options and determine which best fits your goals.
Work with a Maryland Estate Planning Attorney
Establishing a UTMA account involves significant financial and legal decisions. A Maryland estate planning attorney from Apol Law, LLC, can help you properly protect your child’s inheritance while complying with the law.
At Apol Law, LLC, we help Maryland families plan for the future. Our firm provides compassionate, practical guidance in estate planning, probate, and inheritance matters. Whether you want to establish a UTMA account, create a will, or manage a child’s inheritance, we can help you make informed decisions that protect your loved ones and your legacy.
Call Apol Law LLC today to learn how we can help you establish or manage a UTMA account in Maryland.