Don’t Let a Minor’s Account Become a Major Issue: Protecting Your Bank from UTMA Account Liability

A Uniform Transfers to Minors Act (UTMA) account is an irrevocable custodial deposit account that allows an adult custodian to manage assets for a minor child. In Texas, the age of majority — the age when a beneficiary takes control of his or her UTMA account — is 21. The age of majority likely applies if, at the time of the account’s creation, the transferor, minor, or custodian resided in Texas, or the custodial property was located in Texas.

Texas law mandates that the custodian transfer the UTMA account to the beneficiary on the date he or she turns 21. But what if the custodian, out of negligence or malicious intent, fails to do so? In such a case, the bank may be subject to liability if the custodian takes any action after the beneficiary’s 21^st birthday that causes loss to the account.

For this reason, we recommend that Texas banks program all UTMA accounts, preferably at the time of setup, to “ping” the bank at least a few weeks before the beneficiary’s 21^st birthday. At that point, banks should send a communication to the relevant UTMA account’s custodian and beneficiary reminding them of the custodian’s statutory obligation to transfer the account to the beneficiary on the beneficiary’s 21^st birthday. The program should also place a notice or block on the account to prevent bank employees from granting the custodian access to the account after the beneficiary’s 21^st birthday. For  more information, contact Kelly Rentzel at 214-682-2015.