The Maryland Uniform Transfers to Minors Act lets an adult transfer money, investments, real estate, or other property to a child by placing it in a custodial account instead of a trust. A custodian you name manages the property for the minor’s benefit, and the child takes full control at 18 or 21, depending on how the transfer was made. The law is found in Maryland’s Estates and Trusts Code at Sections 13-301 through 13-324. It is cheaper and simpler than a trust, but every transfer is permanent, and the young adult receives everything outright at the termination age with no conditions attached.
What You Can Put Into a Custodial Account
Section 13-309 allows a wide range of property to be held in a Maryland UTMA account:1Maryland General Assembly. Maryland Code Estates and Trusts – Section 13-309
- Securities such as stocks and bonds.
- Cash held at a broker or financial institution.
- Life insurance policies, endowment policies, and annuity contracts.
- Real estate, transferred by recorded deed.
- Titled personal property such as vehicles.
- Other property transferred with a written instrument identifying custodial ownership.
That breadth is the main advantage over the older Uniform Gifts to Minors Act, which was limited to cash, securities, and insurance.
How to Set Up the Account
Custodial property has to be titled or registered in a specific form. The asset is held in the custodian’s name followed by language along the lines of “as custodian for [child’s name] under the Maryland Uniform Transfers to Minors Act.”1Maryland General Assembly. Maryland Code Estates and Trusts – Section 13-309 The exact mechanic depends on the type of asset. Securities are registered with the issuer or delivered to the custodian with a signed transfer instrument. Cash goes into a broker or bank account titled in the custodial format. Real estate is recorded by deed in the custodian’s name using the required language. Insurance and annuities are assigned to the custodian with the issuer.
The custodian can be any adult other than the transferor, or a trust company. When an individual makes a gift under Section 13-304, that person can also serve as custodian for most property types, but the naming format still has to follow the statute. The transferor is responsible for putting the custodian in control of the property as soon as practicable after the transfer.
Every Transfer Is Irrevocable
This is the point that catches people off guard. Section 13-311 provides that a transfer under the act “is irrevocable, and the custodial property is indefeasibly vested in the minor.”2Maryland General Assembly. Maryland Code Estates and Trusts – Section 13-311 Once you put assets into a UTMA account, they belong to the child. You cannot pull them back if you change your mind, need the money, or become unhappy with the child’s choices. The custodian manages the property, but the minor is the legal owner from the moment of transfer, and the transferor has no ability to claw the assets back. Treating a custodial account like a joint savings account you can dip into later is a mistake.
When the Child Gets the Money
Maryland fixes the termination age by statute. There is no option to pick a later age. Under Section 13-320, custodianship ends at the earliest of:3New York Codes, Rules and Regulations. Maryland Code Estates and Trusts 13-320 – Transfer of Custodial Property to Minor
- Age 21, for property transferred as a gift by an individual under Section 13-304, or by a personal representative or trustee under Section 13-305 or 13-306.
- Age 18, for property transferred by someone who holds assets or owes a debt to the minor, such as an employer or financial institution acting under Section 13-307.
- The minor’s death, in which case the property passes to the minor’s estate.
Most family gifts fall under Section 13-304, so the standard termination age is 21. At that point the young adult receives everything outright and can spend it however they choose. If handing an unrestricted lump sum to a 21-year-old worries you, a trust with drafted conditions is a better tool.
What the Custodian Must Do
A custodian has to manage the property the way “a prudent person dealing with property of another” would, and a custodian with specialized financial expertise is held to a higher standard matching that expertise.4Maryland General Assembly. Maryland Code Estates and Trusts 13-312 – Duties and Powers of Custodian Custodial property has to be kept clearly separate from the custodian’s own assets and recorded so it is identifiable as belonging to the minor.
Under Section 13-313, a custodian acting in that capacity has the same rights and powers over the property that an unmarried adult owner would have over their own.5Maryland General Assembly. Maryland Code Estates and Trusts – Section 13-313 Investments, sales, and exchanges can be made without court approval, subject always to the prudent-person standard. A custodian is not liable for investment losses if they followed that standard, but the protection does not shield a custodian who breaches their duties.
A custodian can spend custodial property on whatever they consider advisable for the child’s use and benefit without a court order. Those decisions do not depend on whether a parent has a duty to support the child, and the custodian does not have to account for other income the minor may have.6Maryland General Assembly. Maryland Code Estates and Trusts – Section 13-314 UTMA spending supplements other support rather than replacing it.
Records of every transaction must be kept, including whatever is needed to prepare the minor’s tax returns. Those records have to be available for inspection at reasonable intervals by a parent, legal representative, or the minor once the child is at least 14. Any custodian can be reimbursed from custodial property for reasonable expenses. A custodian who is not the transferor can also charge reasonable compensation each calendar year, but a custodian who is also the transferor under Section 13-304 cannot. No bond is required unless a court orders one.7Maryland General Assembly. Maryland Code Estates and Trusts – Section 13-315
If a custodian is mismanaging assets, a minor who is at least 14, the minor’s guardian, an adult family member, the transferor, or their legal representatives can petition a court for an accounting or for removal of the custodian under Section 13-318.8Maryland General Assembly. Maryland Code Estates and Trusts Section 13-318 – Refusal of Nomination, Designation of Successor, Resignation, Lapse of Custodian, Removal
Taxes on the Account
A transfer into a UTMA account is a completed gift for federal gift tax purposes. For 2026, the annual gift tax exclusion is $19,000 per recipient, or $38,000 for a married couple splitting gifts.9Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Contributions above those amounts count against the donor’s lifetime exemption but usually do not result in tax owed immediately.
Investment income inside the account belongs to the child and is reported on the child’s return. For 2026, the first $1,350 of a child’s unearned income is tax-free, the next $1,350 is taxed at the child’s rate, and unearned income above $2,700 is taxed at the parent’s marginal rate.10Internal Revenue Service. Revenue Procedure 2025-32 – Tax Inflation Adjustments for 2026 This “kiddie tax” applies to children under 18, to 18-year-olds whose earned income does not exceed half their support, and to full-time students under 24 meeting the same test. When unearned income exceeds $2,700, Form 8615 is filed with the child’s return. If the child’s gross income is under $13,500 and consists only of interest, ordinary dividends, and capital gain distributions, a parent can elect to report it on their own return using Form 8814, though that election can produce a slightly higher tax bill.11Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income (Kiddie Tax)
Effect on College Financial Aid
A UTMA account is treated as the student’s asset on the FAFSA, not the parent’s. Student assets are assessed at 20% in the Student Aid Index calculation, so every $10,000 in a UTMA raises the expected student contribution by $2,000.12Federal Student Aid. Student Aid Index (SAI) and Pell Grant Eligibility – 2025-2026 The same $10,000 held in a parent’s own account would count for only about $564. A parent-owned 529 plan gets the favorable parental-asset treatment, which makes it far friendlier to need-based aid.
One planning move is to liquidate a UTMA brokerage account and roll the proceeds into a custodial 529 plan before the student files the FAFSA. The assets still belong to the child, which satisfies the irrevocability rule, but they are assessed at the lower parental rate. Selling investments in the UTMA to make that switch may trigger capital gains tax.
A Warning for Families With SSI or Medicaid
If the child receives or may need Supplemental Security Income, be careful. SSI has a $2,000 resource limit for an individual, increased by $2,000 when a parent applies for a child.13Social Security Administration. Who Can Get SSI Under Social Security Administration policy, UTMA property is generally not counted as a resource while the child is still under the age of majority, but once the child reaches the termination age and gains access, the full value becomes a countable resource the following month.14Social Security Administration. POMS SI 01120.205 – Uniform Transfers to Minors Act A modest UTMA balance can disqualify a young adult from SSI and any Medicaid tied to it. For a child with a disability, a special-needs trust is almost always the right vehicle instead.
UTMA Account or 529 Plan
Both are common ways to save for a child, and they serve different purposes.
- UTMA funds can be spent on anything that benefits the minor during custodianship, and on anything at all after termination. A 529’s tax advantages only apply to qualified education expenses, and non-qualified withdrawals trigger income tax and a 10% penalty on the earnings portion.
- 529 earnings grow tax-free and come out tax-free for qualified expenses. UTMA earnings are taxable each year within the kiddie-tax framework.
- A 529 owner keeps control even after the child turns 18 or 21. A UTMA transfers fully to the child at the termination age with no strings.
- A parent-owned 529 is assessed at the lower parental rate on the FAFSA. A UTMA is assessed at the 20% student rate.12Federal Student Aid. Student Aid Index (SAI) and Pell Grant Eligibility – 2025-2026
- A 529 owner can change the beneficiary to another family member. A UTMA is irrevocably vested in the named minor and cannot be redirected.2Maryland General Assembly. Maryland Code Estates and Trusts – Section 13-311
For education savings specifically, the 529 is usually the better tool. A UTMA account fits better when the goal is broader wealth transfer, or when the asset itself (real estate, for example) cannot go inside a 529.
When a Trust Makes More Sense
The Maryland UTMA works well for moderate gifts where the cost of a trust is not justified. A grandparent making annual gifts within the $19,000 exclusion can fund a UTMA account year after year without filing a gift tax return, moving wealth out of a taxable estate over time. A will can also direct that a bequest for a minor go into a UTMA account, avoiding a court-supervised guardianship of the property, and life insurance proceeds payable to a minor can be routed to a custodian by a personal representative or trustee under Sections 13-305 and 13-306.
The limits still matter. A UTMA gives no creditor protection once the property has vested, no way to stagger distributions, and no ability to keep control past 21. For larger transfers, for a child with special needs, or where the child is not ready to manage money at 21, a properly drafted trust gives the flexibility and protection the UTMA cannot.