For gifts made by using a TUTMA, the gift must be made to a person as custodian for the beneficiary and the beneficiary must be under the age of 21 at the time the gift is made.  The main advantage is the relative simplicity of the process.  Generally, an account is set up pursuant to the Texas Property Code and transfers of money, real estate, investments, etc. are made.  The principal disadvantage of the TUTMA is the fact that the beneficiary takes full control of the account when he or she turns 21.  This could be dangerous if the child lacks the maturity to deal with a substantial amount of money or simply wants to do something different than the custodian or person giving the gift originally intended.  Another disadvantage is the fact that the funds will be includable in the parent’s estate if the parent is custodian and dies before the child reaches majority. There may also be differing tax consequences for parents as opposed to grandparents in gifting to a TUTMA.

Last updated on January 6, 2011 by Glenn Karisch