Naming Custodian AFTER the fact

Submitted by John James on Fri, 2017-10-20 19:31

Will try and make it simple. My mother wants to leave IRA to my minor son. Fidelity says that all she needs to do is name him the benificiary. AFTER her death, I could just open a custodial account, NAME MYSELF custodian, and then (with a birth certificate showing I am the father) deposit the money there. No probate, no executor, nothing of any kind. Seems strange that i can name myself. I asked what would stop a disgruntled ex spouse from doing the same and they said it was “first come first serve”. Is this how it really works? Amount is too small for a trust (around $20k)



Submitted by Jose Morales on Fri, 2017-10-20 19:50

You are correct in questioning the ease at which you could simply claim to be the rightful guardian/custodian of the minor and have the funds moved to an account that you would control on behalf of the minor.  I know that I require an affidavit and hold harmless letter attesting to the fact that the person before me is the true legal guardian of the minor.  If the person is not the birth parent then we would also require the court order establishing guardianship.  Even a grandparent can open a UTMA and name themselves the custodian, but that wouldn’t make them the legal guardian of the minor.

Submitted by Bruce Steiner on Fri, 2017-10-27 22:23

Most states permit anyone holding property belonging to a minor not in excess of a specified amount (which varies from state to state) to pay it to a custodian for the minor under the Uniform Transfers to Minors Act.  To avoid leaving it to Fidelity as to whether they would be willing to pay it to a custodian or set up an inherited IRA for the custodian, and as to the selection of the custodian, and whether the amount is within the limits under state law for the holder of property belonging to a minor to pay it to a custodian, the IRA owner might want to name a specified person as custodian as the beneficiary if the person is still a minor at her death.

Submitted by William Tuttle on Sat, 2017-10-28 14:56

Bruce, I have a related question for you. A will can certainly designate a legal guardian for a decendent’s minor children, but can someone designate a minor as a beneficiary of an account making it a non-probate asset. Then in their will designate a property guardian or UTMA custodian for those non-probate assets? If so, does it matter whether the decedent is the minor’s legal guardian?  

Submitted by Bruce Steiner on Wed, 2017-11-01 22:30

You can (and usually would) name a guardian for your minor children in your Will.  But you don’t want a minor to inherit property subject to a guardianship.  Guardianships are cumbersome.  If the amount is too small to warrant a trust, designate (on the beneficiary designation form or on a rider to it) a custodian for the minor under the Uniform Transfers to Minors Act as the beneficiary, not the minor.  If you pick the custodian, it can be any adult person.

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