A minor owned Roth IRA
Hello,
A minor owned Roth IRA was set up for a 16 year with a parent acting as the custodian. The minor is now an adult and is 24 years old. The account is still in the custodial registration with the parent listed as the signor on the account. If the 24 year old is okay with leaving it in this registration where the parent is the signor on the account, is this okay? Is there any rule or law that requires the custodian to transfer the account into the minor’s own name once they become an adult?
To clarify….this is NOT an UTMA account….its a minor owned Roth IRA.
Thanks!
Permalink Submitted by William Tuttle on Wed, 2021-03-17 14:18
A minor can NOT own a Roth IRA or any other financial account without custodial control.
Regardlessss of what the Roth IRA is called, it almost certainly IS a UTMA or UGMA Roth IRA.
A UGMA automatically transfers control to the adult beneficiary at age 18. The financial institution should no longer allow custodial control.
A UTMA account has an age of termination, reaching the age of Majority is irrelevant. Only KY and SD terminate at age 18. About ten states have an age of termination up to 25. The remainder are at or up to age 21.
The UTMA states; “The custodian shall transfer in an appropriate manner the custodial property to the minor”, at the state’s specified age of termination.
Historically, financial institutions have taken the approach of only releasing UTMA custodial control with the consent of the custodian or a court order. Generally, only the beneficiary or parent/guardian (if still a minor), will obtain the latter.
However, a year ago the Financial Industry Regulatory Authority issued FINRA Notice 20-07. This requires all financial institutions to institute policies and procedures to ensure timely termination of UTMA accounts.
My guess is that the pandemic has delayed the rollout/enforcement of this notice. It will eventually be fully implemented.