3.10 Alternatives to Trusts

• Library: Estate Planning in Virginia (Virginia CLE) (2018 Ed.)

3.10 ALTERNATIVES TO TRUSTS

3.1001 Uniform Transfers to Minors Act. The estate planner must be familiar with techniques other than trusts that may be suitable for a particular client's needs. These techniques are generally less expensive and easier for the client to implement than a trust. An individual wishing to give money or other property to someone under age 21 can transfer the money or property to a custodian under the Virginia Uniform Transfers to Minors Act. ⁷⁶ The minor is the beneficial owner of the asset for all purposes, including income taxation. But until the minor reaches age 18 (or 21 if specified in the initial transfer), the custodian has control over the distribution of income or principal, which can be made only to or for the benefit of the minor. Under UTMA, almost any type of property, including real property, can be held by a custodian. The drawback of using UTMA is the fact that the minor is entitled to receive the property upon reaching age 18 or 21, when the individual may not be capable of handling the management of the property. ⁷⁷

3.1002 Uniform Custodial Trust Act. Virginia adopted the Uniform Custodial Trust Act (UCTA) in 1990. ⁷⁸ The UCTA permits a person, including individuals and entities, to transfer property to an individual or corporation authorized to serve as a trustee to be held for the benefit of either the individual making the transfer (in which case the transferor cannot also be the trustee) or for another individual (in which case the transferor may be the trustee). While UCTA can be used for transfers to any individual, including minors, its principal use is for transfers to adults who are incapacitated. A competent beneficiary under a custodial trust may terminate the trust and receive the assets held by the trustee at any time. At the death of the beneficiary, the assets held in trust...