Help! No Info About My Girl's UTMA Accounts & Reimbursing ex-spouse

[A Loving Father]

What is the name of your state (only U.S. law)? California

I am the father and custodian for my girls UTMA accounts which they just inherited from my grandfather.
I am aware that by being the custodian of their UTMA accounts, I have the duty/right to decide how funds are spent as long as it's for the benefit of my girls. I have spoken to my Trust attorney but not a divorce attorney.
I need to know whether I am legally required to reimburse my ex spouse(remarried) for any of her children expenses or just my expenses? I have been paying child support for 5years that is 50% above California State guidelines & I pay for medical insurance & education & most activities. So I would think that should cover any of her expenses.
Please let me know your thoughts as I have found no information about my situation.
Thank you.

 

[Nevergrowup]

What is the name of your state (only U.S. law)? California

I am the father and custodian for my girls UTMA accounts which they just inherited from my grandfather.
I am aware that by being the custodian of their UTMA accounts, I have the duty/right to decide how funds are spent as long as it's for the benefit of my girls. I have spoken to my Trust attorney but not a divorce attorney.
I need to know whether I am legally required to reimburse my ex spouse(remarried) for any of her children expenses or just my expenses? I have been paying child support for 5years that is 50% above California State guidelines & I pay for medical insurance & education & most activities. So I would think that should cover any of her expenses.
Please let me know your thoughts as I have found no information about my situation.
Thank you.

I'm confused. Are you asking whether or not you can reimburse yourself child support that you paid above what was ordered? Or are you ordered to pay a higher amount than the guidelines?

There are certain things for a child's benefit that you are allowed to use the funds for...education, special activities such as a special camp or school trip, anything that is extra ordinary that is for the benefit of the child. You can't just use it for every day expenses, like medical insurance or normal support of the child. I should rephrase. You CAN, as a custodian of the account...but your child can make you account for the spenditure later...and it might be possible for your ex to have a judge order you to account for it also. Don't use that account for normal expenses, and certainly not to reimburse yourself for child support.

I used to work in the financial field with these accounts, I personally saw a parent get in big massive trouble for mismanagement of an UTMA account, the child in her early 20's sued the parent and actually recovered some of the expenses because they were deemed to be typical expenses that all children rack up and not something the parent should have reimbursed themselves for. The financial institution also got a wrist slap from a regulatory body for not supervising the account themselves, although personally I don't understand how they were to stop the parent in charge.

 

[mistoffolees]

What is the name of your state (only U.S. law)? California

I am the father and custodian for my girls UTMA accounts which they just inherited from my grandfather.
I am aware that by being the custodian of their UTMA accounts, I have the duty/right to decide how funds are spent as long as it's for the benefit of my girls. I have spoken to my Trust attorney but not a divorce attorney.
I need to know whether I am legally required to reimburse my ex spouse(remarried) for any of her children expenses or just my expenses? I have been paying child support for 5years that is 50% above California State guidelines & I pay for medical insurance & education & most activities. So I would think that should cover any of her expenses.
Please let me know your thoughts as I have found no information about my situation.
Thank you.

You are paying the court ordered support. You do not have to pay one penny more than the court ordered amount - either from your own pocket or from the trust. Use the trust money for whatever you think will benefit the child. That does not include reimbursing Mom for her expenses.

At the same time, check the terms of the trust. I doubt if the intent was for you to use it to pay your support or normal expenses, either. I would guess that the intent was to use it for something that you couldn't ordinarily afford or for education or whatever. The terms of the trust will tell you what you can use it for, though. Tell use (word for word, but without the names) what it says about how the money is to be used.

 

[A Loving Father]

I'm confused. Are you asking whether or not you can reimburse yourself child support that you paid above what was ordered? Or are you ordered to pay a higher amount than the guidelines?

There are certain things for a child's benefit that you are allowed to use the funds for...education, special activities such as a special camp or school trip, anything that is extra ordinary that is for the benefit of the child. You can't just use it for every day expenses, like medical insurance or normal support of the child. I should rephrase. You CAN, as a custodian of the account...but your child can make you account for the spenditure later...and it might be possible for your ex to have a judge order you to account for it also. Don't use that account for normal expenses, and certainly not to reimburse yourself for child support.

I used to work in the financial field with these accounts, I personally saw a parent get in big massive trouble for mismanagement of an UTMA account, the child in her early 20's sued the parent and actually recovered some of the expenses because they were deemed to be typical expenses that all children rack up and not something the parent should have reimbursed themselves for. The financial institution also got a wrist slap from a regulatory body for not supervising the account themselves, although personally I don't understand how they were to stop the parent in charge.

Thank you for your reply.. I am aware I cannot use UTMA funds for child support unless I can prove hardship.. Also I elected to pay above the State Guideline in child support to benefit the kids so their lives would be easier and my ex could live nearby.. I'm not asking to be reimbursed the 50% above in child support but whether she can demand to be reimbursed for her children expenses out of their UTMA account.. I pay her child support so I don't see why she can but when she see's me reimburse myself for child expenses she wants to be reimbursed too..I have documented all reimbursements with receipts/statements to myself.
Thank you

 

[Nevergrowup]

Thank you for your reply.. I am aware I cannot use UTMA funds for child support unless I can prove hardship.. Also I elected to pay above the State Guideline in child support to benefit the kids so their lives would be easier and my ex could live nearby.. I'm not asking to be reimbursed the 50% above in child support but whether she can demand to be reimbursed for her children expenses out of their UTMA account.. I pay her child support so I don't see why she can but when she see's me reimburse myself for child expenses she wants to be reimbursed too..I have documented all reimbursements with receipts/statements to myself.
Thank you

As long as the expenses are extraordinary expenses, you should have no problem. Then again, if Mom's expenses are also extraordinary, you might want to consider letting her reimburse. If they are normal expenses, then say no. You actually aren't obligated though at all to reimburse her for anything, you are in charge.

How is she seeing anything? Why does she see anything that has to do with the account?

Just a funny story...one dad I knew was the custodian of his daughters' UTMA accounts. During his divorce, the ex complained that she wasn't on the account too. The Judge asked Dad if he would be willing to ad his wife to the account, Dad said "No your honor". The Judge, very crankily, said "Why not? I may order you to do so" and Dad replied "It is against the law to have more than one custodian, your honor, as I'm sure your honor is aware". The judge then ordered that each check request also be signed by mom, attached with a receipt, which the financial institution dutifully filed, but that was completely unenforcable and not in agreement with the terms of an UTMA account.

 

[LdiJ]

What is the name of your state (only U.S. law)? California

I am the father and custodian for my girls UTMA accounts which they just inherited from my grandfather.
I am aware that by being the custodian of their UTMA accounts, I have the duty/right to decide how funds are spent as long as it's for the benefit of my girls. I have spoken to my Trust attorney but not a divorce attorney.
I need to know whether I am legally required to reimburse my ex spouse(remarried) for any of her children expenses or just my expenses? I have been paying child support for 5years that is 50% above California State guidelines & I pay for medical insurance & education & most activities. So I would think that should cover any of her expenses.
Please let me know your thoughts as I have found no information about my situation.
Thank you.

To be honest dad, I wouldn't be using a UTMA account to cover ANY of the children's ordinary expenses. I would be saving those accounts for college...or other seriously major issues. I would consider it to be a breech of fiduciary duty to do anything else.

 

[mistoffolees]

To be honest dad, I wouldn't be using a UTMA account to cover ANY of the children's ordinary expenses. I would be saving those accounts for college...or other seriously major issues. I would consider it to be a breech of fiduciary duty to do anything else.

Just curious how you can say that without knowing what the UTMA says?

The UTMA should have instructions for what it is to be used for. If there are instructions, then OP needs to follow them. If there are no instructions, OP can distribute the money in any way that he feels is in the best interests of the child. In the case of financial difficulties which mean that a child's needs are not being properly met, that can (and probably should) include covering ordinary expenses.

Now, it would be most common for the money to be used for college - or buying a home - or starting a business - or some other major expense, but it doesn't have to be unless the UTMA specifies that.

Oh, and btw, what does this have to do with a gun or a human trunk?
breech - definition of breech by the Free Online Dictionary, Thesaurus and Encyclopedia.
breach - definition of breach by the Free Online Dictionary, Thesaurus and Encyclopedia.

 

[LdiJ]

Just curious how you can say that without knowing what the UTMA says?

The UTMA should have instructions for what it is to be used for. If there are instructions, then OP needs to follow them. If there are no instructions, OP can distribute the money in any way that he feels is in the best interests of the child. In the case of financial difficulties which mean that a child's needs are not being properly met, that can (and probably should) include covering ordinary expenses.

Now, it would be most common for the money to be used for college - or buying a home - or starting a business - or some other major expense, but it doesn't have to be unless the UTMA specifies that.

Oh, and btw, what does this have to do with a gun or a human trunk?
breech - definition of breech by the Free Online Dictionary, Thesaurus and Encyclopedia.
breach - definition of breach by the Free Online Dictionary, Thesaurus and Encyclopedia.

Did you not notice the number of times I said "I"?. That's called a personal opinion.

You really are back on the "belittling phase" aren't you? It really is ok to disagree with someone without being belittling. Nobody is going to think you less smart if you are civil when you disagree with someone.

 

[mistoffolees]

Did you not notice the number of times I said "I"?. That's called a personal opinion.

But you told the person that it would be a breach of fiduciary duty. Considering that this is a legal site and people think that they're getting expert opinions, your insistence on posting your own bizarre viewpoint as fact runs the risk of leading someone in the wrong direction.

If you can't post factually accurate information and back it up, you shouldn't be here.

You really are back on the "belittling phase" aren't you? It really is ok to disagree with someone without being belittling. Nobody is going to think you less smart if you are civil when you disagree with someone.

So pointing out your endless errors is 'belittling" You made a major error in interpretation and gave the person lousy advice and I simply pointed that out. The fact is that you almost never back up anything you say and generally provide nothing more than "I know everything so you should listen to me". Even when you're proven wrong by attorneys licensed to practice in a state, you continue to insist that you're right.

People are hear looking for legally accurate, factual, supportable advice. Your incessant personal opinions (which are so often wrong) could damage someone's situation greatly. And it just happens that I'm disgusted that you do it ALL THE FLIPPING TIME.

 

[LdiJ]

But you told the person that it would be a breach of fiduciary duty. Considering that this is a legal site and people think that they're getting expert opinions, your insistence on posting your own bizarre viewpoint as fact runs the risk of leading someone in the wrong direction.

If you can't post factually accurate information and back it up, you shouldn't be here.



So pointing out your endless errors is 'belittling" You made a major error in interpretation and gave the person lousy advice and I simply pointed that out. The fact is that you almost never back up anything you say and generally provide nothing more than "I know everything so you should listen to me". Even when you're proven wrong by attorneys licensed to practice in a state, you continue to insist that you're right.

People are hear looking for legally accurate, factual, supportable advice. Your incessant personal opinions (which are so often wrong) could damage someone's situation greatly. And it just happens that I'm disgusted that you do it ALL THE FLIPPING TIME.

Ok Misto....you win. Do you feel better now?

 

[mistoffolees]

Ok Misto....you win. Do you feel better now?

It's not about winning.

It's about my attempts to keep you from giving people erroneous information that will lead them astray. If you would stop making things up and giving people advice that's factually incorrect, I wouldn't have to get involved.

 

[Nevergrowup]

UTMA and UGMA accounts are to be used for extraordinary expenses, as I previously stated, NOT ordinary everyday child expenses. Parents are assumed to be able to care for their children to meet their everyday needs.

I worked with these acounts for about 8 years...the fiduciary duty of the custodian is to hold the funds for the minor until he/she is no longer a minor, OR use the funds for the child's benefit for extraordinary expenses, that parents would normally have a hard time with, such as education, travel for class trips, car purchase (yes, that qualifies if it is for the child, it gets tricky though because minors can't be title holders, parents have to be careful if that car is sold and either use the money for another one for the child, or put the money back). Extraordinary medical expenses would most likey not cause any questions. It is NOT okay to use it for food, gas, regular clothing (I say regular because if the child needs some particular uniform for a group, for example a special choir, that would be considered fine), medical insurance or copays, household expenses, haircuts, child care, Christmas presents...hopefully you get the picture.

As I told OP before, if he is reimbursing himself for expenses above and beyond NORMAL child raising, he should be fine. If he is reimbursing himself for normal expenses, he could be in a world of trouble. The financial institution holding the UTMA account will not likely monitor, unless they see excessive use, then they may send a letter out to protect themselves, but they cannot actively prevent the custodian from removing funds. The fiduciary custodian signs paperwork when he/she opens an account that makes THEM responsible for the proper handling of the account. The child, or potentially the ex with the right judge, CAN make OP responsible for the money he removed if it is for ordinary expenses. It could even go beyond that with excessive abuse, to the state prosecuting level, as the various states set the rules for these accounts (and different ages of majority apply). I tried looking up a link for opening account paperwork with the verbiage, but I was unsuccessful at first glance. I sent an email to the broker that I worked with, hopefully he'll be able to send me a link, but it will be his state specific. Might give a guidline though.

OP, I suggest you look up the rules for your state, and request a copy of the paperwork you signed when the UTMA account was opened. I again want to ask, why is the ex wife seeing the account activity? Unless judge ordered, she has no right.

 

[mistoffolees]

UTMA and UGMA accounts are to be used for extraordinary expenses, as I previously stated, NOT ordinary everyday child expenses.

I worked with these acounts for about 8 years...the fiduciary duty of the custodian is to hold the funds for the minor until he/she is no longer a minor, OR use the funds for the child's benefit for extraordinary expenses, that parents would normally have a hard time with, such as education, travel for class trips, car purchase (yes, that qualifies if it is for the child, it gets tricky though because minors can't be title holders, parents have to be careful if that car is sold and either use the money for another one for the child, or put the money back). Extraordinary medical expenses would most likey not cause any questions. It is NOT okay to use it for food, gas, regular clothing (I say regular because if the child needs some particular uniform for a group, for example a special choir, that would be considered fine), medical insurance or copays, household expenses, haircuts, child care, Christmas presents...hopefully you get the picture.

That is not correct. There is no restriction in UTMA or UGMA rules in ANY state that I know of that says that they can not be used for everyday expenses.

Now, NORMALLY, UTMA gifts are for exceptional expenses, so what you're saying is the norm, but it's not required by statute or case law.

OP needs to read the UTMA documents to see if there were any specific restrictions set by the donor. If not, s/he can do anything that's allowable by state law. So far, I've been searching CA law on UTMA and can't find a single thing that restricts what the custodian can use the money for. It simply says that the money must be for the benefit of the child.

Let's bee specific. Look at section 14a of the UTMA:
http://www.fairmark.com/custacct/spend.htm

The starting point is section 14(a) of the Uniform Transfers to Minors Act, which says:

A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to (i) the duty or ability of the custodian personally or of any other person to support the minor, or (ii) any other income or property of the minor which may be applicable or available for that purpose.

That's a pretty liberal standard! An earlier version of the Act contained the words, "for the support, maintenance, education and benefit of the minor." The current version, which is in effect in nearly all states, uses the more generous words, "for the use and benefit of the minor." Official commentary on the Act says this change was "intended to avoid the implication that the custodial property can be used only for the required support of the minor."

Note: As custodian, you're supposed to be able to account for where the money went. If you pulled money from the account to buy a computer for your child, make a permanent record of this fact.

Many people have the mistaken impression that you can't use a custodial account for items that a parent is required to provide as support for the child. Click here for discussion of this issue.

And more:
http://www.fairmark.com/custacct/support.htm

A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to (i) the duty or ability of the custodian personally or of any other person to support the minor, or (ii) any other income or property of the minor which may be applicable or available for that purpose.

It says the expenditure is proper without regard to a duty to support the minor. In other words, even if someone (including the custodian) has a duty to support the minor, the custodian can go ahead an make the expenditure, provided that it's for the benefit of the child. You can read in many places on the Internet and elsewhere that a custodial account cannot be used to pay for items that are within the parent's support obligation, but the language quoted above from the Uniform Act makes it clear that those statements are not literally correct. Perhaps what they mean is that you shouldn't do this because of the tax issue described below.

Note: The issue we are discussing involves the use of the custodial account to pay for things like food and shelter that are part of the parent's support obligation. We are not discussing the use of these accounts to make child support payments after a divorce. In my view, those payments are not a proper use of a custodial account.

Now, it IS true that use of a UTMA account to pay for standard expenses might create a tax issue. But that doesn't mean you can't do it. From the same source above:

IRS rulings on custodial accounts create a concern that if the account is used for expenses that are within the parents' support obligation, then the parents may have to pay additional tax. It's a gross exaggeration to suggest that these rulings mean you can't use a custodial account in this way, or even that you shouldn't use a custodial account in this way. The rulings do not in any way imply that it is improper to use custodial money for the minor's support. They simply provide a tax rule that applies when this happens. In most cases, the tax rule will not be terribly costly. Furthermore, as explained later, there is some question as to whether the rule even applies to custodial accounts under the Uniform Transfers to Minors Act.

Here is the essence of the rule, as paraphrased from Revenue Ruling 56-484:

Income derived from property transferred under the model custodian act which is used in the discharge or satisfaction, in whole or in part, of a legal obligation of any person to support or maintain a minor is, to the extent so used, taxable to such person. However, the amount of such income includible in the gross income of a person obligated to support or maintain a minor is limited by the extent of his legal obligations under local law.

As I read that, if OP uses UTMA money to pay normal support obligations that are owed by a parent, that expenditure may be taxable income to the parent. It does not make it illegal to do so, though.


Now, if you have statute or case law that says otherwise, feel free to present it.

Parents are assumed to be able to care for their children to meet their everyday needs.

That's true, but emergencies happen and as I read UTMA law, the administrator can use the money for whatever is needed.

 

[Nevergrowup]

That is not correct. There is no restriction in UTMA or UGMA rules in ANY state that I know of that says that they can not be used for everyday expenses.

Now, NORMALLY, UTMA gifts are for exceptional expenses, so what you're saying is the norm, but it's not required by statute or case law.

OP needs to read the UTMA documents to see if there were any specific restrictions set by the donor. If not, s/he can do anything that's allowable by state law. So far, I've been searching CA law on UTMA and can't find a single thing that restricts what the custodian can use the money for. It simply says that the money must be for the benefit of the child.

Let's bee specific. Look at section 14a of the UTMA:
What Expenditures Are Proper?


And more:
Custodial Account Used for Support


Now, it IS true that use of a UTMA account to pay for standard expenses might create a tax issue. But that doesn't mean you can't do it. From the same source above:


As I read that, if OP uses UTMA money to pay normal support obligations that are owed by a parent, that expenditure may be taxable income to the parent. It does not make it illegal to do so, though.


Now, if you have statute or case law that says otherwise, feel free to present it.




That's true, but emergencies happen and as I read UTMA law, the administrator can use the money for whatever is needed.

I agree that there is no document that outlines specifically what the expenses are. However, the custodians CAN be held responsible for using the funds for every day expenses, by either the child as an adult, or the judge ruling for the ex. I've seen it happen. In one instance, there was a car involved...that is why I went into detail about that...because a car was purchased, for the child. Then it was sold, and the money was not put back into another vehicle, or the child's account...we had to excute the garnishment on a single name financial account to withdraw the amount used inaccurately. I thought it was unfair because the amount was the entire amount used for the car, not minus depreciation, which didn't seem right. However, the CHILD recovered the money as an adult, by judge's orders. I physically had to transfer the funds. So whether or not it is stated clearly in the rules, a judge CAN and MAY order the OP to pay back funds used for ordinary expenses, or expenses done incorrectly, as the car example states.

In the example I used previously, the one where the judge ordered for all check requests to be signed by both parents even though there was one custodian? Really, the financial institution, by virtue of what the custodian is, cannot enforce that. But the judge ordered it, and was very specific. If the account was used for anything but education expenses, the judge made it clear that it was not allowed. Again, not RIGHT, but ordered.

So OP should be very careful here, even if a ruling is appealable, does he really want to have to go through that?

 

[mistoffolees]

I agree that there is no document that outlines specifically what the expenses are. However, the custodians CAN be held responsible for using the funds for every day expenses, by either the child as an adult, or the judge ruling for the ex. I've seen it happen. In one instance, there was a car involved...that is why I went into detail about that...because a car was purchased, for the child. Then it was sold, and the money was not put back into another vehicle, or the child's account...we had to excute the garnishment on a single name financial account to withdraw the amount used inaccurately. I thought it was unfair because the amount was the entire amount used for the car, not minus depreciation, which didn't seem right. However, the CHILD recovered the money as an adult, by judge's orders. I physically had to transfer the funds.

That's entirely different. A car was bought for the child and then someone sold it and kept the money. Entirely different than what was being asked.

So whether or not it is stated clearly in the rules, a judge CAN and MAY order the OP to pay back funds used for ordinary expenses, or expenses done incorrectly, as the car example states.

Again, that's different. The money was taken and not accounted for. It appears that it was ordered to be reimbursed because it was not accounted for, not because of what it was used for.

In the example I used previously, the one where the judge ordered for all check requests to be signed by both parents even though there was one custodian? Really, the financial institution, by virtue of what the custodian is, cannot enforce that. But the judge ordered it, and was very specific. If the account was used for anything but education expenses, the judge made it clear that it was not allowed. Again, not RIGHT, but ordered.

So OP should be very careful here, even if a ruling is appealable, does he really want to have to go through that?

So because one judge violated the law, that means that everyone should ignore the law?

Besides, the judge in that case made his rule because someone had essentially stolen money from the child (by selling the car and not accounting for the money). That creates an entirely different situation.

As it is, I've stated the law for you. And the law is very clear that any expenditure that's for the benefit if the child is OK. In fact, the lawyer who wrote my links specifically states (several times) that it is definitely OK to use the money for normal every day living expenses. I'm willing to add "with appropriate documentation" which should have been understood, but that's apparently why your case came up.

Again, if you have any case law or statute that says otherwise, feel free to present it.