The Age of Majority and UTMA Distribution by State

ByAngelique Cruz
Edited byScott Strandberg

Updated: June 30, 2023

ByAngelique Cruz
Edited byScott Strandberg

Updated: June 30, 2023

Advertising & Editorial Disclosure

The age of majority is when a person is legally considered an adult. Most states and the District of Columbia consider 18 to be the age of majority. The only exceptions are Alabama and Nebraska (which put it at 19) and Mississippi and Pennsylvania (where it's 21). You can take on legal responsibilities upon reaching this age, such as voting and signing a contract. However, it doesn’t mean you can legally drink since the Minimum Legal Drinking Age (MLDA) is 21.

Most states do not allow minors to own and manage assets. However, the Uniform Transfers to Minors Act (UTMA) allows them to receive gifts without establishing a formal trust. A UTMA account helps minors avoid tax consequences until they are old enough to claim ownership of it. Note that although most states consider 18 as its legal age, the prevailing UTMA age of majority in the U.S. is 21.

Fast Facts on Age of Majority and UTMA Distribution

 

The age of majority varies by state. Not everyone is familiar with the concept or how it ties in with the Uniform Transfers to Minors Act (UTMA). MoneyGeek highlights some essential information.

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Upon reaching the age of majority, a person becomes of legal age and receives certain rights and responsibilities.

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For most states, 18 is the age of majority. Only Alabama (19), Nebraska (19), Mississippi (21) and Pennsylvania (21) have it set at other ages.

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The Uniform Transfers to Minors Act (UTMA) allows minors to receive property, whether tangible or intangible, real or personal. However, they can only claim and use it when they reach their state's UTMA age of majority.

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Any gift a minor receives goes to a UTMA account, which a custodian manages until they come of age.

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The UTMA expanded the Uniform Gifts to Minors Act (UGMA), which only defined gifts as cash or securities. Under UTMA, patents, royalties, cash, stocks, bonds, real estate and art are included.

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The age of majority is different from the UTMA age of majority. The former is 18 for most states, while the latter is 21.


Understanding the Age of Majority

The definition of the age of majority is the point when the state acknowledges you as an adult, whether or not you have disabilities. For most states, the age of majority is 18. The Centers for Disease Control and Prevention only identifies four states with different ages of majority: Alabama (19), Nebraska (19), Mississippi (21) and Pennsylvania (21).

Reaching the age of majority in your state means you gain several rights that only your parents had previously (hence the term transfer of rights). These include applying for a credit card, signing contracts or leases and obtaining individual bank accounts.

Besides your finances, these also extend to decisions about your education and living conditions. That means you can drop out of school, make independent living arrangements, get married, vote or enlist in the military. MoneyGeek details several rights that transfer from parent to child when they reach their state's age of majority.

Rights and Privileges

Depending on your state, you reach the age of majority between 18 and 21. When that happens, you gain some privileges and rights. MoneyGeek expands on some of these below.

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    Signing Leases, Mortgages and Other Legal Contracts

    You can sign contracts, such as rental agreements or leases, which become legally binding. You can also apply for loans without a parent or another adult as a co-signer.

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    Getting a Credit Card

    You can apply for your own credit card, unlike a minor, who can only have a credit line if a family member makes them an authorized user on a credit card account.

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    Getting a Driver’s License

    You no longer have to secure parental consent when getting a driver's license. The state's Graduated License Program (if it has one) also no longer applies to you.

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    Opening a Bank Account Under Their Name

    You can open a bank account independently without having a parent or guardian set up a custodial or joint account.

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    Marrying and Voting

    You can become a registered voter when you reach your state's age of majority. Marriage is also possible without parental consent.

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    Making Medical Decisions

    Those at the age of majority may make medical decisions regarding their health, such as selecting a regimen or refusing treatment.

Age of Majority by State

According to the Legal Information Institute at Cornell, each state determines its age of majority — when you gain control of your affairs and become solely accountable for your choices. Although the age of majority varies between states, most set it at 18.

Only four states have a higher age of majority. You legally become an adult when you turn 19 in Alabama or Nebraska. Meanwhile, in Mississippi and Pennsylvania, the age of majority is 21.

State laws don't allow minors to own or manage their own assets. That's why they can't open bank accounts or have credit cards under their names. However, regulations don't say anything preventing minors from receiving them.

The Uniform Transfers to Minors Act (UTMA) allows minors to receive gifts through a UTMA account. The donor (the person transferring the assets) assigns a custodian who manages it until the minor reaches the UTMA age of majority and can claim ownership.

What Is the Uniform Transfers to Minors Act (UTMA)?

The Uniform Transfers to Minors Act (UTMA) provides a way for minors to receive assets using a UTMA account. Finalized in 1986, the UTMA expanded the Uniform Gifts to Minors Act (UGMA), which had been in place since 1956 (and revised a decade later).

The UTMA uses some specific terminologies, such as:

  • Donor: The person transferring assets to a minor.
  • Custodian: The person managing the UTMA account.
  • Custodial Property: Any earnings accumulated by the transferred assets.
  • Minor: A person who hasn't reached the UTMA age of majority.
  • Adult: A person who has reached the UTMA age of majority.
  • Transfer: The movement of assets to a UTMA account.
  • Irrevocable Transfer: When a donor relinquishes all rights to the transferred assets.

The Act also has the following provisions:

  • The transfer a donor makes is irrevocable.
  • A custodian manages the assets in the UTMA account, plus any earnings it accumulates until the minor can claim ownership.
  • A minor cannot liquidate any asset before reaching the state's UTMA age of majority.
  • The custodian can use the assets to provide for the minor's support, benefit, education or maintenance.
  • The minor automatically gains control of the assets when he reaches the state's UTMA age of majority (note that it is different from the state's age of majority).

How Do UTMA Accounts Work?

There's more to understanding how a UTMA account works beyond its definitions and provisions. MoneyGeek breaks down the process into steps to help you grasp how this legislation benefits minors when they receive gifts.

1
Minor Receives a Gift

While the UGMA restricted gifts to cash and securities, the UTMA includes other assets, such as art, stocks, bonds, patents, real estate and royalties. The donor transfers these to a UTMA, which the minor can access once they reach the state's UTMA age of majority.

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Gift Is Placed in a UTMA Account

The gifts (or assets) go into a UTMA account, which requires anywhere from $500 to $2,000 to open. A brokerage firm or bank can help you establish it. Remember, once the donor transfers the assets, they can no longer revoke them.

3
UTMA Account Is Managed by a Custodian

Although a UTMA account is in the minor's name, the donor assigns a custodian who manages the UTMA account. It becomes their responsibility until the minor reaches the state's UTMA age of minority.

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Once the Minor Reaches the UTMA Age of Majority, They Can Use the Gift for Any Purpose

Once the minor reaches the state's UTMA age of majority, they can claim ownership of the assets. They can use it for any purpose, making it more flexible than education plans, which you can only use for tuition and fees.

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TAXES ON UTMA ACCOUNTS

Technically, you can contribute as much as you want to a UTMA account each year. However, as of 2022, federal gift taxes are applied to amounts exceeding $16,000 for an individual or $32,000 for a married couple filing a joint tax return.

A UTMA account also incurs earnings. Only the first $1,150 is not subject to tax. The minor's tax rate applies to the next $1,150. The parent's tax rate applies to any amount the account earns above $2,300. Comparing the two tax rates, the minor's is usually lower.

UTMA Age of Majority by State

Like how the age of majority varies by state, the same is true for the UTMA age of majority. Remember, the former refers to when a person is officially considered an adult. The latter is when a minor can claim ownership of a UTMA account — and each state has the right to change its UTMA statutes.

As of 2022, more than half of states (28, to be exact) have a UTMA age of majority of 21. Two (Kentucky and South Dakota) have it lower, at 18.

The UTMA age of majority in Louisiana ranges from 16 to 18. Nine states (Maryland, Nevada, Arkansas, Maine, Michigan, Missouri, New Jersey, North Carolina and Oklahoma) plus the District of Columbia have it from 18 to 21. California's is from 18 to 25.

Eight states (Florida, Virginia, Washington, Alaska, Ohio, Oregon, Pennsylvania and Tennessee) have their UTMA age of majority from 21 to 25. Wyoming's range is the widest, spanning from 21 to 30.

How Age of Majority Impacts Financial Plans

Becoming an adult means taking ownership of financial decisions, so it's best to understand how the age of majority (and the UTMA age of majority) affects several areas of financial planning. MoneyGeek specifically looks at life insurance, estate planning and educational financial aid.

Life Insurance

A life insurance policy can ensure financial protection for your loved ones, but most states do not allow minors to own one. One example is Massachusetts, where it's better to set up a trust as the beneficiary since insurers cannot pay proceeds to those who haven't reached the state's age of majority.

However, in some states, minors can own life insurance even if they're below the state's age of majority or the UTMA age of majority. These include New York, where minors can be direct-donees of life insurance policies when they turn 14.5, and Virginia, where minors who are at least 15 can already contract a life insurance policy.

Estate Planning

Knowing what assets to pass on is a large part of estate planning. Some set up a trust and make it the beneficiary on behalf of a minor since most states do not allow those below the age of majority to own property.

UTMA allows estate planners to put properties in their children's names without establishing a trust. However, UTMA requires a custodian to manage the property on the minor's behalf until they reach the state's UTMA age of majority. In a 2020 publication, Gerstner and Associates highlight that donors must identify at least two custodians.

In Texas, if the primary custodian passes before the minor reaches the age of majority, a successor custodian is immediately identified, avoiding a court proceeding (which happens if a minor over 14 doesn't appoint one within 60 days). In Ohio, custodianship transfers to the minor's guardian if the original custodian did not designate a successor. In Nevada, someone who is at least 14 can assign a successor custodian. If they don’t within 60 days, custodianship goes to the minor's conservator.

Educational Financial Aid

Although a custodian manages a UTMA account until a minor reaches the state's UTMA age of majority, all assets belong to the latter. Unfortunately, it may impact their ability to secure financial aid (whether through private or federal student loans) as they prepare for college. Granting institutions may view the minor as someone with ample resources, making needs-based aid unnecessary.

Finaid suggests transferring assets from a UTMA account to a different plan (specifically a 529), which makes it part of the parents' resources. That gives the minor better odds if and when they apply for financial aid.

Age of Majority and UTMA FAQ

UMTA and the age of majority affect several areas in a person's life. It's best to know how it works and how to use it. MoneyGeek included several frequently asked questions to provide additional information.

Is the age of majority the same as the legal drinking age?
At what age can you withdraw from UTMA?
What can UTMA be used for?
Is UTMA the same as a trust?
What are the disadvantages of having a UTMA account?

Expert Insights on Age of Majority and UTMA

MoneyGeek reached out to several finance professionals to get their insights on how a UTMA varies from a trust and why most states' age of majority varies from the minimum legal drinking age.

  1. Is it important for parents and young adults to understand the age of majority in their state and how UTMAs work? Why or why not?
  2. How does a UTMA account differ from a trust account?
  3. Why is the UTMA age of majority different from the legal age of majority?
Noah Schwab
Noah SchwabCertified Financial Planner at Stewardship Concepts Financial Services, LLC
Asher Rogovy
Asher RogovyChief Investment Officer at Magnifina
Michael C. Bass
Michael C. BassPresident of Wealth Advisory Group, Inc.

Related Resources

A UTMA account is a tool for estate and financial planning. However, there are others that you can consider. Here are some online resources that you can pursue to learn more.

About Angelique Cruz


Angelique Cruz headshot

Angelique Cruz has been researching personal finance for three years, with expertise in macroeconomics, financial statistics and behavioral finance. After a decade-long stint as a management consultant creating professional and personal development programs, she now specializes in writing informative content around personal, auto and home loans. Angelique has a degree in psychology from the Ateneo de Manila University.


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