The Age of Majority and UTMA Distribution by State
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
- 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?
- How does a UTMA account differ from a trust account?
- Why is the UTMA age of majority different from the legal age of majority?
Certified Financial Planner at Stewardship Concepts Financial Services, LLC
Chief Investment Officer at Magnifina
President of Wealth Advisory Group, Inc.
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.
- Ultimate Guide to Wills and Why They Are Important: UTMAs and trusts aren’t the only ways to pass on assets to your children — you can also use a will. Read about why you would need one and how it works.
- Navigating Life Insurance for Estate Planning: Learn more about the benefits of life insurance and the role it plays when planning your estate.
- Financial Planning for Parents of Children with Disabilities: The challenges when you have a child with disabilities are unique. MoneyGeek shares strategies to create a financial plan and provides financial planning tools.
- A Financial Literacy Handbook for All Life Stages: It’s never too early to learn how to manage your finances. MoneyGeek’s page provides tips for better money management, regardless of your age.
- Financial Playbook for Married Couples: Finances become a significant part of married life — and learning how to manage them as a couple can help you sustain a healthy relationship.
About Angelique Cruz
- Centers for Disease Control and Prevention. "State Laws that Enable a Minor to Provide Informed Consent to Receive HIV and STD Services." Accessed June 9, 2023.
- Experian. "What Are UGMA and UTMA Accounts?." Accessed June 9, 2023.
- Finaid. "UGMA and UTMA Custodial Accounts." Accessed June 9, 2023.
- Gerstner and Associates. "Estate Planning Insights." Accessed June 9, 2023.
- Legal Information Institute. "Legal Age." Accessed June 9, 2023.
- Social Security Administration. "Uniform Transfers to Minors Act." Accessed June 9, 2023.