It's time to catch up on some of the questions that readers have sent me.
Q: I want to open a brokerage account for my grandson. My broker suggested that I open it under UGMA. What is UGMA and why is it better to open the account under it?
A: UGMA stands for the Uniform Gift to Minors Act. Since nonemancipated minors can't legally own property, someone has to be appointed to hold the property until the minor turns eighteen.
Indiana's version of UGMA is IUTMA, or the Indiana Uniform Transfer to Minors Act. Under IUTMA, you transfer the asset to a custodian until the minor reaches 21. Distributions can be made prior to that time at the discretion of the custodian. Personally, I like IUTMA. IUTMA allows you to make gifts to minors and protect it until they reach twenty-one. It's considerably less expensive than either a guardianship or creating a trust
Q: I have been told that if I re-title my bank accounts into my name as trustee, I don't actually have to create a trust. Is this correct?
A: Many years ago, there used to be a thing called a Toten Trust.
Essentially, a person re-titled their accounts and made them payable to a beneficiary after death. Toten Trust designations have been largely replaced by payable on death provisions, which function in a very similar way. I have been told that Toten Trusts may still exist in the State of Illinois and may even be fairly common.
If you attempt to re-title a bank account into your name as trustee, I guarantee that the bank will be looking for a trust document. If you find a bank that will allow you to title the account in the name of a trustee without actually seeing a trust, you probably still don't want to do it. After your death, the bank will want to know who is the successor trustee. If there isn't an actual trust, that could cause problems with the bank. My advice is if you want to avoid probate with a bank account, use a POD provision or bite the bullet and pay for the trust. Remember folks, it is almost always easier and cheaper to avoid a problem than to solve it later.
Q: My family has recently celebrated the arrival of another grandchild. I currently have provisions for grandchildren in my trust. Do I need to see my attorney to have it amended to include my new grandson?
A: This is one of those questions that I can't really answer without actually seeing the document. I will say that estate plans are drawn up anticipating that new beneficiaries will be born and, unfortunately, some beneficiaries may die. My gut feeling tells me that if you have a provision for grandchildren in your trust, your new grandson will be included.
You may still want to talk to your attorney just to make sure.
Christopher W. Yugo is a member of the Indiana Bar and a vice president and senior trust officer for First National Bank's Trust Department. Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321. The information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.
