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By Nathan Paulus
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Director of Content Marketing, MoneyGeek
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy. Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
Edited by Scott Strandberg
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Writer and Editor
Scott Strandberg is an editor at MoneyGeek who has focused on personal finance and small business development since 2017. He is also the founder of Strandberg Media Services LLC. Strandberg has a bachelor's degree in film/cinema/video studies from the University of Oklahoma.
MoneyGeek is dedicated to providing trustworthy information to help you make informed financial decisions. Each article is edited, fact-checked and reviewed by industry professionals to ensure quality and accuracy.
Updated: September 10, 2024
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Noah Schwab
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Certified Financial Planner at Stewardship Concepts Financial Services, LLC
Currently an active CFP® professional in Spokane, WA, Noah Schwab helps small business owners save time by combining business and personal financial planning. Noah holds a bachelor's degree in finance and economics. He worked at Stewardship Concepts Financial Services for about three years.
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Asher Rogovy
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Chief Investment Officer at Magnifina
Asher Rogovy is the founder and Chief Investment Officer of Magnifina, an independent Registered Investment Adviser (RIA) firm. He started Magnifina to share his passion for investments with others, particularly those who are traditionally overlooked by Wall Street. Outside of work, Asher enjoys sailing and is a skipper mentor at North Cove Sailing in downtown Manhattan.
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Michael C. Bass
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Michael C. Bass President of Wealth Advisory Group, Inc. Michael C. Bass is an Accredited Investment Fiduciary (AIF) with over two decades of experience as a Co-Fiduciary Investment Advisor to large private and corporate pension, 401(k) and 403(b) retirement plans. An entrepreneur, Michael was President and co-owner of Wealth Advisory Group, Inc. and co-founder of Corporate Benefits Alliance, Inc., before selling both entities to World Insurance, one of the largest insurance brokers in the U.S. Michael continues his work in advanced employee benefits with World as a Principal and Unit Leader.
NP
By Nathan Paulus
NP
Director of Content Marketing, MoneyGeek
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy. Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
Edited by Scott Strandberg
SS
Writer and Editor
Scott Strandberg is an editor at MoneyGeek who has focused on personal finance and small business development since 2017. He is also the founder of Strandberg Media Services LLC. Strandberg has a bachelor's degree in film/cinema/video studies from the University of Oklahoma.
MoneyGeek is dedicated to providing trustworthy information to help you make informed financial decisions. Each article is edited, fact-checked and reviewed by industry professionals to ensure quality and accuracy.
Updated: September 10, 2024
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.
Upon reaching the age of majority, a person becomes of legal age and receives certain rights and responsibilities.
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.
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.
Any gift a minor receives goes to a UTMA account, which a custodian manages until they come of age.
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.
The age of majority is different from the UTMA age of majority. The former is 18 for most states, while the latter is 21.
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.
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.
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.
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:
The Act also has the following provisions:
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.
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.
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.
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 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.
TAXES ON UTMA ACCOUNTSTechnically, 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.
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.
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.
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.
