Gifting to a child sounds simple until the forms start stacking up. At Woods & Bates, P.C., we focus on helping Illinois families protect what matters and set kids up for a confident start.
In this guide, we explain how an Illinois UTMA account works, when it makes sense, and what to watch for as you plan a gift for a minor. This article is for education only, not legal advice, and your facts can shift the best approach.
What is an Illinois UTMA Account?
An Illinois UTMA account is a way to gift assets to a minor without creating a formal trust. You transfer property into a custodial account, then an adult custodian manages it for the child’s benefit. The UTMA law was written to make gifting to minors easier and to cover many types of property.
The custodian controls the account until the child reaches the statutory age, then the assets pass to the child outright. During the custodianship, the funds belong to the child, not the custodian or the person who made the gift. This structure keeps management simple while keeping ownership with the minor.
Features of Illinois UTMA Accounts
Illinois gives families broad tools under a UTMA. Below are practical highlights that tend to matter most when you are deciding how to gift.
Eligible Assets
UTMA covers a wide range of assets, far beyond cash and basic investments. This flexibility makes it useful for families with different types of property.
- Cash, savings, and CDs
- Stocks, bonds, and mutual funds
- Real estate interests
- Royalties and patents
- Fine art and other collectibles
- Beneficial interest in a land trust, which Illinois treats as transferable to a custodian
Financial institutions will have their own forms and rules for certain assets, yet the statute itself is quite broad.
Custodial Responsibilities
The custodian must manage, invest, and use the property for the minor’s benefit. Illinois law expects prudent investing and requires the custodian to keep custodial property separate from personal assets. Records of all transactions must be kept and made available to a parent or representative, or to the minor once the minor turns 14.
A careful custodian also tracks tax documents, distributions for the child’s needs, and account statements. Good paper trails prevent headaches later and protect the child’s interests.
Tax Implications
Income inside a UTMA is taxed under the kiddie tax rules. For 2025, the first $1,350 of a child’s unearned income is not taxed, the next $1,350 is taxed at the child’s rate, and amounts above $2,700 are taxed at the parent’s marginal rate. The minor’s Social Security number is used for tax reporting on the account.
Gifts to a UTMA can qualify for the annual gift tax exclusion, which is $19,000 per person for 2025. Tax thresholds change, so check current IRS guidance with your tax preparer.
Age of Termination in Illinois
In Illinois, most UTMA custodianships end at age 21. Once the child reaches 21, control of the account shifts to the child. This holds true, even though Illinois sets the general age of majority at 18.
That extra time often helps young adults handle funds with more maturity. If earlier access is needed for education or health, the custodian can still use funds for the child’s benefit before age 21.
Setting Up an Illinois UTMA Account
Opening and funding a UTMA is simpler than drafting a trust, but a few details make a big difference. Here is how to get it right from the start.
Choosing a Custodian
Pick someone responsible and organized since they will manage investments and withdrawals for the child. The custodian can be the transferor, an adult member of the minor’s family, or a trust company. If the custodian serves without compensation, Illinois limits personal liability unless there is bad faith, intentional wrongdoing, or gross negligence in investing.
You can also name a successor custodian in case the first choice cannot serve. Clear backup plans help avoid court involvement later.
Establishing the Account
Most banks and brokerages support UTMA registrations with standard forms. You will provide the minor’s legal name, date of birth, and SSN, and identify the custodian. The title must show the custodian “as custodian for [Minor] under the Illinois Uniform Transfers to Minors Act.”
- Choose the financial institution and asset type; for example, brokerage or savings.
- Complete UTMA account paperwork with proper titling language.
- Provide the minor’s SSN and the custodian’s identification.
- Set up investment choices and beneficiary records if offered.
- Fund the account and save the confirmations in a secure place.
Institutions can request extra documentation for certain assets, especially insurance contracts or real estate interests.
Transferring Assets
Illinois sets out methods for creating custodial property at 760 ILCS 20/10. Securities can be retitled into UTMA form, cash can be deposited to a UTMA account, and life insurance or annuities can be assigned with UTMA language. For real estate, the deed or assignment should use UTMA wording, then be recorded or acknowledged by the custodian as the statute allows.
Less common assets, such as a beneficial interest in a land trust, can also be transferred using the statute’s forms. Follow the exact titling and notice steps in the law to keep the gift valid and clear.
UTMA vs. Other Gifting Options
UTMAs are flexible, yet they are not the only way to save for a child. Many families compare UTMAs to 529 plans and to formal trusts before choosing a path.
| Feature | UTMA | 529 Plan | Minor’s Trust |
| Who owns assets | The child | Account owner until used for beneficiary | The trust |
| Child control age | 21 in Illinois | No automatic control transfer | As stated in the trust |
| Allowed uses | Any use that benefits the child | Qualified education expenses for tax advantages | Guided by trust terms |
| Tax perks | Kiddie tax rules apply | Tax-deferred growth and tax-free qualified payouts | Varies, depends on trust design |
| Control by donor | Limited after transfer | Strong control by account owner | Highly customizable by the trust |
| Financial aid impact | Counts as the child’s asset | Usually counts as parent asset if parent is owner | Depends on trust type and terms |
| Setup complexity | Low | Low | Higher, requires legal drafting |
| Investment choices | Broad | Limited to plan options | Broad, guided by trustee and trust terms |
Your goals drive the choice. If you want broad spending flexibility for a child and simple setup, a UTMA is attractive, while a 529 offers strong education tax perks, and a trust offers custom control.
- A UTMA is flexible with spending, yet the child takes control at 21.
- A 529 can offer tax-free education payouts and strong parent control.
- A trust can delay access, add safeguards, and spell out use rules.
If you are unsure which path fits your plan, we can walk through your priorities and budget to find a clear next step.
Potential Drawbacks and Considerations
There are a few tradeoffs to know before funding a UTMA. Financial aid formulas often weigh a child’s assets more heavily than a parent’s, which can reduce need-based aid. If college aid is a major goal, this matters quite a bit.
Assets in a UTMA are owned by the minor from the moment of transfer. That ownership is great for clarity, yet it also means the child gains control at 21 in Illinois, even if you would have preferred a later date.
Spending must benefit the child, not the custodian or anyone else. In practice, that can cover education, health care, activities, housing, and other child-focused needs, so there is still plenty of room to help in smart ways.
Looking to Establish an Illinois UTMA Account? Contact Woods & Bates, P.C.
We care about helping families build, sustain, and preserve their legacies. If you want a clear plan for gifting to a minor, we can explain your UTMA choices and where a trust or 529 plan might fit better. Feel free to call us at 217-735-1234 or visit our website to start a conversation.
At Woods & Bates, P.C., we offer both virtual and in-person meetings for your convenience. We work to make the process practical, cost-aware, and aligned with your goals. We welcome your questions and look forward to helping you protect what you have built for the people you love.