Legal Question in Investment Law in California

Re: redeem zero coupon bonds

First, my understanding is that zero coupon bonds don't pay interest, at least in the ordinary sense. They are sold at a deep discount from value at maturity, and the holder gets the equivalent of interest, e.g. for buying the "zero" at $325 in 1988 you are promised $1000 in 2008. There are tax advantages to such bonds in some cases.

Some zero-coupon bonds may begin accruing, or even paying, interest if not redeemed at maturity. You need to consult a securities broker for terms applicable to each separate issue of bonds for details.

As a lawyer, though, I'm somewhat puzzled about the inability to sell the bonds at this time. In California, an 18 year old is an adult for all purposes except consumption of alcohol and possibly one or two other obscure things, but at 18 the young lady is not only entitled to possession and management of her UTMA property, she can insist on it and hold anyone standing in her way responsible for unlawfully interfering with her property rights. A different result would come about if these bonds had been in a trust, the specific terms of which referred to "age 21" rather than adulthood or maturity.

There are enough facts missing here to make me wary of further guesswork, but someone presumably has a trustee kind of relationship with the kids and the assets, and that person has at least two duties: to manage the property wisely, and to turn it over to the beneficiary according to the trust instructions. Trustees who diddle with the trust assets of a minor and fail to turn them over when they should are worse than thieves and courts treat them accordingly.