Legal Question in Investment Law in California

Re: Utma

It has been done, but the parent or other custodian is committing a tort and probably a crime. The property in a custodial account belongs to the minor! If the custodian takes it to his or her own use, that is no different than taking money from a stranger's account by identity theft or forgery, and possibly worse, because the custodian, unlike an ordinary thief, occupies a position of trust.

On the other hand, I believe UTMA funds can be used by the parent for the support of the minor. This does not warrant or allow transferring the account back to the parent, however.

There don't seem to be a lot of cases on this, but where it has happened, the judges and juries have not been sympathetic with the parent, and they end up paying damages for the tort called 'conversion.' If charged as a crime, as to which I could find no published cases, it would probably be classified as embezzlement.

The principle to keep in mind is that once a gift is made, the gifted property no longer belongs to the donor. If the donor is in charge of it as a custodian under the UGMA or UTMA, the custodian role must be distinguished from the owner's role. Think of it like a Brinks truck guard's relationship to the bank. The money is under the guard's custody, but when it arrives at the bank, it must go into the bank's vault and not via the guard's account.