Legal Question in Wills and Trusts in New York

UGMA/UTMA handling by trustee

Hello,

I am involved in a very complicated custody battle. In 1992, the husband opened UGMA account for his two minor kids. In 1998, he withdrew most of the money, but in 1999 under wife's pressure he put money back. In 2000, he withdrew money again and recently put it back again. In 1998, his attorney prepared promissory notes telling that the husband will repay borrowed money with interest. Is this enough to cover the withdrawal legally?

Both times, husband deposited money from UGMA/UTMA accounts to his bank account and used it to pay child support and his other expenses.

The judge inclined to agree with husband's attorney that transactions were proper, one asset (UGMA money) was replaced by another asset (promissory note signed by husband).

Currently, I am looking for a legal body in charge of UGMA/UTMA law we can contact to get clear information from them for the judge:

1. If the husband was allowed to withdrew money from UGMA/UTMA for personal use, does promissory note allow that, and if not what should be legal cosequenses for such conduct.

2. How ethical was it for the attorney to assist his client in such transaction.

Could you help? We are in New York.

Thanks a lot.


Asked on 11/06/02, 6:15 pm

1 Answer from Attorneys
Walter LeVine Walter D. LeVine, Esq.

Re: UGMA/UTMA handling by trustee

I disagree with the judge. This was set aside specifically to be the child's money and not a separate bank account for the husband. IRS has allowed the income to be taxed to the child. You might want to consider reporting this to IRS, as an informer you might get a reward if income taxes are asserted. However, it could also lead to loss of the funds for the child, as taxing the income to the husband might make it considered to be his money. Also, when the child become an adult, he/she could sue for the unapproved use by the father. I suggest doing some internet research for articles on UGMA accounts and the fiduciary responsibility owed by the guardian. This may lead you. Also, some research on legal websites, like findlaw.com, could lead you to cases in Ny on this issue and how other courts have responded. There is a moral as well as a legal requirement to keep the funds intact for the child. What security backs the note if it is not repaid?

Read more
Answered on 11/09/02, 11:59 am


Related Questions & Answers

More Probate, Trusts, Wills & Estates questions and answers in New York