UTMA Headaches

My child has a UTMA CD that matures next week. The plan was to use this to pay her monthly college tuition plan next semester. I am not sure the best way to do this. Apparently I cannot deposit it into her 529 because it is not a custodial 529. I also cannot create a new custodial 529 because she is over the age of 18. Seems like a huge catch 22 when it comes to these accounts once a child reaches age of majority (your child can have the money, but only if it is put in another custodial account, even though they are adults.) I am wondering if she can cash the CD, open a bank account in her name, then use the money to make payments to her payment plan?

If she’s over 18, the money’s hers and she can do whatever she wants with it. No custodial account is required. I suspect that the reason you’re getting pushback is that it’s not your money to do anything with.

@allyphoe seriously? You did not understand my post since you are indicating that I am trying to take her money, which is rather offensive. I am trying to get the account closed and moved into an account she can use for her tuition. I want the account to be hers with HER name on it ONLY. The push back is that I am being told that a liquidated UTMA can only be put into another UTMA. The reason I am given by multiple banks is that the check from the liquidated UTMA will be titled exactly as the UTMA, and therefore cannot be deposited into anything other than another custodial account. I don’t see how this can be true. I want the money in her name only and I cannot figure out a way to do this.

Eighteen year olds can open their own non-custodial 529 accounts. If your preferred plan won’t permit it, despite there being no outside rule against it, she should use some other plan. Or she could just put it in a checking account, since there won’t be significant income in the short time before she pays the tuition with it.

You can’t do any of it, though, any more than you could open an account in my name.

The check can be written exactly as the account is titled- and then you both endorse the back of the check, and deposit it anywhere you want-- her current checking account is fine, no need to open a new account. If you want to be super cautious, have your D present a copy of her birth certificate at the bank when she goes to deposit the check. You are making this too hard- if the check is made out to both of you, you both need to endorse it. That’s it.

Not sure why she would want to run this through a 529 if it is going to be spent soon. Yes, she can deposit the funds in an account and use them. She could open a 529 (regular not custodial) if she really wants to with herself as the beneficiary. However, the benefit of tax free growth is likely to be little to none.

@blossom thanks. Trust me, I’m not the one making it hard. It’s the bank I’m dealing with I suppose. I should have prefaced this to say that we went through this entire scenario last year and ended up having to call the regional head of Capital One to get permission for my son to deposit his custodial check into his non-custodial account. He was 21 at the time.

@Eeyore123 agree.

You can’t just do what you did last time?

If this is the same bank as last year, then sit down with the manager, list the steps that were followed last year, and get the job done. If this is a different bank, list the steps that were followed, and ask why it is that their process is different.

My guess is that the manager doesn’t have much experience with this kind of account and so doesn’t know how to deal with it.