If the custodian for a Uniform Gifts to Minors (UGMA) account dies before the minor beneficiary reaches legal age, the transferred property is included in the deceased donor's gross estate for federal estate tax purposes even though the property belongs to the minor from the instant the UGMA gift is made. The custodial property must be turned over to the minor when the minor attains the age specified in the UGMA law of the state in which the gift is made. In most states, the age is 18, but in some states it is 21.
Read more: http://www.answers.com/topic/uniform-gifts-to-minors-act#ixzz2Ljt6l5Mk and http://www.investopedia.com/terms/u/ugma.asp#axzz2LjttF0zU
To avoid this situation, a donor who is also a custodian can change the account so that someone else (for example, a trusted family member) is named as a successor custodian. Check with the financial institution holding the UTMA funds for details about the required paperwork.
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