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Vanderbilt Law Review

First Page

495

Abstract

The current treatment of uniform gifts as creating interests in only one person for gift tax purposes, and as creating interests in others as well for income and estate tax purposes, is inappropriate. Resolution of the underlying ambiguity within the Uniform Gifts to Minors Act would produce a more uniform tax treatment. If section 4(b) were modified to state clearly that the custodian is not empowered to use the fund to discharge parental support duties,no change would occur in the gift tax treatment. Income tax liability would be incurred by only the minor donee, the result presumably desired by most donors. Situations in which the estate tax is imposed would remain unchanged, but different Code authority would apply. On the other hand, if section 3(a) were modified to limit expressly the interest of the minor in the custodial fund by recognizing the interest in the parent, only the gift tax treatment would be affected.The framers of the UGMA intended to facilitate the conveyance of property to minor donees by creating the custodial relationship. Eliminating the custodian's authority to use the uniform gift fund to discharge parental duties to support the minor donee would be consistent with this general purpose. Clarifying section 4(b) to allow use of the fund only for the benefit of the minor do-nee would produce changes in the income and estate taxation of custodial property that are reconcilable with the current gift tax treatment of uniform gifts.Outside the area of federal taxation, the ambiguity in the Uniform Act regarding the availability of custodial funds for the sup-port of the minor donee has generated uncertainty and needless litigation centered around the ownership of UGMA property. Section 3(a) indicates that only the minor donee has an interest, while section 4(b) indicates that both the minor and the minor's parents have interests in the custodial fund. Resolution of this ambiguity,by amending section 4(b) in the manner proposed in this Article,would introduce a desirable element of certainty to the custodial relationship created by the Uniform Gifts to Minors Act.

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