Generally, minor children (those under 18 years of age, depending on state laws) cannot own property because they are not old enough to enter into legal contracts. Therefore, property in a minor’s possession is typically owned by a parent. Deportation of a parent can thus disrupt the child’s possession or use of the property, including access to a bank account, vehicle, home, and other personal property. While you should consider granting power of attorney to a trusted individual who will remain in the U.S. to handle financial matters in case of deportation, you might also consider transferring assets for the benefit of the citizen child. Similarly, if you currently hold property for the benefit of your minor child, you should consider transferring custodianship or trusteeship to an individual who will remain in the U.S. in case you are deported. When assets are currently held in trust for the citizen child and the trustee is not subject to deportation, action may not be needed.
The Uniform Transfers to Minors Act
Every state has adopted some form of the Uniform Transfers to Minors Act (UTMA). The UTMA permits the transfer of a wide variety of property—including real or personal and tangible or intangible property—to a custodian for the benefit of a minor.
Transfers under the UTMA are irrevocable and leave the donor with no legal or equitable rights in the property. The owner transfers “legal title” of the property to an adult (custodian) while the minor retains “equitable title.” Equitable title means that the child gets the benefits of the property but cannot sell or mortgage the property until becoming a legal adult.
The custodian has broad powers regarding the use of the assets for the child. For example, the custodian may use the funds toward the child’s rent, utilities, car payments and repair bills, activities, and spending money, in addition to expenses such as education and medical care. However, the custodian has a fiduciary duty to the child to manage the funds as “would be observed by a prudent person dealing with property of another.” Accordingly, the custodian can be personally responsible for losses of the child’s property if found to have acted imprudently. The child generally has a right of accounting, which requires the custodian to document what has happened to the child’s property. Most state laws hold that an account under UTMA must be turned over to the child when they turn 21. In some states, this can be extended to age 25.
UTMA agreements are popular because they can be made with a simple writing, can appoint additional adults as substitute custodians, and generally do not require an attorney. However, in order for the state Transfers to Minors Act (TMA) to apply to a transfer, the agreement must explicitly state that the agreement is made pursuant to the state TMA. Assets may be identified by general description, but property not included in the document or inadequately identified will not be transferred.
As a general rule, custodial accounts under the TMA should not be used for significant gifts or for a series of gifts that will grow over time. UTMA accounts do not guarantee that funds will be used for a specific purpose and the entire amount of the account will be transferred to the child for uninhibited use at the age of maturity. Also, when a significant amount of assets—more than a few thousand dollars—are transferred in a TMA agreement, courts may intervene to create a trust for management of the assets. Courts may require investment of assets for return at a later time, or create a “blocked” account that permits withdrawals only by a court order.
Trusts, Guardianships, and Conservatorships
State law also provides for the creation of more formal arrangements for the management of assets, including: trusts; co‐signed accounts or title documents; guardianships; or conservatorships. These arrangements are generally more appropriate for assets of significant value or when more complex schemes are desired to protect property from transferring to your citizen child immediately upon their reaching the age of maturity (generally, 21), or by creating special restrictions that assets be used for a specific purpose (e.g., education).
When the Departing Parent is the Custodian or Trustee
If you are facing deportation and are the custodian or trustee of your child’s property, and your child is remaining behind in the U.S., you should have an alternate custodian named to control and protect the assets. If an alternate custodian was named in the original document, they may simply step into the role of custodian. In California, if the child has reached the age of 14, the child may appoint a new custodian who is a member of the minor’s family. Other states may have similar or additional rules. For other situations, the court may need to approve the new custodian or trustee, depending on the assets and the nature of the trust or custodial property.
If your child is leaving the U.S. with you and you are the trustee of their property, you should confer with an attorney experienced in this area before cashing‐out the assets and taking them out of the country. As the trustee or custodian, you are obligated to protect the assets for your child, and the specific requirements for protection will vary depending on the specifics of the original arrangement. The specific rules of states may vary.
Restrictions on Transfer
Other laws, such as those governing the transfer of securities or investments, may require additional action for a transfer to be effective and enforceable. In an effort to protect the greatest amount of property, you should aim to include all potential property in a transfer, knowing that some transfers may be affected by other laws.
Taxes
Generally, special tax rules apply to assets held by minors. In some circumstances a minor will be taxed at the parent’s or guardian’s tax rate, and in other circumstances, special exclusions and tax rates may apply. If the minor’s assets produce an income or a capital gain over a certain amount, taxes must be paid. Moreover, tax rates change regularly.
Personal Liability
The transfer of some property (e.g., real estate and motor vehicles) may create personal liability. For example, personal injury claims may be made against the owner of a motor vehicle or property even when the owner is a minor.
Emancipation
Emancipation is the legal process through which a minor, typically not less than the age of 16, can petition a court to be legally recognized as an adult. An emancipated minor may fully own property and enter into legally binding contracts. Because of the gravity of the order, the minor must demonstrate that they are sufficiently mature to manage their own financial and health-related affairs. If your citizen child is supported by family and friends who will remain in the U.S., emancipation may not be needed. However, in some cases, emancipation avoids the use of a custodian to transfer property or create a trust.