Course: Estate Planning
Lesson 13: Case Study Online

Student Question:

If a check given by Mary to Peter was deposited into a custodial account where Mary was the custodian, doesn’t that mean that Mary didn’t give up ALL control, so it’s not a completed gift?

Thanks,

Megan


Instructor Response:

Hi Megan,

That’s a great way to approach completed gift questions! Generally, the donor must give up all ownership and control.  

As an exception, a gift is deemed a completed gift if the donor retains only the power to control beneficial use and enjoyment to a defined class of donees (which must exclude the donor). In this case, the custodian has a fiduciary (legal) obligation to use custodial funds exclusively for the donee’s benefit.  While the custodian controls the timing and amount of distributions from the custodial account, the gift is a completed gift by exception to the general rule. 

Onward and Upward,

Bruce