Boy sitting at desk removing cash from a wallet.

In a brand-new case decided last week, the Colorado Court of Appeals held that a child’s funds held in a properly constituted Uniform Transfer to Minors Act (UTMA) account are not marital assets, and it was error for the trial court to divide the account between the parties on a spreadsheet.

In Nevedrova, the parties’ asset/debt spreadsheet included an account with $132,050 labeled “UGMA_UTMA.” The father’s spreadsheet listed this as a non-marital asset, whereas the mother included the balance as part of the marital estate. The trial court sided with the mother and divided the account equally between the parties, and the father appealed.

Child Assets in UTMA (Uniform Transfer to Minor’s Act) Account

Colorado’s UTMA codified at C.R.S. 11-50-101 et seq, provides a means by which assets can be invested in a child’s name, following a procedure set forth in C.R.S. 11-50-110, including a declaration that funds are held by “as custodian for _______ (name of minor) under the “Colorado Uniform Transfers to Minors Act.”

Legal Effect of UTMA Account

There are no “takebacks” – once funds are transferred to an UTMA account, that transfer is irrevocable. C.R.S. 11-50-112(2). It is legally the minor child’s property but has a custodian named to manage it. That custodian owes the child a fiduciary duty and cannot simply spend the funds as she deems fit. C.R.S. 11-50-113(2).

UTMA Account is Not Asset of Custodian

Logically, since the funds legally belong to the child, and the parent is merely the “custodian” who manages the account on the child’s behalf, those funds would not be marital assets. But there was very little case law in Colorado that was on point.

Gavel pounding down on stack of money in front of teddy bear.

In an earlier case, Ludwig, the trial court ordered the father removed as custodian over the parties’ child’s account set up under the UTMA precursor, the Uniform Gifts to Minors Act (UGMA). He appealed, and the court of appeals reversed, holding that the trial court only had jurisdiction over assets classified as marital, so only the district court, in a separate action pertaining to the UGMA account, could replace the custodian.

While Ludwig at least implies that because UGMA/UTMA accounts are property of the child, not the parents, they are beyond the jurisdiction of the domestic relations court, it did not expressly preclude a family law judge from finding UTMA assets to be marital.

The Nevedrova court has now clarified this point. The court briefly discussed the two relevant Colorado cases, as well as the weight of authority from other states holding that UTMA accounts were not marital property, and held:

“Therefore, we conclude that if the account was established under the UTMA, the district court erred by treating it as marital property and dividing the funds between husband and wife.”

Nevedrova, ¶ 14.

Note that this does not necessarily mean the issue is firmly settled. The court of appeals remanded the matter to the trial court to determine whether the father complied with UTMA in creating the account and transferring funds with the appropriate UTMA declaration.

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UTMA account

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