It is fairly common for parents to establish and fund financial accounts in the name of their minor child. Often this is done in anticipation of the child’s college education expenses, to create savings for the child, or for estate planning purposes. Depending on the type of account, the age of the child, and the purpose for which the account is created, the account may be titled in the child’s individual name, as a joint account with one or both parents, or established as a custodial account pursuant to the Uniform Gift to Minor Act (UGMA) or Uniform Transfers to Minor Act (UTMA).
Parties often wonder how to treat these accounts when they separate and begin the process of dividing their marital property. If an account has been funded or acquired with marital monies, is it considered marital property that is subject to division between the parties? What if one party contends that such an account was established or funded by the other party in an attempt to hide, conceal or divert marital assets from the marital estate?
A custodial account established in the name of a minor child is presumed to be an asset of the child and a gift from whomever donated and/or funded the account. An account held solely in the name of an adult child is presumed to be the property of the adult child. However, when a party to an equitable distribution action contends that the other party transferred or deposited funds (or other assets) into an account titled in the child’s name for the purpose of hiding, concealing, or diverting funds or assets from the parties’ marital estate, then the child becomes a necessary party to the legal action so that the trial court can obtain jurisdiction to determine the legal owner(s) of the assets in the account. This procedure is necessary, regardless of whether the child is a minor or an adult.
A judge presiding over an equitable distribution action does not have authority to distribute an asset that is not owned by one of the parties to the equitable distribution action. When a child holds legal title to an asset that is claimed to be marital property, then the child must be made a party to the equitable distribution action, with their participation limited to the issue of determining ownership of the asset. If the child is not made a party to the legal action, then the trial judge does not have jurisdiction to enter an order affecting title to the asset held in the child’s name, and the asset cannot be distributed in the equitable distribution action.