Answer:
Most states replaced the UGMA with the UTMA some time ago. However, your acronym may be appropriate, depending on the statute in effect in your state at the time the account was opened. Before you do anything else, please review your state's statute in detail to verify that it uses age 18 as the date when delivery is to be made. (The model version of UTMA uses age 21.) The following answer is based on the model language which your state may or may not have adopted.
When the child reaches the age set out in the statute he or she is entitled to delivery of the funds from the custodian. If the custodian fails to deliver, the child (now an adult) can go to court to force an accounting and delivery. The depository institution has neither the obligation nor the right to make delivery to the child. The child is a third party beneficiary of the contract, but your contract is with the custodian, not the child.
When a custodian makes a withdrawal from a UGMA/UTMA account the preferred practice is for the bank to make the check payable exactly the way the account is set up; e.g. "Jane Doe Beneficiary XUTMA, John Doe Custodian." Now, John can endorse the check over to Jane or, if he chooses, he can endorse it and deposit to his own account.
Your institution is not the policeman on UGMA/UTMA accounts. Generally, you have no responsibility for a breach of the custodian's fiduciary duty unless your institution benefited from the breach. For example, you let the custodian pledge the account as security for a loan.
First published on BankersOnline.com 3/4/02
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