In Ferraro v. Ferraro, a new unpublished (not precedential) decision from the Appellate Division, the Court reaffirmed the notion that gifts made to children under the Uniform Transfers to Minors Act (UTMA) are "in addition to, not in substitution for, and does not affect any obligation of a person to support the minor." 

Before getting into the relevant facts in Ferraro, a brief review of UTMA’s underlying legal principles is instructive.  Generally, UTMA allows for the transfer "by irrevocable gift" to a custodian for a minor’s benefit.  The Appellate Division noted the statutory provision applicable to securities, which requires that such gifted securities be registered by the giftor in his or her own name, with the subsequent notation, "as custodian for . . . under the New Jersey Uniform Transfers to Minors Act."  The law establishes that the custodian’s responsibilities over such gifts include collecting, holding, managing, investing and reinvesting the custodial property for the minor’s benefit.  As highlighted at the outset of this entry, since the gift is vested in the children, it cannot be used by a parent custodian – who has a fiduciary duty over the gift – to fulfill his or her child support obligation.  It is for that reason why the gift must, unless stated otherwise, be transferred to the minor upon the minor turning 21 years old or the minor’s death.

That brings us to the facts in Ferraro, where the parties settlement agreement established the creation of two accounts with Merrill Lynch, designated in the agreement "to meet the post[-]secondary school educational needs of the children – both accounts are in the amount of $125,000."  Dad named himself as custodian of the accounts.  During post-judgment motion practice, Dad sought to modify his support obligation and, in response, Mom sought for Dad to turn over the accounts to her out of concern that he would liquidate same for his own use.  Interestingly, Dad responded at the time that he would use the accounts for the children’s college expenses "as agreed" and that he would not turn over to Mom any unused portion.  Mom’s application was denied at that time.

Almost 2 years later following more post-Judgment motion practice, the parties entered into a Consent Order, one term of which required Dad to pay Mom $500,000 to absolve him from any further child support or child-related expenses (including, but not limited to, health insurance, unreimbursed medical bills and college costs).  One year later in February 2010, Mom filed a motion seeking Dad to pay the money previously contained in the college accounts, since, as Mom feared, Dad had removed the funds for his own use.  Dad argued that the Consent Order disposed of any issues as to the accounts, even though they were not expressly mentioned in the Consent Order. 

Following oral argument, the trial court found that the account monies were irrevocable payments to the children and, since there was no specific agreement regarding whether the accounts were encompassed by the Consent Order, Dad’s actions were deemed improper.  Notably, the trial court stated, "These are the rights of the children.  The mother could not even waive it if she chose to, legally.  So the money has to be reinstalled into the children’s accounts." 

The Appellate Division agreed that the accounts at issue were covered by UTMA and, thus, irrevocable gifts for the children that were separate, apart, and in addition to Dad’s child support obligation.  As a result, neither parent had the right to divest the children of such funds, no matter what interpretation of the settlement agreement was argued before the court.  Interestingly, the matter was remanded because the trial court failed to determine whether the Consent Order and the underlying $500,000 payment made by Dad to Mom included a resolution of any issues involving money contained in the accounts.

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