The Surfer and the UTMA (How It All Went Wrong For Two Caring Parents)

By Ned Armand, President of Eastern Point Trust Company

An UGMA was depleted because of the ebb and flow of a career in surfing

When a passion for surfing led to unwarranted injuries, Skyler sought aid from his UGMA. Quickly, the funds were depleted, leaving his parents wishing that they had known about Kiss Trust.

Key Takeaways

When Dave and Brenda learned that Dave’s parents had left a fairly large bequest to their son, Skyler, they were delighted.  Skyler was their only child, and since Dave was an only child the amount inherited was easily enough to cover four years of college and the expenses associated with starting life after school.

Being devoted parents, Dave and Brenda put the money into an UGMA (Uniform Gift to Minor Account), where it would earn interest.  When Skyler turned 18, the account would transfer to him and he would have the money available to concentrate on his studies at college without having to get a job outside school.

Living in Florida, the whole family spent a lot of time at the beach, and Skyler learned at a young age that he had an affinity and a talent for surfing.  He won his first competition at the age of 11, and by the time he was 16 he had an entire wall full of trophies he had won from all across the East Coast, and even two from tougher competitions in California.  His parents were very proud, but always emphasized that surfing was a hobby and that academics came first.

As graduation time approached, Skyler began to bristle at his parents’ insistence on grades and studies over his beloved surfboard. He’d put in applications at several colleges, especially in California where he knew he’d have better access to big waves, and his good grades got him accepted in several.  However, when he turned 18 two months before graduation and learned about the UGMA which would be his, he abruptly decided that college could wait.  To his parents’ chagrin, he graduated, took the lump sum from the UGMA and headed for the West Coast, determined to make his living with his surfboard.

He soon learned that paying for your own food, lodging and expenses really cut into the infrequent winnings from competitions, and an ankle injury sidelined him for an entire season.  He started giving lessons to get regular money coming in, but he had trouble competing with older surfers who had years of experience and championships to recommend them to potential students. He kept having to tap into the UGMA funds, and within four years he had drained it.

Skyler was left with no savings, no real job experience, and his surfboard. He moved back home with Dave and Brenda, got a job at a sporting goods store selling the surf equipment he once thought would be his livelihood and started saving up for classes at community college.

This situation could have easily been prevented had Dave and Brenda taken the generous bequest and put it into a third-party managed trust, such as those offered byEastern Point Trust Company through Kiss Trust.  The trust allows for grantors to set requirements for distributions, such as graduating high school, going to college, and maintaining good grades among many other options. It also allows grantors to build in penalties for bad behavior, failure to complete school or even criminal activity or substance abuse.

Instead of Skyler being in his early 20s with very little money and a long road ahead of him to get to a successful life, a Kiss Trust would helped him strive for his work passion, instead of giving him an easy way out.

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by Ned Armand, President of Eastern Point Trust Company

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