Opinion
92196.
Decided November 4, 2009.
Leigh E. Anderson, Esq., Attorney for Plaintiff, Buffalo, NY.
Joseph L. Leone, Jr., Attorney for Defendant, Niagara Falls, NY.
This is a decision to determine whether Defendant should be held in contempt for converting funds in the Uniform Gift to Minors Act (UGMA) account held for the benefit of the parties' minor child, and whether Defendant should return the funds to the account. The parties entered into a Stipulated Settlement Agreement on December 10, 1997, which was incorporated into a Matrimonial Judgment of Divorce, granted February 9, 1998. The Agreement resolved issues of equitable distribution, and the support and care of minor child, Rebecca, born September 16, 1988. Specifically, the Agreement provided that Defendant set aside $9,000 for college for Rebecca, barring any unforeseen financial difficulty that would require him to reduce or eliminate the fund. According to the agreement, the fund was intended to be for Rebecca and Rebecca only, neither party having any claim, right, title, or interest in the money. The parties also agreed to joint custody of Rebecca, with Plaintiff having residential custody.
Rebecca enrolled at Fredonia State University in fall of 2006. From fall of 2006 to spring of 2009, Plaintiff paid $15,774.76 towards college expenses and Defendant paid $16,610.24. Plaintiff states she was pressured by Defendant to split college expenses 50/50, despite the fact that Defendant had earned more than Plaintiff during the relevant years.
On October 10, 2008, Defendant unilaterally closed the UGMA account and withdrew the entire amount of $14,148.88. Plaintiff sent a demand letter to Defendant's attorney, requesting that the money be returned to the fund. Defendant's attorney stated that all college expenses were paid from Defendant's personal funds in order to keep the UGMA account growing and he was simply reimbursing himself.
Plaintiff contends this "reimbursement" is in violation of the EPTL, as well as the Matrimonial Judgment and Agreement, and the monies should be returned to the fund until Rebecca reaches the age of 21. Plaintiff also argues that when Defendant withdrew the money from the UGMA account, he converted the funds back to a marital asset, and therefore could only have reimbursed himself for half. Therefore, Plaintiff contends that in the alternative, Defendant should pay Plaintiff $7,074.40.
Under EPTL § 7-6.4, a gift made under the UGMA is irrevocable. In re Estate of Ajamian, 270 AD2d 724, 707 (3rd Dept., 2000). A gift under the UGMA is found valid were there is evidence of delivery and donative intent. Id. A UGMA account established in accordance with EPTL § 7-4 is prima facie evidence that the gift was intended. Id. at 727. In this case, an irrevocable trust was created, as evidenced by the agreed upon Stipulated Settlement Agreement, which was incorporated into the Judgment of Divorce. Therefore, the money deposited into the account does not constitute marital assets and should not be deemed marital property. Contrast, N.B. v. R.B. , 12 Misc 3d 1153 (A), 15 (N.Y.Sup., 2006)(holding, the UGMA Account was not a proper custodial account and cash deposits were considered marital assets because the custodian testified she could access the account for her own benefit).
Moreover, under EPTL § 7-6.14(c), expenditure or payment into the account is not a substitute for and does not affect any obligation to support the minor. Therefore, UGMA funds cannot be used as a substitute for Defendant's obligation to support Rebecca and pay for her college expenses. The funds must only be held for the benefit of the minor donee. See Beece v. Beece, 289 AD2d 352, 353 (2nd Dept., 2001) (ordering Plaintiff to repay the amount withdrawn from the children's UGMA custodial accounts to pay her attorney). Therefore, Defendant is ordered to return the full amount withdrawn from the UGMA account. Due to an apparent lack of willfulness, the Defendant will not be held in contempt of Court for converting the funds.
Furthermore, a custodian shall transfer the custodial property to the minor, pursuant to EPTL § 7-6.20(a), when the minor turns 21. Therefore, as Rebecca is now 21, the account is now in her name and she can use the funds to cover college expenses, including her spring tuition bill should it be necessary.