Ohio law now allows a donor to direct a custodial account for a minor to be held until the beneficiary turns age 25. An account established prior to this change, and irrespective of its value, is required to be distributed to the beneficiary at age 21 — giving the beneficiary much reason to celebrate and parents cause for headaches. The recent change will help to alleviate these concerns in the future by allowing the custodian to manage the account until the beneficiary is through college and early adulthood.

In order to delay the payout of the account to the beneficiary after age 21 (but not beyond age 25), the donor will have to specify the later age at the time the account is established. If a later age is not specified, the account must be paid out at age 21.

The new law applies to accounts created after April 6, 2017, so existing accounts will not be able to be held beyond age 21.

The new law provides a limited right for the beneficiary to withdraw the account at age 21, which allows a donor’s transfer to the account to qualify for the gift tax annual exclusion (currently $14,000 per year, per donee). However, the donor can elect to not give the beneficiary this right and the custodian has no obligation to notify the beneficiary of such right.

As previously allowed, the donor or custodian may designate successor custodians, avoiding probate court involvement upon the custodian’s death or inability to serve.

These recent changes have made custodial accounts more practical and flexible gifting tools. For some beneficiaries, the champagne flutes will just have to stay on the shelf for a few more years.