What is the Age of Majority?

November 4, 2021
financial gifting

Let’s face it: kids don’t stay kids for long. They grow up in the blink of an eye — and before you know it, they’re adults. 

But, when exactly is the age that suddenly transforms children into adults? 

For many, it’s the “age of majority.”

But, what exactly is that? And how is it different from the legal age? 

We’ll explain what the age of majority is, how to find it in your state, and how it differs from other terms like legal age.

Then, we'll walk you through what happens when children hit this age and what you should do to prepare for this milestone. 

What is the Age of Majority: A Definition

The age of majority is the age at which a child becomes an adult in the eyes of the law. 

Why is it called the age of majority? 

In the context of U.S. law, the term “majority” means that adults are considered responsible for the majority of things they do. Some things are going to be out of your control — like getting sick. But generally speaking, as an adult you’re held accountable for most things.

You’ve probably already guessed where the term “minor” stems from. It describes children who can only be held responsible for some (or a “minority”) of their actions. 

If a person is in the age of minority, a parent or legal guardian is responsible for most of a child’s actions.

Illustration of man with daughter on shoulders walking past line chart.

That all changes when they hit the age of majority. Unlike a legal age (which we’ll cover in a minute), the age of majority isn’t set in stone by federal mandate.

State governments decide the age of majority, so it varies from state to state. In most U.S. states, the age of majority is either 18 or 21.

But there are special cases where a child can be considered part of the majority without reaching this milestone. 

For example, a court could grant emancipation to a legal minor, making them a legal adult before they’ve reached the age of 18. 

There are a number of reasons a child may become emancipated. Often, it’s because the minor wishes to leave their parent or guardian’s home and become self-sufficient. 

Some states will also grant emancipation to minors wanting to get married or join the military before they reach 18. 

When a person hits the age of majority, they’re viewed as a legal adult. 

Someone who’s reached the age of majority can sign their own contracts, purchase assets, file a lawsuit, and just about anything else the adults in their life have been doing.

They’re also now responsible for most of their own actions and can take ownership over their finances.

This is particularly important if you’ve been saving up for a child’s financial future using an investment vehicle like a custodial account. (We’ll break down exactly why that’s important and how the age of majority impacts custodial account assets shortly.)

The age of majority in your state won’t affect the voting age, drinking age, smoking age, military age, or when you can buy a lottery ticket. These all fall under ‘legal age,’ which we’ll cover next. 

What is the difference between the age of majority and legal age?

The terms “age of majority” and “legal age” are often used interchangeably. The truth is, they mean two totally different things.

We’ve already covered what the age of majority is. The age of majority is the state-appointed age at which you become an adult. You’re then legally responsible for most things in your life.

Legal ages work a little bit differently. 

The age of legal majority is the age at which a child is granted the legal status of an adult — but the term ‘legal age’ can apply to a range of activities in different ways. 

When you hear about legal voting ages or legal drinking ages, people are talking about a “legal age of license.”

A legal age of license is a particular age of legal majority that pertains to just one thing. 

Some of those legal ages are determined by the federal U.S. government. Others are delegated to state governments. 

For example, the legal age of license to drink alcohol in the U.S. is 21. The legal age of license to vote in federal elections in the U.S. is 18. That same age (18) applies to playing the lottery or joining the army. 

On the flip side, states tend to have very different rules on when minors can get their hands on an unrestricted driver’s license. 

The age of consent (age when someone may legally consent to a sexual relationship) is different in some U.S. states, too.

age of consent by state in the US
(Image Source)

The point is, you can reach the age of majority in your state without having reached the legal age to do something and vice versa. 

For example, you reach the age of majority in California when you turn 18 — but you still haven’t got a legal age of license to buy a beer.

What is the Age of Majority in My State?

Although the U.S. government has established the legal age of license for a few statutory rights, like when somebody gets to start voting in elections, politicians on Capitol Hill have no say over the age of majority.

Each state has the right to determine its own age of majority. 

In the 1970s, there was a movement in many states to lower the age of majority from 21 to 18.

Now, 18 is the most common age of majority in U.S. states, but there are exceptions.

If you live in Alabama, Colorado, Maryland, or Nebraska, the age of majority is 19. If you live in the District of Columbia (DC), Indiana, Mississippi, or New York, the age of majority is 21. In every other state, it’s 18.

But if you’re looking for the age of majority in your state as it pertains to financials, things aren’t quite so clear-cut.

What’s the age of majority for custodial accounts?

Custodial accounts are a fantastic way to invest in a child’s financial future, and they’re pretty straightforward.

When an adult opens a custodial account, they name a minor beneficiary. Every asset that gets placed into the account then becomes the legal property of that minor, and the adult manages the assets as its “custodian” until the child reaches the age of majority.

This is also called the “age of termination” because it ends the custodianship.

There are two types of custodial accounts you can choose from when investing for a child — and in a lot of states, the age of majority varies based on the account type you pick.

Adults can either set up a Uniform Gifts to Minors Act (UGMA) account or a Uniform Transfers to Minors Act (UTMA) account. 

The key difference between the two is that UTMA accounts can hold a wider variety of assets, but they aren’t legal in every state, while you can set up a UGMA custodial account in every state. 

The age of majority for UTMA accounts is also normally higher than UGMA accounts. Here’s a table breaking down the age of majority for each account type by state: 

Table showing UGMA and UTMA ages of majority by state.
Table showing UGMA and UTMA ages of majority by state.
Table showing UGMA and UTMA ages of majority by state.
(Image source)

With a UGMA account, the age of majority in every state is either 18 or 21.

But the UTMA age of majority varies from 18 to 25. In some states, that age isn’t set in stone — the custodian gets to choose the exact age (within the given range). 

For example, in Florida, an adult can set up a UTMA that ends when a child reaches any age from 21 to 25 — the custodian decides.

Translation: just because a child has reached the age of majority in their state doesn’t necessarily mean they’ve reached the age of majority for a custodial account. 

For example, the state age of majority in Wyoming is 18. But you can’t take ownership over the assets in a UTMA custodial account there until you’re 21.

That means you’ve got to do your homework beforehand and make sure you understand the state rules on custodial accounts and the age of majority. 

By planning, you’ll be able to make sure the rules work for you and the child in your life when it comes time to pass on the wealth you’ve accumulated for them.

What Happens When My Dependent Reaches the Age of Majority?

When your dependent child reaches the age of majority, there’s a transfer of majority rights that takes place. In some respects, this is done automatically — in others, both the child and their parent or guardian will be notified in advance of what can or must be done moving forward.

Likewise, if you’ve been investing for a child using an investment vehicle like a UGMA custodial account, your account provider will also need to initiate a transfer of assets after the minor beneficiary hits the age of majority.

To help you wrap your head around these changes, we’ll quickly break down how the transfer of rights and assets work.

How does the transfer of rights work?

The “transfer of rights” is essentially just a fancy way to describe a child’s new legal status after they reach the age of majority in their state. On their birthday, the child is no longer a minor in the eyes of the law. 

This means they can make a legal decision just like any other adult.

This change takes place automatically — and in most states, it happens when a child turns 18. As we’ve already covered, there are a few exceptions.

But generally speaking, the transfer of rights happens when a child hits either 18 or 21 years old. It means they have the power to sign legal contracts, take responsibility for their own education and finances, and face the same penalties as an adult for breaking laws.

How does the transfer of assets work? 

As we’ve already covered, a transfer of rights and transfer of assets don’t work the same way. You can legally obtain most rights after hitting the age of majority in your state — but that won’t necessarily impact any looming transfer of assets.

To explain, let’s backtrack a bit and revisit custodial accounts.

If an adult sets up a UGMA custodial account and invests for a minor beneficiary, everything in that account is the child’s legal property. 

When that child reaches the age of majority in their state, the custodianship has got to be terminated. The adult no longer manages the assets, and ownership must be passed on to the child beneficiary.

This process is called the “transfer of assets.”

The exact process of that transfer can vary slightly based on the account provider. The custodian normally initiates the transfer. Account management will likely be restricted after the child reaches the age of majority until the transfer is made.

The account might then need to be changed to a different account type through the same provider, or the assets may be transferred to a separate account elsewhere.

Once the transfer of assets has been made, the fresh-faced grown-up in your life is free to use those assets however they want.

How to Help Prepare My Dependent for the Age of Majority 

Letting go of control can be tricky for adults. After all, we all want what’s best for the children in our lives — and sometimes it’s scary when you know the kids you love aren’t totally equipped to make financial decisions.

That’s why it’s critical you do everything you can now to help develop their financial literacy skills.

Financial literacy is the basic set of skills we use to make important financial decisions. Things like budgeting, how interest works, how stocks and bonds work, saving, and more are all core financial literacy components.

A great way to prepare a child before reaching the age of majority is to get them involved in the financial decisions you make. 

Sit down with them to discuss your monthly budgets. Encourage them to take part in that budgeting and ask questions.

Illustration showing girl placing coin in a piggy bank.

You can also help them set up their own savings account and start putting away their money, and push them to set financial goals that can be applied to those savings.

More importantly, you can invest in that child’s future using an investment vehicle like a custodial account. 

By investing now and explaining to your child as they grow up how those investments build using compound interest, you can get them involved in growing their own nest egg.

In turn, they’ll grow to understand the value of that investment. By the time they reach the age of majority, they’ll have enough financial maturity to use those assets wisely.

Conclusion

The age of majority is a critical part of every child’s life. Like it or not, the kids you love are going to reach the age of majority eventually. When they do, there will be a transfer of rights and assets.

To prepare the kids you love for those transfers, you need to invest early and help them develop the financial literacy skills they’ll need to make good choices with those investments. 

But with a little organization and a dynamic UGMA account, it can be quite simple.

Are you ready to start investing for the kids in your life? Download the EarlyBird app now.

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