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About Uniform Gifts to Minors Act / Uniform Transfers to Minors Act Accounts (UGMA/UTMA)

A UGMA/UTMA account provides a way for an adult to transfer assets to a minor. These acts, which most states have established, prevent families from having to hire an attorney to draw up a special trust in order for a minor to own securities. While not specifically designed as college savings accounts, they are used for this purpose because the assets belong to the minor when he reaches the age of majority in his state. He then may use those assets to pay college expenses.


Maximum Investment No Limit.
Account Control Custodian before child reaches age of majority; the child takes control after reaching age of majority.
Permissible Use of Funds
  • Custodian — Any reasonable expense for the child.
  • Child 18 or older — Any expense, college or non-college related.
Income Tax Treatment For children under age 18:
  • First $950 of unearned income is tax-exempt.
  • Next $950 is taxed at the child's rate.
  • More than $1,900 taxed at the parent's rate.
Estate and Gift Tax Advantages Contributions qualify for the $14,000 ($28,000 for married couples) gift tax exclusion.
Income Restriction None.
Tax Credit Affected No.
Penalties Limiting Flexibility Money can be used at any time for the benefit of the child without penalty.
Financial Aid Treatment Student's assets; may affect amount of financial aid received.

UGMA/UTMA Benefits and Considerations

  • Contribute as much as you want up to $14,000 per year ($28,000 for a married couples) without paying federal gift tax.
  • Anyone can open or contribute on behalf of a child.
  • The custodian does not own the assets and any withdrawals before the child reaches the age of majority must be for the child's benefit.
  • Once the child reaches the age of majority, the assets become his to use however he pleases.

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