UTMA Custodial Account

UTMA custodial savings accounts are established under the Uniform Transfers to Minors Act for the benefit of a minor child and managed by a parent or another designated custodian until the child reaches statutory age (usually age 18 or 21, depending on the state). 

Benefits

  • Funds must be used for the benefit of the child (not limited to education)
  • After the account is established, anyone can make contributions
  • Less expensive than setting up a trust
  • Donors can gift securities that have gained in value or cash

Considerations

  • Once the child reaches statutory age (usually age 21), the account terminates and
    he or she can use the funds as they wish
  • Gifts made to the account are irrevocable
  • Funds are not transferable to another beneficiary
  • Considered student assets for federal financial aid purposes
  • Income subject to “kiddie tax” – parent responsible for making sure a tax return is filed on the child’s behalf (see your tax advisor)

Details

Income Limits
  • No Limits
Annual Contribution Limits
  • No limits
  • Contribute up to $12,000 per child (single filers), $24,000 per child (joint filers)1
Tax Considerations
  • The first $850 of earnings each year are tax-free for children under 18. Income earned is subject to federal and state taxes
Compare Education Accounts

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Disclosures:

  1. Higher contributions will be subject to federal gift tax regulations.
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