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).
- 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
- 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)
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- Higher contributions will be subject to federal gift tax regulations.
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Mutual funds, annuities, and other investment products:
Not FDIC-insured May lose value No bank guarantee
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