Uniform Transfers to Minors Act
The Uniform Transfers to Minors Act (UTMA) allows a minor to receive gifts without the aid of a guardian or trustee. The minor can avoid tax consequences until they attain legal age for the state.
Who is the beneficiary of a UTMA account?
A UTMA account belongs to the minor beneficiary. The custodian operates as a sort of trustee, with a duty to hold the money for the benefit of the minor. When the minor reaches a certain age, he or she is entitled to receive the balance of the UTMA account.
Can an UTMA account have a beneficiary?
There is no provision for naming a POD beneficiary on a UTMA account. As the funds belong to the minor from the date of deposit, only the minor could possibly have the right to name a beneficiary anyway. Generally, parties below the age of 18 are not considered to have “testamentary capacity.”
Can a parent withdraw money from a UTMA account?
A parent can withdraw money from a UTMA account provided that they’re the custodian of the account, but the custodian can only spend the withdrawn funds on the minor’s behalf and for their benefit.
Who is the custodian of UGMA and UTMA accounts?
UGMA and UTMA Custodial Accounts allow adults to make financial gifts to a beneficiary while naming someone else (including themselves) as the custodian of the account. The crucial word for these accounts is “gift.”
When do you transfer control of an UGMA account to a beneficiary?
Here are the logistical details: The adult custodian opens the account for a specific beneficiary. The adult can then add money to the account and choose investments. When the child reaches the age of majority specified by the state, control of the account must be transferred to them.
When to open a UGMA / UTMA account for your kids?
Typically the money is released to the minor at the age of majority (usually 21 but sometimes 18 or other ages). How do UGMA and UTMA accounts differ from 529 plans? 529 plans can only be used for educational expenses, while UGMA/UTMA accounts can be used for anything that benefits the child. .
How old do you have to be to roll over a UTMA account?
The money invested is considered a gift to the child, but it can be rolled over to another beneficiary if the first doesn’t have qualifying education expenses by age 30. Better yet, you do not have to use this account only for college costs.
