UGMA/UTMA

These options, established under the Uniform Gifts/Transfers to Minors Act, enable you to transfer ownership of assets to your child without needing to establish a more costly trust. UGMA investment options include cash, bank accounts, stocks, bonds and mutual funds; UTMA options may also include real estate, limited partnerships, fine art patents and royalties.

Contributions

  • $15,000 for individuals, $30,000 for married couples, per beneficiary per year
  • No limit on income to contribute
  • No age limitation to contribute

Deductions

  • Not tax-deductible

Withdrawals

  • Control of withdrawals transfers to child upon age of majority (or later if state law permits)
  • Proceeds used are available to any types of expenses for child's benefit

Taxation

  • Accounts are taxable; Kiddie Tax: Under age 19 or students under age 24, any investment income over $2,100 taxed at trust and estate tax rates
  • No withdrawal penalties

Other

  • Accounts are assets of the beneficiary
  • Reduces federal aid by 20% of the UTMA/UGMA value
  • Plan beneficiaries cannot be changed
  • Typically, plan funds are removed from the donor's estate unless the donor dies while acting as custodian

 

Source: Raymond James MFRM-01630518