Uniform Gifts to Minors Act Accounts

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Uniform Gifts to Minors Act Accounts

Most states have variations on the UGMA (sometimes called the UTMA) account, which allows anyone to transfer ownership of assets or an investment to a minor.

Here are some answers to some common questions:

• How much can I contribute to the plan? There is no limit to the amount you can contribute. Any amount beyond $18,000 is subject to the gift tax, however.
• What are the plan’s investment options? You can transfer cash, any mutual fund or stock, or property to the account.
• What are the taxes? Withdrawals are taxed at the recipient’s rate.
• Who controls the money? The money belongs to the recipient, not to you. You can, however, act as a custodian until the recipient reaches a set age. That age varies from state to state.
• Can the money in the plan be used for anything other than education? UGMAs can be used for anything (except parental obligations), not just college costs.

The biggest problem with the UGMA is the control you surrender. If Junior would rather spend the account on a new car than college, he can. It’s his money.