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What is the difference between a UTMA and UGMA?

What is the difference between a UTMA and UGMA?

UGMA and UTMA accounts allow parents to save money and invest, maintain full control until their child is an adult. UTMA stands for Uniform Transfers to Minors Act, and UGMA stands for Universal Gifts to Minors Act. Both accounts allow you to transfer financial assets to a minor without establishing a trust.

What does UTMA mean on a bank statement?

Uniform Transfer to Minors Act
The terms of this trust are established by a state statute instead of a trust document. The Uniform Transfer to Minors Act (UTMA) is similar, but also allows minors to own other types of property, such as real estate, fine art, patents and royalties, and for the transfers to occur through inheritance.

Which is better UGMA or UTMA?

The biggest difference between UGMA and UTMA accounts is that UTMAs allow for more types of assets. While UGMA accounts are typically limited to things you find in most IRAs like stocks, bonds, and mutual funds, UTMAs can also hold things like real estate, art, patents, and even cars.

Can a custodian withdraw from an UTMA account?

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money from a UTMA account provided that they’re the custodian of the account, but the custodian can only spend the withdrawn funds on the minor’s behalf and for their benefit.

What do you need to know about UGMA / UTMA?

…You plan to apply for financial aid. UGMA / UTMAs count as student assets, which are weighted 20% in FAFSA calculations, meaning students will be expected to draw down 20% of the UGMA / UTMA to finance their educations each year.

Which is better a 529 plan or an UGMA / UTMA?

529 plans and Coverdell Education Savings Accounts offer greater tax advantages than UGMA / UTMAs for saving larger amounts of money, but they all require expenditures on education. If you want an account that offers more flexibility in how you spend the money, an UGMA / UTMA might be the right fit.

What are the tax implications of an UGMA account?

Tax Implications of UGMA vs. UTMA Accounts. UGMA and UTMA accounts are not tax-deferred assets. All gains on investment properties are taxed as normal, and the creator of the account may choose to pay these capital gains taxes on behalf of the recipient.

Who is the custodian of the UTMA account?

The account custodian manages any investment assets in the UGMA or UTMA account. The custodian can also withdraw funds to cover expenses related to the welfare or education of the minor recipient. You can name yourself custodian of the account, although that does not change the irrevocable nature of the transfer.