Uniform Transfers to Minors Act (UTMA)
If you want to give an irrevocable gift to a minor, while reducing tax liability, a UTMA custodial account may be right for you.
You control the money in the account until the child reaches a majority age. There is no limit on how much you can contribute. Earnings and withdrawals are subject to taxation.
Principal UTMA account details:
|Minimum to open account||
|Annual Contribution Limits||
|Deductibility of Contributions||
What are the advantages of a UTMA account?
- Wide choice of investment options
- Easy to start
- No earnings restrictions
- Tax liability of money invested in a minor's name may be lower than the taxes due on the same money if it were a regular account (under an adult's name). Currently, annual earnings are taxed as follows:
|Under 14 years of age||14 years or older|
What are the disadvantages of a UTMA account?
- Withdrawals are taxable
- Child owns account at majority age (18 or 21) - can use the money for non-education expenses
- May affect financial aid - considered a student asset
- Earnings taxable in current year
If you have questions, please contact us at 1.800.222.5852.