minor beneficiary
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 a child contribute to their own UTMA?
Who can make contributions to the UGMA/UTMA? Anyone can contribute to an UGMA/UTMA account, including grandparents, relatives, friends, and even the child. And there are no income restrictions limiting how much any of these individuals may give.
Can a parent withdraw money from a UTMA account?
Under the Uniform Transfers to Minors Act (UMTA), money deposited into a UTMA account cannot be withdrawn for any reason—except by the child at the appropriate age. In the United States, a child’s money does not belong to the child’s parents or guardians. If you’re thinking about spending your child’s UTMA money, think again.
Why do you need a UGMA / UTMA account for your kids?
The biggest advantage of UGMA/UTMA custodial accounts is their flexibility. Because they can be used for a wide array of expenses, you can use the money in the account even if your child chooses not to go to college.
What does UTMA stand for in savings account?
According to Vanguard’s website, these accounts “allow you to save on behalf of a child for education or any other purpose that benefits the child (other than parental obligations such as food, clothing, and shelter).” UTMA stands for Uniform Transfer to Minors Act. For simplicity sake, we’ll just refer to them as UTMAs.
What happens if you take money out of a UGMA account?
There are no IRS penalties on taking money out of a UGMA or UTMA account. Profits made on the liquidation of investments in a child’s UGMA or UTMA account are generally reported on the child’s tax return, but some or all might be included on the parent’s tax return, at the parent’s tax rate, depending on how the family files its federal taxes.
