Hi Reader,
While UTMA accounts are a popular way to gift and invest for minors, they require careful consideration:
✅ Irrevocable Gift – Once contributed, the funds legally belong to the minor. The beneficiary cannot be changed, and funds must be used for their benefit.
✅ Tax Implications – The first $2,700 of unearned income is taxed at the child’s rate, but anything above that is taxed at the custodian's rate (a.k.a. Kiddie Tax).
✅ Financial Aid Impact – UTMA assets are considered student-owned, which can reduce financial aid eligibility. In contrast, 529 plans are treated as parental assets and have a lower impact.
✅ Control typically from age 18-21 – At the “age of trust termination” (varies by state), the minor gains full control of the funds—whether they’re ready or not.
While UTMAs are set up with good intentions, I’ve seen stress and regret when a minor approaches the age of termination.
Make sure this account aligns with your long-term goals before moving forward.
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David N. Waldrop, CFP®
Owner of Bridgeview Capital Advisors, Inc. a Registered Investment Advisor.
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