The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA) established accounts that allow adults, usually the parent, to transfer assets to a minor without the need to establish a special trust. The beneficiary assumes full control at age of majority (18 or 21 depending on the state).
The main difference between an UTMA and UGMA is what kind of assets they can hold. Assets within an UGMA are limited to bank deposits, stocks, bonds, mutual funds, and other securities and insurance policies. UTMAs, on the other hand, allow almost any kind of asset, including real estate.
- Contributions are irrevocable transfers to the beneficiary
- A custodian manages the assets on the minor’s behalf
- Do not have to be used for educational purposes
- Assets are considered the student’s for financial aid purposes
- Contributions are not tax deductible