What is meant by UTMA?
• UTMA refers to the Uniform Transfer to Minors Act. The Uniform Transfers to Minors Act allows parents, grandparents, relatives and friends to make irrevocable transfers in any amount to a UTMA account. UTMA accounts are not specifically designed to provide financing for college, however many parents use UTMAs for this purpose. The money belongs to the minor but is controlled by a custodian until the minor reaches the age of majority. • Advantage of UTMA: • Income taxes on income-producing assets will be in the name of the child, who is likely to be in a lower tax bracket. • A UTMA is simpler to set up than a trust and does not require a separate income tax return. • Disadvantage of UTMA: • Transfers to UTMA accounts are irrevocable transfers. The asset cannot be reclaimed or given back and once the child reaches the age of majority, the child can use or dispose of the assets as they see fit. • A UTMA account in the name of the child may reduce the amount of financial aid the child is
