What are the advantages of opening a UGMA/UTMA account?
A UGMA or UTMA lets a donor transfer ownership of assets to a minor and control how the assets are invested until the child reaches the age of majority. The age of majority is the age at which the child is old enough to assume control of the account, and is determined by the state in which the minor resides. The tax benefit associated with this is that your assets will be taxed at the child’s tax rate, which may be considerably lower than your own. You must check with your state to see what the tax rate is for minors. Each donor may provide gifts up to $13,000 per child per year on or after January 1, 2009, without being subject to federal gift taxes.
