What is a Uniform Gift to Minors Act (UGMA) Account?
A Uniform Gift to Minors Act Account (UGMA), called a Uniform Transfer to Minors Act Account (UTMA) in some states, allows an adult to act as a custodian and open an account on behalf of a minor. This type of account allows a minor to hold securities in their name and once the minor reaches the age of majority (usually 18 or 21 years old), they can readily access and withdraw the money for any purpose. Donors are currently allowed to contribute up to $13,000 per child per year, free of gift tax consequences. For a child under the age of 18 (24 in the case of a full-time student whose earned income does not exceed one-half of the student’s support), the first $900 of unearned income such as investment earnings each year is tax-free, the next $900 is taxed at the child’s rate (10-15%) and any unearned income above $1,800 is taxed at the parent’s top tax rate. Rather than filing returns for the child, the parents may elect to include the child’s unearned income on the parents’ return. How
