What is Uniform Gift to Minors Act?
The Uniform Gifts to Minors Act (UGMA), superceded by the Uniform Transfers to Minors Act (UTMA) in some states, is simply a way for a minor to own property, such as securities. The UGMA/UTMA setup is commonly used to give monies to a minor. IRS regulations allows a person to give many thousands of dollars per year to any other person with no tax consequences (please see the FAQ article on Estate and Gift Tax for current numbers). If the recipient is a minor, the UGMA provides a way for the minor to own the assets without involving an attorney to establish a special trust. When giving assets to a minor using a UGMA/UTMA, the donor must appoint a custodian (the trustee). This page contained a good overview of the UGMA and contains the link to the Estate & Gift Tax FAQ mentioned above: http://invest-faq.com/articles/tax-ugma.
