Uniform Transfer to Minor Account

Uniform Transfers to Minors Account (UTMA): UTMA accounts are irrevocable custodial accounts held for the benefit of a minor. These accounts are usually funded by gifts to the minor. However, other sources of account funds may include transfers from estates, guardianships or persons indebted to the minor.

Who could start a UTMA?

Any persons desiring to give a minor a gift. A custodian is established which can be any adult related or not related to the minor.     

Who can transact on an UTMA?

The only person authorized to transact, withdrawl funds, or close the account is the custodian. The minor is not authorized to transact on the account.   

What is a custodian?

A custodian manages the assets on behalf of the minor and can invest the assets as the custodian feels is proper. The custodian is not the owner of the account. The minor is considered the owner of the assets and the minor's social security number is used for tax reporting.

What kind of gifts qualify and how may they be used?

Any assets can be given to a minor and there is no limit to the amount of money that can be invested.  A custodian can spend the money for the benefit of the child, so long as the expenses aren't "parental obligations" or otherwise benefit the custodian. Parental obligations are expenses a parent is normally expected to provide for his or her child, such as food, clothing, medical care and shelter. However, if your child wants a computer or to go to summer camp, it is usually acceptable to spend the child's money on those expenses. Likewise, you can spend the child's money for the child's college education. Gifts from an adult to a minor of more than $13,000 per year are taxable gifts and may be subject to gift tax. This tax is paid by the person making the gift. 

Can the custodian establish sub-accounts to the UTMA?

Custodians may establish any type of sub-account to the UTMA, except an IRA.

How is an UTMA taxed?

The tax advantage from a custodial account is that it is taxed at the child's rate, subject to the Kiddie Tax rules. The parent is responsible for filing an income tax return on behalf of the child. 

Why might I not want to start a Uniform Transfer to minor Account?

Once the child takes control of the account, the child may use the money for purposes other than education or any other intended expense the custodian had in mind. An UTMA could also reduce financial aid. If your family is applying for need-based financial aid, having an UTMA may reduce the size of the package.


This information is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.

For more information contact a Member Service Representative at (530) 895-1947.

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