Why Open a Custodial Account?
Understanding UTMA Accounts and Their Benefits
Why Open a Custodial Account (Uniform Transfer to Minors Account)
A custodial account can be a great way to save on a child's behalf, or to give a financial gift. For both of my children, we established UTMA accounts. Otherwise known as an UGMA/UTMA account, there are no income or contribution limits—and no early-withdrawal penalties or restrictions on how the funds are used for the child. Basically, these are easy-to-open accounts used to invest in stocks, bonds, mutual funds, and more—all to give a child a better future.
Things to Consider
- •Great way to directly transfer wealth
- •Transferred to the minor at a certain age (between 18 and 25, depending on the state)
- •When my son turned 18 in Massachusetts, the custodial account ended and he gained legal control of all assets as we established a new individual account for him
- •Friends and family can contribute
- •Grandparents of my clients often gift shares of stock to their grandchildren
- •A portion of earnings may be exempt from federal taxes
- •Factored into financial aid eligibility
Interested in learning more about custodial accounts? Let's connect to discuss how they might fit into your financial planning strategy.
Contact Us