UTMA custodial accounts
Custodial accounts set up under the Uniform Transfers to Minors Act (UTMA) may help you save for future education costs, enjoy limited tax advantages (for smaller accounts) and maintain investment flexibility.
How do UTMA custodial accounts work?
UTMA accounts allow an adult to make an irrevocable gift to a minor.
- The account is set up by an adult to benefit a minor child.
- Funds in the account can be used for education expenses and other expenses that benefit the child.
- Control of the account passes to the child when he or she reaches the age of majority (18 or 21 depending on state law.)
- Adults can take advantage of the annual gift tax exclusion in 2011 of $13,000 ($26,000 for married couples who consent to splitting gifts) by making a contribution to this account.
- Investment earnings over $1,900 in 2010 and 2011 are generally taxed at the parent’s income tax rate until the year the child turns 18 (19 if the child’s earned income does not exceed one-half of their support or 24 for full time students whose earned income does not exceed one-half of their support).
- The accounts are considered the student's assets in financial aid calculations.
Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.
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