Uniform transfers to minors act
Uniform Gifts to Minors Act
What is the Uniform Gifts to Minors Act?with the
Discover the definition of financial words and phrases in this comprehensive financial dictionary. An appointed adult oversees the account until the child reaches the age of majority in the state, usually between the ages of 18 and Although every state in the U. The expansions provided under UTMA bring the various state rules back into alignment. It allows property transfers based on future events instead of only present gifts, and it establishes jurisdictional guidelines to reduce conflicts during interstate transfers. UTMA also limits the liability of custodians.
The Uniform Gifts to Minors Act UGMA is an act in some states of the United States that allows assets such as securities , where the donor has given up all possession and control, to be held in the custodian's name for the benefit of the minor without an attorney needing to set up a special trust fund. This allows a minor in the United States to have property set aside for the minor's benefit and may achieve some income tax benefit for the child's parents. Once the child reaches the age of maturity 18 or 21 depending on the state , the assets become the property of the child and the child can use them for any purpose. Contributing money to an UGMA account on another person's behalf could be subject to gift tax ; however, the Internal Revenue Code of the United States allows persons to give up to the annual gift tax exclusion to another person without any gift tax consequences, and gifts exceeding that amount as long as total gifts are below the lifetime limits. The assets are held in the custodian's name until the child reaches age of maturity. Under the UGMA or UTMA, the ownership of the funds works like it does with any other trust and the donor must appoint a custodian the trustee to look after the account for the benefit of the beneficiary.
The Uniform Transfers to Minors Act UTMA allows a minor to receive gifts—such as money, patents, royalties, real estate, and fine art—without the aid of a guardian or trustee. Under the UTMA, the gift giver or an appointed custodian manages the minor's account until the latter is of age. The Act also shields the minor from tax consequences on the gifts, up to a specified value. Note that, while the UTMA offers a way to build a tax-free savings account for minor children, the assets will be counted as part of the custodian's taxable estate until the minor takes possession. It allows minors to receive gifts and avoid tax consequences until they become of legal age for the state, which is typically age 18 or While the UTMA offers a way to build a tax-free savings account for minor children, the assets will be counted as part of the custodian's taxable estate until the minor takes possession. The UGMA provides a way to transfer property to a minor without the need for a formal trust.
Parents and students who are currently completing the FAFSA and learning about financial aid may be kicking themselves for not having a better plan in place to pay for college. When it comes to college costs, a little planning can go a long way. There are several useful ways to save money for your child's college education , each of which has its pros and cons. A custodial account is not an education-only savings account, and your kids may use the money you invest however they like. The same tax benefit that makes custodial accounts attractive can also make them unattractive.
Uniform Transfers to Minors Act (UTMA)
Did you know that you can make a gift of property to a minor without needing to set up a trust? While trusts are a great way to hold property for a minor, there are situations where a trust may be a bit of overkill, or sometimes a gift or bequest is made before a trust can be established., The Uniform Gifts to Minors Act UGMA , developed in and revised in , allows individuals to give or transfer assets to underage beneficiaries—traditionally, parents and their children, respectively. The amount is free of gift tax, up to a certain amount.
Uniform Transfers to Minors Act
For tax and other reasons, parents, grandparents and others sometimes want to transfer ownership of cash and other financial assets to children who are too young to handle such assets. This can be accomplished with a trust, however, an UTMA is an alternative that may be simpler, cheaper and faster than a trust. Eligibility: Any adult can set up a custodial account for any child under age Contribution Rules: Although there are no contribution limits, amounts above a set amount will incur federal gift tax. Use of this account can help, however there is no guarantee, that a certain amount of investment income will be exempt from federal income tax, with another set amount being taxed at the child's tax bracket. The child must be under age 18 at the end of the current tax year. Potential Disadvantages: A custodian must hand over control of the assets to the child at anywhere from age 18 to
As used in sections A "Benefit plan" means any plan of an employer for the benefit of any employee, any plan for the benefit of any partner, or any plan for the benefit of a proprietor, and includes, but is not limited to, any pension, retirement, death benefit, deferred compensation, employment agency, stock bonus, option, or profit-sharing contract, plan, system, account, or trust. B "Broker" means a person that is lawfully engaged in the business of effecting transactions in securities for the account of others. A "broker" includes a financial institution that effects such transactions and a person who is lawfully engaged in buying and selling securities for the person's own account, through a broker or otherwise, as a part of a regular business. C "Court" means the probate court.