How To Help Your Child Graduate College Without Debt
UTMA stands for Uniform Transfers to Minors Act and UGMA stands for Universal Gifts to Minors Act. These accounts can be opened by a parent, in a child’s name. The parent can make contributions, so the funds can grow for their child. The benefit behind these types of accounts is that they allow an adult to transfer funds to a minor without establishing a trust. Furthermore, because the funds are in the child’s name, they are taxed at the child’s income rate – which is typically much lower than the parent’s. The first $1,050 in earnings are even tax-free. The main difference between the two is that the UTMA allows the funds to mature longer before being transferred to a beneficiary (25 years of age), while the UGMA must be transferred at 18 years of age.