How To Help Your Child Graduate College Without Debt

- By
student debt articles

Source: jayk7 / Getty

UTMA/UGMA accounts

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.

TRENDING ON MADAMENOIRE
Comment Disclaimer: Comments that contain profane or derogatory language, video links or exceed 200 words will require approval by a moderator before appearing in the comment section. XOXO-MN