UTMA and UGMA
Chapters in this video
- 0:00 The irrevocable mailbox analogy and one-custodian rule
- 1:47 UGMA vs. UTMA: asset types and age of termination
- 3:02 Prohibited trading and the basic-support expense trap
- 4:22 Gift tax rules and the $19,000 annual exclusion
- 5:01 Kiddie tax brackets and the $2,700 parent-rate threshold
- 6:07 FAFSA impact: 20% student asset vs. 5.64% parent asset
- 7:23 Rapid-fire exam recap
What this video covers
- Why gifts to a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account are irrevocable and the minor becomes the legal owner at transfer
- How UTMA differs from UGMA on permissible assets (real estate, patents, fine art vs. cash and securities only) and age of termination (up to 25 vs. typically 18)
- The strict one-custodian, one-minior rule and why joint custodians or multiple beneficiaries are never allowed
- What fiduciary duty prohibits: margin trading, short selling, options, and using account assets for parental basic-support obligations
- How the annual gift tax exclusion ($19,000 per donor for 2025-2026) works with unlimited contributions and when gift tax filing triggers
- The kiddie tax brackets for 2026 (tax-free first $1,350, child's rate on next $1,350, parent's marginal rate above $2,700) and which children it hits
- Why UTMA and UGMA assets count as student assets (20% FAFSA assessment) while parent-owned 529 plans count as parent assets (5.64%), making 529 plans the better choice for college savings and financial aid maximization
Read the full lesson, free
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