UTMA/UGMA Accounts
Chapters in this video
- 0:00 The Carl scenario: custodial account horror story
- 0:41 UGMA vs UTMA: property types and age of majority
- 2:22 Irrevocable gifts and why control means trust, not custodial
- 3:26 Gift tax exclusion and no contribution limits
- 3:57 The kiddie tax: crushing the income-shifting loophole
- 5:37 Who the kiddie tax hits: exact age brackets
- 5:59 UTMA/UGMA vs 529 plans and Coverdell ESAs
- 7:50 Rapid-fire exam recap
What this video covers
- Why UGMA (Uniform Gifts to Minors Act) holds only financial assets, while UTMA (Uniform Transfers to Minors Act) holds any property including real estate
- How the age of majority varies by state: typically 18 for UGMA, 18 to 25 for UTMA, and why extending control past 18 requires UTMA
- Why custodial accounts are irrevocable gifts with no take-backs, and why a trust (not a custodial account) is correct when a client wants retained control
- The $19,000 annual gift tax exclusion per donor and the $38,000 married-couple gift-splitting election, plus the lack of contribution limits
- How the kiddie tax slams unearned income above $2,700 at the parent's marginal rate, while earned income from a summer job stays at the child's rate
- Which age brackets get caught by the kiddie tax: under 18, 18 if not providing half their own support, and full-time students 19-23 if not providing half support, with relief at age 24
- Why custodial accounts wreck financial aid eligibility: student assets assessed at 20% under the Student Aid Index (SAI) versus parent-owned 529 plans converting at 12%
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 66 course also includes adaptive practice questions and spaced-repetition flashcards.