Custodial Accounts (UTMA/UGMA)

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Chapters in this video

  1. 0:00 What custodial accounts do and who owns the assets
  2. 0:43 UTMA versus UGMA: asset types and age of majority
  3. 2:55 The one-custodian, one-minor rule
  4. 3:59 Irrevocable gifts and no personal benefit
  5. 5:03 The three prohibited trading activities
  6. 6:01 Rapid-fire exam recap

What this video covers

  • Why the minor owns every asset in a custodial account even though the custodian manages it, and how the title must read on exam day
  • The exact asset-type difference between UTMA and UGMA (real estate and patents versus cash and securities), and why UTMA has largely replaced UGMA
  • How the age of majority varies by state under UTMA (18, 21, or even 25) compared with the fixed age 18 under UGMA
  • The one-custodian, one-minor rule and why no joint owners or multiple beneficiaries are ever permitted
  • Why all gifts to custodial accounts are irrevocable, and the trap of custodians using assets for personal benefit
  • The three prohibited trading activities in every custodial account: no margin trading, no short selling, and no options trading
  • Why income is taxed at the minor's rate, and what happens to control when the age of majority is reached

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