One reason why some families may use an UGMA or UTMA account to save for college is convenience. You can use the money in an UGMA or UTMA account for any purpose, not just to pay for college. 529 plan distributions are subject to a 10% tax penalty if you don’t use the money to pay for qualified expenses.
Do UTMA accounts count on FAFSA?
An UTMA account is reported as a student asset on the FAFSA. A 529 Savings Plan established by a parent with a child as the beneficiary is solely for qualified education expenses (or will incur a hefty 10% penalty plus additional taxes), and the owner of the account always maintains control of the account.
When can a parent cash out a UTMA or a UGMA?
Each state has adopted its own version of these accounts, but generally, beneficiaries can access their UGMA money at age 18 and UTMA cash at age 21. These accounts are popular ways to save for a child’s college costs. However, the parent or custodian does not have to use the money for education.
Is the income from a UGMA account taxable?
Earnings on custodian UGMA/UTMA accounts are not taxable on a parent’s income tax return, even though the parent may elect to pay these taxes. In many states, UGMA accounts are really UTMA accounts.
Who is the custodian of a UGMA savings account?
If you open a savings account for your minor child under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), your child actually owns the account. As custodian of the account, you’ll maintain control over the funds until your child reaches the age of majority.
How old do you have to be to get UGMA money?
Each state has adopted its own version of these accounts, but generally, beneficiaries can access their UGMA money at age 18 and UTMA cash at age 21. These accounts are popular ways to save for a child’s college costs.
