Who pays the taxes on a UGMA account?
Because money placed in an UGMA/UTMA account is owned by the child, earnings are generally taxed at the child’s—usually lower—tax rate, rather than the parent’s rate. For some families, this savings can be significant. Up to $1,050 in earnings tax-free. The next $1,050 is taxable at the child’s tax rate.
Can UGMA accounts hold real estate?
UTMA accounts can hold virtually any kind of asset, including real estate, intellectual property, and works of art. UGMA accounts are limited to financial assets of cash, securities—stocks, bonds, or mutual funds—annuities, and insurance policies. All U.S. states allow UGMA accounts.
Can anyone contribute to an UGMA?
Anyone can contribute to an UGMA/UTMA account, including grandparents, relatives, friends, and even the child. And there are no income restrictions limiting how much any of these individuals may give.
Who is considered the owner of an UGMA account?
For federal tax purposes, the minor or beneficiary is considered the owner of all assets in a UGMA account and the income they generate. But these accounts’ earnings can be taxed either to the child or the parent.
Can a minor withdraw money from an UGMA account?
There are no withdrawal penalties. However, because UGMA assets are technically owned by the minor, they do count as assets if he applies for federal financial aid for college, possibly decreasing his eligibility. Once they reach the age of majority in their state, minors are granted full access to their UGMA account.
When to transfer UGMA brokerage account to beneficiary?
UGMA/UTMA brokerage accounts are considered assets owned by the child, which can impact financial aid when applying to college. Also, no matter what kind of custodial account, the custodian must transfer the account to the beneficiary at a relatively young age (between 18 and 25) and the money can be used for any purpose.
Is the Uniform Gifts to Minors Act ( UGMA ) tax sheltered?
UGMA account-generated earnings are not tax-sheltered, but they are taxed at the minor’s lower “kiddie tax” rate, up to a certain amount. Watch Now: What Is the Uniform Gifts to Minors Act?
For federal tax purposes, the minor or beneficiary is considered the owner of all assets in a UGMA account and the income they generate. But these accounts’ earnings can be taxed either to the child or the parent.
There are no withdrawal penalties. However, because UGMA assets are technically owned by the minor, they do count as assets if he applies for federal financial aid for college, possibly decreasing his eligibility. Once they reach the age of majority in their state, minors are granted full access to their UGMA account.
UGMA/UTMA brokerage accounts are considered assets owned by the child, which can impact financial aid when applying to college. Also, no matter what kind of custodial account, the custodian must transfer the account to the beneficiary at a relatively young age (between 18 and 25) and the money can be used for any purpose.
UGMA account-generated earnings are not tax-sheltered, but they are taxed at the minor’s lower “kiddie tax” rate, up to a certain amount. Watch Now: What Is the Uniform Gifts to Minors Act?