- Money for the Next Generation

What is a UTMA account?

By The Loved Investing Team October 27, 2020

What is a UTMA account?


  • UTMA stands for the Uniform Transfers to Minors Act.
  • It allows people to gift assets to minors much like a trust account, just less complex.
  • It provides you a way to reduce taxes while making investments for kids.

What is a UTMA account?

The Uniform Gift to Minors Act (UTMA) was created to allow a minor to receive gifts without needing a specific guardian or trustee to be involved. While a UGMA account is limited to purely financial products, a UTMA account allows transfers of physical assets too such as real estate or fine art. Both are referred to as custodial account but differ in the assets one can transfer.

UTMA account rules

A UTMA account is managed by an adult (custodian) on behalf a beneficiary that is under the age of 18 or 21. The custodian can invest or spend the money how they like once it benefits the minor. This covers expenses like education, summer camps and sporting activities. When the child reaches adulthood, they take full ownership of the assets.

A UTMA can help save on taxes

Using a UTMA, an adult can gift up to $15,000 ($30,000 for married couples) without triggering a gift tax. It is therefore a great way to distribute wealth inter-generationally, e.g. to your kids, or grandkids. It is important to also consider the impact of a UTMA on the child themselves. The IRS provides kids a tax-free threshold for their first $1,050 of unearned income annually, and a reduced tax rate of 10% to 15% on their next $1,050. This provides an opportunity to let your kids hold assets while avoiding higher taxes once their income remains below these levels.

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