Overview
- 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 avoid taxes while making investments for kids.
What is a UTMA?
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.
A UTMA can Help Save 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 intergenerationally, e.g. to your kids, grandkids, or just someone else's kids.
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, if their income remains below these levels.
