UGMA & UTMA Custodial Accounts for Minors

Top page in our guide to custodial accounts.

For tax and other reasons, parents, grandparents and others sometimes want to transfer ownership of cash and other financial assets to children who are too young to handle such assets. One way to do this is to establish a trust. The Uniform Transfers to Minors Act (or Uniform Gifts to Minors Act) provides an alternative that may be simpler, cheaper and faster than a trust.

Our guidance on custodial accounts for minors appears on the following pages:

Custodial Accounts 101
Read this page to get a general background on what custodial accounts under UTMA and UGMA are all about.

Advantages of Custodial Accounts
Why would you want to set up a custodial account? This page describes the main reasons.

Problems with Custodial Accounts
Custodial accounts aren't always the best choice. They're especially risky when dealing with very large amounts of money. Consider the points on this page before setting up an UGMA or UTMA account.

What Expenditures Are Proper?
Can I use the account to buy a car for my child? Or to send the child to private school?

Custodial Account Used for Support
Yes, you are allowed to  use UTMA accounts for items included in a support obligation, regardless of what you read elsewhere.

The Minor's Right to the Money
Does the minor have an absolute right to the money? What happens if the custodian abuses that right?

UTMA Regret
What if you've already set up a custodial account and now realize it was a mistake? You don't want it to affect your child's eligibility for financial aid, or you're reluctant to turn over a large sum of money to an immature young adult? A three-part series of articles deals with this issue.

Transfers to Section 529 Plans
Can you transfer a custodial account to a 529 savings account? Should you?