The Uniform Transfer to Minors Act (UTMA) is an extension of the Uniform Gifts to Minors Acts (UGMA), which allows people to donate money to minors without establishing a relationship of trust. These gifts are tax-exempt up to $12,000 and can be used for any child's benefit, including computers, gadgets, tutoring lessons, and music. A designated adult oversees the account until the child reaches the age of majority in the state, usually between 18 and 25 years of age.
John and Jessica are already studying the sky-high costs of college for their son Tom. Where will they potentially receive hundreds of thousands of dollars and, just as important, where should they invest?
The Uniform Transfer to Minors Act (UTMA) allows them to legally give the money to Tom until he reaches the legal age in your state.
The UTMA is similar to the original version of the UGMA, which was developed in 1956 and revised in 1966. The UGMA provides a means of transferring property to a minor, without the need for formal trust. It allows the administration of the property by a guardian designated by the donor. The goods are then returned to the minor when she/he is of full age in the state where the donation was made.
The UTMA incorporates the language of the UGMA and extends the initial definition of gifts beyond money and securities, including real estate, paintings, royalties, and patents. It is up to each state to adopt or modify the UTMA. The state of Florida passed a law in 2015 that allows the caretaker to own property until the child turns 25 if they wish.
UTMAs are deposit accounts in which John and Jessica can act as depositories and make all investment decisions. Funds can be used for most research support purposes, including all costs associated with elementary and secondary schools and university, including tuition, accommodation and meals, and other reasonable expenses to ask.
Although there is no limit to the amount, you can contribute to a UTMA, only $ 30,000 currently would be exempt from gift tax ($ 15,000 for a single mother).
As of 2018, the IRS allows the exclusion of a donation of up to $ 15,000 per person for a qualifying gift, including contributions for minors. UTMA offers children a convenient way to save and invest, without incurring any tax burden. The child's social security number is used for tax reporting in UTMA accounts. It is also important to note that because the assets held in a UTMA account are owned by the minor, this can have a negative impact when the minor requests financial aid or scholarships.
The law authorizes the donor to appoint a depositary, who has the duty to manage and invest the property in the name of the minor until the age of majority. The property belongs to the minor from the donation. If the donor dies while acting as a caretaker, the value of the property kept will be included in the donor's activities.
Although UTMA offers a way to create tax-free savings account for minors, the assets will be considered part of the taxable assets of the custodian bank until the child is in possession. The UTMA allows minors to receive gifts and avoid tax consequences until the state's legal age, which is generally 18 or 21 years old.
An uncle would like to give his cousin $ 8,000 of the money he made from selling his house. If he gives the money directly to his cousin, the cousin's parents can decide to use all or part of the money on the house bills. By giving the gift via UTMA, parents do not have access to cash (unless one of them is called a caretaker), and the caretaker can only use the funds for purchases for a direct profit of the child.
John Pournaras Agency