Every state has either a
Uniform Gifts to Minors Act or a Uniform Transfers to Minors Act.
Traditionally, the common way to save for children and other descendants was to make annual gifts to
Uniform Gifts to Minors Act accounts (UGMA), which involved no lawyer, no trust, and no complications.
Taxpayers with young dependent children who are starting to plan how to pay for college should not overlook the use of the Uniform Transfers to Minors Act (or
Uniform Gifts to Minors Act) for some portion of their savings for college plans.
Parents who wish to shift investment income to their children can establish custodian accounts under the Uniform Transfers to Minors Act or the
Uniform Gifts to Minors Act. Interest, dividends, and capital gains may then be reported by their children, who will owe less tax.
Most state laws provide a way to establish a custodial account under either UGMA (
Uniform Gifts to Minors Act) or UTMA (Uniform Transfers to Minors Act).
Many grandparents are familiar with UTMAs, (Uniform Transfer to Minors Accounts) or UGMAs (
Uniform Gifts to Minors Act); they make contributions to them for the benefit of a grandchild.
The
Uniform Gifts to Minors Act (UGMA), The Uniform Transfers to Minors Act (UTMA) Accounts, and Coverdell Education Savings Accounts (formerly known as Education IRAs) are just some of the traditional ways to fund college.