158:(UTMA), the assets are treated similarly. The assets are held in the custodian's name until the child reaches age of maturity. States that adopted UTMA also repealed UGMA; UTMA specifically provides that contracts in UTMA states which reference UGMA are governed by UTMA. Thus, UGMA is often still referred to in contracts designed for use in multiple states, even though it may actually mean UTMA in a particular state. Under the UGMA or UTMA, the ownership of the funds works like it does with any other trust and the donor must appoint a custodian (the trustee) to look after the account for the benefit of the beneficiary.
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One negative effect of UGMA or UTMA assets for minors who plan to attend college is that financial aid is typically reduced by 20-25% of the UGMA or UTMA balance. Some financial advisers therefore advise depleting the balance in these accounts, always for purposes benefiting the minor such as
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of the United States allows persons to give up to the annual gift tax exclusion to another person without any gift tax consequences, and gifts exceeding that amount as long as total gifts are below the lifetime limits.
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bracket. Tax law changes in 1986, 2006, 2007 and 2017 known as the "kiddie tax" have substantially reduced the tax savings of UGMAs and UTMAs. Until 2018, for beneficiaries under 19 (under 24 if a student), the first
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was taxed at the minor's rate (typically 15%), and the amount over
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