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Uniform Transfers to Minors Act (UTMA) Account – Custodial Accounts

A Uniform Transfers to Minors Act account, commonly referred to as an UTMA account, allows adults to hold and protect assets for minors. Because of this, UTMAs can be a good option when it comes to college savings, especially if a large sum of money is to be transferred to a minor for future tuition expenses. This is often the case if the minor is to receive an inheritance.

  • UTMAs have no limit to yearly contributions
  • The custodian of the account is responsible for managing and distributing the money on behalf of the minor until the minor reaches the age required by state law
  • An UTMA can be opened as a savings account, a CD or a Brokerage Investment Account
  • The account grows either through deposits and interest earned, or through return on investments, depending on the account structure
  • One primary difference between an UTMA account and a 529 Plan or CESA, is that UTMAs do not have to be used for education

There is no deadline to use the funds in an UTMA, but by age 21, the money becomes the sole property of the beneficiary, and they can use it for anything. This is important to understand when choosing a college savings option, as the funds can be used for any expenses that benefit the beneficiary.

UTMA Tax Information

The earnings are taxed under the minor’s social security number, which is often at a lower rate than the custodian’s tax bracket. Regardless of how the UTMA beneficiary chooses to spend the funds within the account, they will be subject to income taxes.

Get More Information on UTMA Accounts

Download our College Funding Quick Guide. The Quick Guide will also include information about a Financial Advisor near you.

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Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. First Commonwealth Advisors is a trade name of the First Commonwealth Bank. Osaic Institutions and First Commonwealth Bank are not affiliated. Products and services made available through Osaic Institutions are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.

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