UGMA/UTMA Accounts – Pros and Cons

If you have young children and are thinking of ways to pay for their college education, you may be considering an UGMA or UTMA account. I know, you’re probably thinking, “what the heck is an UGMA or UTMA?” Well, it’s an acronym for the Uniform Gifts to Minors Act (or Uniform Transfers to Minors Act, in some states). The difference between UGMA and UTMA is that an UTMA law allows virtually any kind of asset, including real estate, to be transferred to a minor. An UGMA law limits gifts/transfers to the following: bank deposits, securities (including mutual funds), and insurance policies. UGMA/UTMA allows a minor to own securities in an account without having to establish a special trust. The assets in the UGMA account will become available to the minor when they reach the age of majority. The age of majority is usually 18 years of age (it's 18 in Virginia, Maryland,...