![]() It used to be that parents could use UGMAs (the older version) to move investment income out of their high tax bracket and into their child’s low bracket.Īnd then the federal “kiddie tax,” a tax on the unearned income paid to minors, was born. One could argue that the UTMA was designed for simpler times. Let’s take a closer look at the differences in the tax benefits and control parameters of these savings vehicles, as well as their impact on federal student loan eligibility. Here is a quick guide to some important differences between 529s and UTMA accounts. Both represent a type of custodial account.įor more information about these and other savings vehicles, or a detailed look at options for grandparents who wish to help with college funding, please click on the “read more” links that follow this piece. It is still common to see these acronyms lumped together. UTMAs are the updated form of the previous UGMA (Uniform Gift to Minors Act) accounts. ![]() This article compares and contrasts a few characteristics of 529 plans and UTMA (Uniform Transfers to Minors Act) accounts and explains the reasons we generally tend to recommend 529s. ![]() As it is with most financial topics, your options for education funding should be reviewed by your financial advisor before you make a selection. There are several vehicles that can be used to save money for college, and each has its own set of rules and complexities.
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