Uniform Gift to Minors Act (UGMA Account)
What Is the UGMA?
The Uniform Gifts to Minors Act (UGMA) allows adults to transfer financial assets to a minor without establishing a formal trust. Assets are held in a custodial account until the minor reaches the age of majority, typically 18 or 21 depending on state law.
UGMA accounts are often used to save or invest money for a child’s future.
Why It Matters
UGMA accounts allow families to gift financial assets to children while maintaining adult supervision until the child becomes legally responsible for the account.
They also provide a structured way to invest on behalf of minors.
How UGMA Works
An adult custodian manages the account for the benefit of a minor.
Assets that may be placed in a UGMA account include:
- cash
- stocks
- bonds
- mutual funds
When the child reaches adulthood under state law, control of the account transfers fully to them.
Example
A parent opening a custodial investment account for their child under UGMA to invest in stocks is using a UGMA account.
UGMA vs UTMA
- UGMA accounts allow financial assets such as cash and securities.
- UTMA accounts allow a broader range of assets, including real estate.
FAQs About UGMA
Who controls a UGMA account?
A custodian manages the account until the minor reaches adulthood.
When does the minor gain control?
When they reach the age specified by state law.
Can funds be used before adulthood?
Yes, if used for the minor’s benefit.
Related Terms
