You can move money from a custodial account, such as a UGMA (Uniform Gifts to Minors Act) or a UTMA (Uniform Transfers to Minors Act), to a 529 plan. But you can’t do the reverse — transfer or convert from a 529 to a custodial account — without adverse tax consequences.

How do I transfer my custodial account?

When children reach the age of majority, the account can be transferred into their name only with custodian consent. Otherwise, they can remove the custodian from the account at the age of termination. Ask your brokerage firm what ages apply to your son’s accounts and the steps you need to take at each point.

What does UTMA mean on a bank statement?

Uniform Transfer to Minors Act
The terms of this trust are established by a state statute instead of a trust document. The Uniform Transfer to Minors Act (UTMA) is similar, but also allows minors to own other types of property, such as real estate, fine art, patents and royalties, and for the transfers to occur through inheritance.

Does an UTMA grow tax-free?

Because money placed in an UGMA/UTMA account is owned by the child, earnings are generally taxed at the child’s—usually lower—tax rate, rather than the parent’s rate. For some families, this savings can be significant. Up to $1,050 in earnings tax-free. Any earnings over $2,100 are taxed at the parent’s rate.

Can you transfer a UTMA account to another bank?

You can close a custodial account and suffer no repercussions if you give the funds to the child or transfer them into another account for the child’s benefit. You can close the custodial account and establish a regular account at your bank or brokerage firm with the child as the sole beneficiary.

How is money transferred to a minor under UTMA?

Under the UTMA legislation: •. a donor makes an irrevocable transfer of money or other property to a minor; •. the transfer, plus any income it generates, is under the control of a custodian until the minor reaches the age of majority established by State law; •.

What does it mean to have a UTMA account?

When parents, grandparents, or other family members want to give young kids a head start financially, they use a variety of financial tools, including a UTMA account. This custodial account, defined by the Uniform Transfer to Minors Act (UTMA), holds cash and other assets gifted to minors.

What does UTMA stand for in uniform gifts to Minors Act?

The Uniform Gifts to Minors Act (UGMA), superseded by the Uniform Transfers to Minors Act (UTMA) in some states, is simply a way for a minor to own property, such as securities. The UGMA/UTMA setup is commonly used to give monies to a minor.

Can a trustee transfer funds from one UGMA to another?

The trustee can transfer funds between UGMA/UTMA accounts at will. For example, this might be attractive if a UGMA seems to be underperforming similar type accounts or if it lacks the services of other UGMA accounts such as online access.