UGMA/UTMA Custodial Accounts
Anyone can contribute up to $15,000 per child each year free of gift-tax consequences ($30,000 for married couples). This amount is indexed for inflation and may increase over time. Because contributions are made with after-tax dollars, a deduction cannot be made.
For children under age 19 and full-time students under age 24 whose earned income is less than one-half of their support, the first $1,100 of earnings is tax-free. Earnings between $1,100 and $2,200 are taxed at the child’s rate; earnings above $2,200 are taxed using the brackets and rates for estates and trusts.
UGMA/UTMA accounts aren’t limited to education expenses. Withdrawals can be used for anything that benefits the beneficiary.
Once the age of majority has been reached — 18 or 21 in most states — the beneficiary is entitled to the account.
There are no contribution limits on UGMA/UTMA accounts.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.