What Are UGMA and UTMA Accounts?

UGMA vs. UTMA Accounts

UGMA and UTMA accounts are custodial accounts that are owned by minor children and administered by adult custodians until the account holders reach adulthood. UGMA and UTMA accounts share some of the same basic characteristics:

• UGMA and UTMA accounts are taxable investment or savings accounts.
• Both allow you to transfer ownership of assets like cash, securities, stocks and bonds to a minor child. UTMA accounts also allow the transfer of real estate, art, royalties and patents.
• Transfers to UGMA and UTMA accounts are irrevocable. Upon transfer, assets belong to the minor whose name is on the account.
• A designated custodian oversees the assets in a UGMA or UTMA account until the minor reaches the age of majority, typically 18 to 25 (each state is different).
• Parents, grandparents, relatives or adult friends who are legal U.S. residents can set up and contribute to a UGMA or UTMA account at a bank or brokerage firm.
• Once the minor becomes of age, they can use UGMA or UTMA assets in any way they like. This is different from a 529 education account, which requires you to use funds for qualified education expenses to avoid a penalty.
• UGMA and UTMA accounts are a simpler legal alternative to opening a trust. They allow minors to own assets under custodial care without the formality or legal expertise required to set up a trust.

Learn more: Smart Ways to Gift Money to Children

What Are the Contribution Limits for UGMA and UTMA Accounts?

UGMA and UTMA accounts don't have contribution limits. However, transfers of more than $19,000 in 2026 (or $38,000 for married couples who file jointly) may be subject to a federal gift tax. The gift tax exemption adjusts annually for inflation.

Some, but not all, of the earnings in a minor's UGMA or UTMA account might be tax-free. For someone under age 19 (or a full-time student under 24), the first $1,350 in earnings from a UGMA or UTMA account is not taxed for 2025. The next $1,350 is taxed at the minor's tax rate, and any amount over $2,700 is taxed at the parent's tax rate. The minor's tax rate is usually lower than the parent's tax rate.

What Is the Age of Majority for UGMA and UTMA Accounts?

The age of majority for UGMA and UTMA accounts varies by state. The age of majority is the age when a UGMA or UTMA must be transferred to the minor whose name is on the account.

In each state, the age of majority for an UTMA typically supersedes the age of majority for a UGMA. Additional rules or updates may apply, so be sure to double-check age rules in your state when you're setting up a UGMA or UTMA.

Here's a state-by-state guide to UTMA ages of majority:

What's the Difference Between UGMA and UTMA Accounts and a 529 Plan?

Parents and grandparents who want to save money for their kids' or grandchildren's college can choose a 529 education plan instead of (or in addition to) a UGMA or UTMA account. In a tax-advantaged 529 plan, funds grow tax-free as long as withdrawals are used to pay for qualified education expenses like tuition, student living expenses, computer equipment and books.

Here are a few of the differences between a 529 and UGMA or UTMA accounts.

How a UGMA or UTMA Account Can Impact Financial Aid Eligibility

Because the assets in a UGMA or UTMA account are considered the student's property, they can affect federal financial aid eligibility.

Under the federal formula for financial aid, a student is expected to pitch in 20% of their assets per year toward college costs. This includes a UGMA or UTMA account that's in the student's name. Meanwhile, parents are supposed to pitch in far less per year—up to 5.64% of their assets. By keeping a student's assets in a UGMA or UTMA account, you could take a significant slice out of your student's financial aid eligibility.

To avoid this dilemma, you may be able to transfer assets in a UGMA or UTMA account to a 529 plan before the student applies for college. This puts the assets under the parents' umbrella, potentially improving your student's odds of securing financial aid.

Learn more: Best Ways to Save for College

Pros and Cons of UGMA and UTMA Accounts

Here are a few of the pros and cons to consider if you're thinking of establishing a UGMA or UTMA account for your child:

Tip: If you want to transfer assets to your minor child but don't want to relinquish control when they turn 18 (or the age of majority), consider setting up a 529 plan or trust fund that won't automatically transfer to your child.

How to Open a UGMA or UTMA Account

1. Choose a provider. Custodial accounts are available at many financial institutions and brokerages. Some UGMA and UTMA accounts have minimum opening deposit requirements that may start at around $200, but you can find options with zero minimum deposit required.
2. Set up the account. You'll need to provide personal information for both the minor child and the custodian.
3. Fund the account. You may be able to transfer stocks and other assets directly into the UGMA or UTMA from your brokerage account. Remember, too, that anyone can contribute to the account, including parents, grandparents and friends.
4. Manage the funds. The account's custodian will manage the assets—including investments—until the child reaches the age of majority. Note that, as custodian, you may have to file and pay taxes on earnings on the child's behalf.

Learn more: How to Open a Brokerage Account for Your Child

Frequently Asked Questions

The Bottom Line

A UGMA or UTMA account is one way to provide for your child's future. If you want to transfer a wide range of assets without contribution limits and you're comfortable with limited tax benefits and turning over control when your child reaches adulthood, a UGMA or UTMA account may be worth considering.