Uniform Gifts to Minors Act (UGMA)

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The Uniform Gifts to Minors Act (UGMA) allows money and financial securities to be transferred to minors through a UGMA account and is allowed in all states. UGMA allows the property to be gifted to a minor without establishing a formal trust. The donor or a custodian manages the property for the minor’s benefit until the minor reaches a certain age. Once the child reaches a specified age set by the state, the child will have full control over the property. Gifts to the minor are exempted up to $15,000 a year from Federal taxes, but the minor will be required to pay taxes beyond this amount. Also, UGMA transfer allows the gift to be taxed based on the minor’s tax rate. A downside of the UGMA is that it can reduce or make a minor ineligible for financial aid since the property is owned by the minor.  UGMA is to be contrasted with newer Uniform Transfers to Minors Act (UTMA) accounts which allow more risky assets and tangible assets such as real estate to be transferred to the minor as well. 

[Last updated in August of 2021 by the Wex Definitions Team]