• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Who We Are
    • About Our Firm
    • Career Opportunities
    • Meet Our Team
    • News and Events
    • Seniors Rock Radio
  • Estate Planning
    • Elder Law & Medicaid Planning
    • Estate Planning Services
    • Estate and Gift Tax Figures
    • Family Farm Succession Planning
    • Family-Owned Businesses & Farms
    • IRA Planning
      • Planning With An IRA
      • IRA & Retirement Planning
    • Legacy Planning Services
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration & Probate
    • Young Families
  • Elder Law
    • Coping With Alzheimer’s
    • Elder Law Resources
      • Elder Law Reports
    • Guardianship & Conservatorship
    • Hospice Care
    • Veteran’s Benefits
  • Resources
    • Definitions
    • FREE Estate Planning Worksheet
    • FREE Webinars
    • Estate Administration Legal Guide
    • Estate Planning Articles
      • Questions for Your Estate Planning Attorney Before Creating Your First Estate Plan
      • How to Create Your First Estate Plan in 2022
      • How to Choose a Guardian for Your Child
      • Address These Three Questions in Your First Estate Plan
    • Estate and Gift Tax Figures
    • Frequently Asked Questions
      • Adult Guardianship
      • Alzheimer’s Care
      • Custodial Accounts for Minors
      • Estate Planning
      • FAQs for Families Without an Estate Plan
      • Elder Law
      • IRA & Retirement Planning
      • Is Your Estate Plan Outdated?
      • Legacy Planning
      • LGBTQ Estate Planning
      • Medicare and Social Security
      • Probate
      • Probate Avoidance
      • Irrevocable Trusts
      • Trust Administration
      • Trusts
      • Veterans’ Benefits
      • Wills
    • Newsletters
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Estate Planning for Niches
      • Trust Administration
    • Top Estate Planning Techniques
  • Reviews
    • Our Reviews
    • Review Us
  • Medicaid Planning
    • Medicaid Planning
    • Emergency Medicaid & Nursing Home Planning
    • Medicaid Frequently Asked Questions
    • Medicaid Resources
  • Blog
  • Contact Us

Law Office of Michael Robinson, P.C.

Estate Planning Services in Rochester, New York and the Finger Lakes Area

Connect With Us Today

(585) 374-5210
Law Pay Button
Attend a Free Webinar
Home » Resources » Frequently asked questions » Custodial Accounts for Minors FAQs

Custodial Accounts for Minors FAQs

    • How can you leave an inheritance to a minor child?

    • Since minors cannot directly own property, you have to take measured steps to include a child in your inheritance plan. One possible course of action would be the creation of a custodial account.

    • What is a custodial account?

    • These accounts were conceived as a result of the Uniform Gifts to Minors Act (UGMA). It was originally developed in 1956, and it was updated in 1966. The Uniform Transfers to Minors Act (UTMA) came along in 1986, and all states in the union are now offering these accounts with the exception of South Carolina and Vermont. A custodian will manage assets that have been conveyed into the account on behalf of a minor child. If you are creating the account for your child or grandchild, you could act as the custodian while you are living, but it is not required. The custodian would manage the assets on behalf of the child until the child reaches the age of majority.

    • Can you change your mind and take back the money in a custodial account?

    • The assets belong to the child as soon as you establish and fund the account. If you are the custodian, you can withdraw money from the account if it is used to benefit the child. You would also be able to close the account, but you would be required to use the funds to establish a different account or fund a trust with the child as the sole beneficiary.

    • What types of assets can be held by a custodial account?

    • This is the question that is at the core of the difference between the UGMA account and the UTMA account. The original custodial accounts could only hold financial products that you would typically see in mutual funds like stocks, bonds, and securities. The Uniform Transfers to Minors Act expanded the possibilities to include other types of property, like collectibles and real estate. You could actually transfer a car and a home into a UTMA account.

    • Is the income that is generated by assets in a custodial account taxable?

    • The first $1100 of non-earned income is not taxable, and the second $1100 is taxable at the child’s rate. Anything above $2200 is taxed at the parents’ income tax rate.

    • So are UGMA and UTMA accounts college savings accounts?

    • Money in the account can be used for any reason, including educational expenses. However, there is another option called a 529 account that is a better choice if the account is going to be used to pay for college. The flexibility is one advantage. You can take back the money that you put into the account at any time for any reason, and you can change the beneficiary if the first beneficiary does not use all of the funds. From a tax perspective, 529 accounts are far superior, because the earnings and education -related withdrawals are not subject to taxation. A 529 account does less harm when it comes to qualifying for student aid. Eligibility is reduced by 20 to 25 percent if the student has a UTMA account, but the maximum reduction is under six percent for a 529 account beneficiary.

    • Are there any other options for leaving inheritances to minors?

    • Money in the account can be used for any reason, including educational expenses. However, there is another option called a 529 account that is a better choice if the account is going to be used to pay for college. The flexibility is one advantage. You can take back the money that you put into the account at any time for any reason, and you can change the beneficiary if the first beneficiary does not use all of the funds. From a tax perspective, 529 accounts are far superior, because the earnings and education -related withdrawals are not subject to taxation. A 529 account does less harm when it comes to qualifying for student aid. Eligibility is reduced by 20 to 25 percent if the student has a UTMA account, but the maximum reduction is under six percent for a 529 account beneficiary.

Schedule a Consultation Today!

We are here to help if you would like to work with a Rochester, New York estate planning attorney to develop a plan that provides for all of your family members effectively.

You can schedule a consultation appointment if you call us at 585-374-5310, and you can use our contact form to send us a message.

Primary Sidebar

Law Office of Michael Robinson, P.C.

Free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube

TESTIMONIALS

News & Events

Seniors Rock Radio Show Recording 5-1-21

https://drive.google.com/file/d/1U7UkQbEGy-xY7XFAXvX9Qz7pKSVDVV3D/view?usp=drive_web   Read more →

Pittsford Office

1163 Pittsford-Victor Road, Suite 120 (Powder Mill Office Park)
Pittsford, NY 14534-3817
Phone: (585) 374-5210
Fax: (585) 485-0394

See Larger Map Get Directions

Map

mrobinson_sidbr_map

Footer

  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Connect with Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
robinson law logo

The Law Office of Michael Robinson, P.C.

Attorney Advertisement


© 2023 American Academy of Estate Planning Attorneys, Inc.