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What Is UGMA
UGMA or Uniform Gifts to Minor Act is an act in some states across the U.S. that allow assets like securities, money to be held in a minor child’s name without using an attorney to set up the trust fund. Usually a custodian is named to oversee and run the account but the ultimate beneficiary is the child. The investments and assets from an UGMA account become the property of the child once he reaches age of majority, which is either 18 or 21 depending on the state law, and he can do whatever he wants with assets. |
However, when a child is a minor, the money is controlled by the custodian and the invested money is secure and carefully kept for the child when he should need it.
You can put as much money as you want in an UGMA account. There is not restriction on maximum contribution. However, each adult can put in a maximum of $11,000 annually to avoid gift tax.
An UGMA account can be used to receive stocks, bonds, annuities, mutual funds and life insurance policies which otherwise a minor child cannot own or possess. However, once the child becomes a major, he can do anything he wants with the monies of the UGMA account. The former custodian of the account can in no way enforce the child to spend or use the money in a particular way.
Furthermore, any monies contributed to an UGMA account are irrevocable. You cannot change your mind once the money has been deposited into the UGMA account.
UGMA accounts do not cost money to set up and it is extremely easy to open an UGMA account.

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