Uniform Gifts to Minors Act


Also found in: Acronyms, Wikipedia.

Uniform Gifts to Minors Act (UGMA)

Legislation that provides a tax-effective manner of transferring property to minors without the complications of trusts or guardianship restrictions.

Uniform Gifts to Minors Act

Legislation in several U.S. states allowing cash or securities to be transferred from a donor to a minor child without needing to set up a trust. Specifically, this act was intended to allow transfers to persons under 18 or 21 (depending on the jurisdiction). The act allows for the giving of gifts to children up to a certain amount in value without any tax consequences. These gifts are held in a custodianship until the child reaches the age of majority. The custodian is appointed by the donor (and is often the donor himself/herself). The UGMA was set up to allow these transfers to occur without a lawyer needing to set up a trust, a process that can be quite complicated and sometimes expensive. See also: Uniform Transfers to Minors Act.

Uniform Gifts to Minors Act (UGMA)

Uniform state laws that facilitate irrevocable gifts to a minor by eliminating the requirement of a guardian or trust. A custodian, who may be the donor, is appointed to manage the gift, but full rights to the principal and income reside with the minor. Under 1986 tax reform, only the first $1,000 of income from these custodial accounts will be taxed at the child's rate if the child is under 14 years of age. Income above $1,000 is taxed at the donor's rate. When the child turns 14, all income from the trust is taxed at the child's rate.

Uniform Gifts to Minors Act (UGMA).

Under the UGMA, you as an adult can set up a custodial account for a minor and put assets such as cash, securities, and mutual funds into it.

You pay no fees or charges to set up the account, and there is no limit on the amount you can put into it. To avoid owing potential gift tax, however, you may want to limit what you add each year to an amount that qualifies for the annual gift tax exclusion.

One advantage of an UGMA custodial account is that you can transfer to it assets that you expect to increase in value. That way, any capital gains occur in the account, and you avoid potential estate taxes that might have been due had you owned the asset at your death.

If you sell an asset in the account, taxable capital gains are calculated at the beneficiary's capital gains tax rate provided he or she is 18 or older. Taxable capital gains are calculated at the parents' rate if the child is younger than 18.

One potential disadvantage of a custodial account is that any gift to the account is irrevocable.

The assets become the property of the beneficiary from the moment they go into the account, even though as a minor he or she cannot legally control activity in the account or take money out. At majority, which typically occurs at 18 or 21 depending on the state, the beneficiary may use the assets as he or she wishes.

In addition, if you are both the donor and the custodian, and die while the beneficiary is still a minor, the assets are considered part of your estate. That could make your estate's value large enough to be vulnerable to estate taxes.

References in periodicals archive ?
Note: Under the official texts of the original (1956) and revised (1966) versions of the Uniform Gifts to Minors Act, gifts of securities and money can be made.
A 2503(c) trust has a number of advantages over the type of custodianship found in the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act arrangements, as shown in Figure 17.
When investing in a child's name, setting up a custodial account under the Uniform Gifts to Minors Act (UGMA) is simple and inexpensive.
362) In many states, these laws conform to the Uniform Gifts to Minors Act (hereinafter UGMA), the Uniform Gift of securities to Minors Act, or the Uniform Transfers to minors Act (hereinafter UTMA).
The Uniform Commercial Code and the Uniform Gifts to Minors Act are among their major accomplishments.
Donee's Age at Which Custodianship Established Under the Uniform Gifts To Minors Act (UGMA) or the Uniform Transfers To Minors Act (UTMA) Ends
Ownership and beneficiary arrangements involving minors are governed by either the Uniform Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA) (see page 562).
529 accounts naming themselves as DB (or when Uniform Gifts to Minors Act and Uniform Transfers to Minors Act accounts set up such accounts for their minor beneficiaries) and subsequently change the DB, deeming the change of DB from the contributor to any other person to be a distribution to the contributor followed by a new contribution of the account balance by the contributor to a new Sec.
The Uniform Gifts to Minors Act (UGMA) provides that an adult, while the adult is alive, may make a gift of certain types of property, such as securities, money, or a life insurance (or annuity) contract, to a minor by (depending upon the property) registering the property in the name of, or delivering it to, a custodian for the minor.
A custodian could be named as beneficiary on behalf of the minor under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act; but the custodian in most states cannot make IRA distribution elections and does not have the same powers that would be granted to a trustee of a trust.
A custodial account under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA).
By setting up a Uniform Transfers to Minors Act account - it's Uniform Gifts to Minors Act for certain states - parents or other benefactors can invest for minors.

Full browser ?