Uniform Transfers to Minors Act

Just curious.

And UTMA accounts for kids too, which I don't want to go too off topic, but I know parents set up their kids with UTMA accounts, which is essentially account in their own name, which the parent cannot touch.

It's literally for the kids.

I believe when they turn 18, it's their money.

Would that impact FAFSA also?

Absolutely.

The UTMA accounts and the sister account, UTMA, UTGA, is that the other? Yeah.

That counts as a student asset.

This will help this money grow faster, compound faster, and grow to a higher dollar amount.

Conversely, you could choose not to invest in a Trump account because you have other options, one being a UGMA or UTMA account.

With that account, you could contribute into it, and then at 18, that account would also become your child's.

But with any earned income that your child receives, the first $1,350 is taxed at zero tax rates, tax-free.

We talked about 529 plans and Trump accounts.

I know you're going to talk about UTMA.

That sounds like something we might want to talk about.

UTMA, that could be a whole lot of different things.

That's good.

If you just tuned in, you just remind you that this is Talk Money with Jim Shoemaker.

They're treated differently.

But this next one you're talking about is completely different than those two.

And so I had to list every brokerage account, either them the beneficiary of, or I have control over.

And so that means I've set up UTMA trust accounts for all my nieces and nephews.

And so I counted up and I have 43 different brokerage accounts on this disclosure statement.

Because as you said, it's every time you got a 401k, every time you had an IRA, every time you chased a transfer bonus, every time you set one up for your niece, I'm impressed that you're able to consolidate them.

Uh-oh, just off that name, they needed a deniability of this question.

It says, can or should I sell holdings in an UTMA account to reset the cost basis slowly over time to take advantage of the kiddie tax?

Okay, so quick vocabulary for those of you that aren't familiar.

An UTMA account is just a custodial account held for a minor.

So you as the parent or grandparent serve as the owner of the account and the minor is the beneficiary.

And so you might hold this account and you might invest in something like an individual stock or a low-cost index fund that does well through time.

Yeah, though there are established legal mechanisms designed specifically to avoid this exact nightmare.

Like the, uh, Uniform Transfers to Minors Act.

Right, UTMA.

It basically acts as a holding pen.

It allows property to be held by a custodian for a minor, completely avoiding the need for a guardianship proceeding.

...

these accounts grow, uh, until the age of 18, so they're a little bit different from a UTMA, which-

Wait, real quick, you can make annual contributions too.

Yep.

That's one of the key things.

Uh, so it's like having the ability to contribute to an IRA before they're 18.

So, you know, I, I look at it and I'm like, "I should probably actually do this." In, in addition to the 529 and UTMA contributions I'm making separately, but, uh, whether or not you convert it to a Roth at 18, you know, when they don't have a ton of earned income, that's something that some people out there wanna do.

But, uh, you know, employers can contribute $2,500 each-