Custodial Savings Accounts for College
Use a Custodial Savings Account as Your Child's College Savings Account
Established under the Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA), a custodial savings account may be used for education expenses, as well as other costs that benefit the child. You control the account's investments, but your child owns the assets held in the account. When used as an education or college savings account, it can be an effective way to plan for your child's future.
Benefits of establishing a custodial savings account
Contact a Financial Advisor to discuss college savings accounts
Benefits of Establishing a Custodial Savings Account
A UGMA or UTMA custodial savings account will let you:
- Contribute up to $12,000 ($24,000 for married couple) annually per child without incurring gift taxes
- Invest in individual securities, mutual funds or U.S. savings bonds
- Control the account until your child reaches the age limit (typically 18 or 21)
- Make withdrawals for costs that directly benefit the child
Since a custodial savings account is considered your child's asset, all income generated will be subject to the "kiddie tax." The "kiddie tax" rules apply to a child who has not reached age 19 and has at least one living parent at the end of the tax year. If the child continues to be a full-time student, the "kiddie tax" applies until age 24. You should consult your tax advisor regarding your family's individual tax situation. Balances in custodial accounts may also affect your child's eligibility for financial aid.