We explain the difference between UGMA and UTMA with table. When it comes to supporting children and saving for them, families choose the best investment options to secure their future. UGMA and UTMA are two of those options that are mostly adopted by families.
UGMA is the abbreviated form of the Uniform Gifts to Minors Act. It is a type of custodial savings account that allows a family to donate basic goods for the future of their children, which are delivered to the beneficiaries when they turn 18.
UTMA is also a savings account but allows a broader range of assets that can be donated and matures when the beneficiaries turn 25 years old.
The difference between UGMA and UTMA is that UGMA stands for Uniform Gift to Minors Act and is a type of savings account with custody that is used by families to support their children in time of need, allows the donation of basic goods and reaches maturity when the beneficiary is 18 years old, on the other hand, UTMA is the custodial savings account that can be used to support children, as well as for other purposes, it allows a reader a variety of assets that can be donated and they mature when the beneficiary reaches the age of 25.
Comparison table between UGMA and UTMA
| Comparison parameter | UGMA | UTMA |
| It represents | UGMA is the short or abbreviated form of the Uniform Gifts to Minors Act. | UTMA is the abbreviated form of the Uniform Transfer to Minors Act. |
| What does it mean | UGMA is a kind of savings option that a family can choose for their children when they are minors. | UTMA is also a type of savings option that a family chooses for their children when they are still minors. |
| Purpose of use | The Uniform Gifts to Minors Act is a custodial account used only for support purposes. | The Uniform Transfer to Minors Act is the custodial account that can be used for support or other purposes. |
| Assets allowed for donation | UGMA is the account that allows the donation of basic assets such as bonds and stocks. | UTMA is the account that allows a wide range of assets that can be donated such as money, stocks, annuities, life insurance, arts, patents, automobiles, real estate, etc. |
| Termination or expiration age | The UGMA account expires when the minor turns 18. | UTMA allows more time before expiration than UGMA. It matures when the beneficiary reaches 25 years of age. |
What is the Uniform Gifts to Minors Law?
UGMA is short for Uniform Gift to Minors Act. It is a type of custodial savings account that acts as an irrevocable trust, which means that it can be referred to as a separate entity in which one person invests for the benefit of another person and is not can use on you. Being a custodian means that you have to take care of it until it is handed over to its beneficiary.
UGMA allows a person to donate only basic assets like bonds, stocks, mutual funds, etc. to his children. The UGMA account expires when the minor beneficiary reaches the age of 18. If a person receives an annual payment from the UGMA account, then he has to pay taxes on it according to the different tax tables, if the payment is Los, then the tax rates are low and if the payment is high, the rates also increase.
If the minor is a college student, the assets in the UGMA account are considered the student’s assets according to the FAFSA. However, the beneficiary can use it wherever he wants.
What is the Uniform Transfer to Minors Act?
UTMA is the abbreviated form of the Uniform Transfer to Minors Act. It is also a type of custodial savings account that families use to invest for their families.
UTMA allows a broader range of assets that can be donated, such as money, stocks, funds, cars, arts, real estate, personal belongings, etc. The UTMA account matures when the minor beneficiary reaches the minimum age of 18, however one can terminate it anywhere between 18 and 25 years of age. UTMA’s tax system is similar to UGMA’s.
Main differences between UGMA and UTMA
- UGMA stands for Uniform Gift to Minors Act, on the other hand, UTMA stands for Uniform Transfer to Minors Act.
- UGMA and UTMA are custodial savings account options that families can choose for their minor children.
- Uniform Gift to Minors Act is the savings account whose custody is in the hands of parents or guardians and is used by families to support their children, on the other hand, Uniform Transfer to Minors Act is the savings account that can be used to support children of families and can be used for other purposes.
- The Uniform Law on Donations to Minors allows the donation of basic assets only, on the other hand, the Uniform Law on Transfer to Minors allows a range of assets that can be donated to minors, including donations of money, life insurance policies, stocks, annuities etc.
- UGMA allows less time before expiration while UTMA allows more time before expiration compared to UGMA.
- The savings account of the Uniform Law of Donations to Minors reaches maturity when the minor beneficiary reaches the age of 18, on the other hand, the Uniform Law of Transfer to Minors reaches maturity when the minor reaches 25 years of age.
Final Thought
UGMA and UTMA are savings accounts whose custody is in the hands of the parents or grandparents. Both have specific characteristics, therefore, before investing one must properly understand their terms and conditions. By investing in the right way, you can ensure a secure future for your children.
