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Follow on Google News | UTMA Accounts: Pros and Cons to ConsiderWhat potential benefits do UTMA accounts offer to families? ▪ Assets in an UTMA account (or UGMA account, the earlier version still used in a few states) are owned by the child, not the parents. As a result, UTMA investment income is generally taxed at the child’ ▪ In 2013, the first $1,000 earned by an UTMA account is tax-free, providing that child has no other income and is younger than 19 (or younger than 24 and a full-time student whose unearned income does not provide 50% of his/her support). The next $1,000 of investment income from the UTMA is taxed at the child’ ▪ College keeps growing more expensive, and certain families are just too wealthy to be eligible for financial aid. Some parents create UTMA accounts in response to this dilemma.3 What are the potential drawbacks of UTMA accounts? ▪ First of all, the gifts and transfers you make to the minor via the account are irrevocable. The adult custodian only has control over those assets until the minor turns 18 (though UTMA custodianships can last up to age 21 or age 25 in some states).1 ▪ Once the UTMA custodianship ends, the young adult now in control of the assets can use those assets for any purpose. Anything. What was once seen as a college savings fund may potentially “go to waste” ▪ Many affluent families assume that their children can’t qualify for college loans, and that their kids are out of the running for need-based scholarships and grants. This often proves inaccurate. So if you aren’t yet a multimillionaire, there may not be much reason to have an UTMA account as a college savings fund – it may reduce your student’ UTMA accounts are hardly the only option. If you want to make a gift to a child or help a child save for college, in the end you may determine that a trust, a 529 plan, a Coverdell ESA or a Roth IRA represents a more appropriate choice. Contact us for further information about family gifting strategies (http://www.shepherdfinancialpartners.com/ This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Citations. 1 - individual.troweprice.com/ 2 - forbes.com/sites/ 3 - cbsnews.com/ 4 - smithbarney.com/ 5 - individual.troweprice.com/ End
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