UGMA/UTMA Custodial Accounts | American Funds
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UGMA/UTMA Custodial Accounts

These custodial accounts, which are named for the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA), let investors take advantage of the lower tax rate for children while saving for education.
 

Who Should Consider an UGMA/UTMA Account?

Investors who want a tax-advantaged investment

Anyone can contribute up to $14,000 per child each year free of gift-tax consequences ($28,000 for married couples). This amount is indexed for inflation and may increase over time. Because contributions are made with after-tax dollars, a deduction cannot be made.

For children under age 19 and full-time students under age 24 whose earned income is less than one-half of their support, the first $1,050 of earnings is tax-free. Earnings between $1,050 and $2,100 are taxed at the child’s rate; earnings above $2,100 are taxed at the parents’ rate.

Investors who aren’t confident the beneficiary will attend college

UGMA/UTMA accounts aren’t limited to education expenses. Withdrawals can be used for anything that benefits the beneficiary.

Investors who want the beneficiary to gain control of the account

Once the age of majority has been reached — 18 or 21 in most states — the beneficiary is entitled to the account.

Investors who expect to make large contributions

There are no contribution limits on UGMA/UTMA accounts.

Objective-focused — Select a “fund of funds” portfolio that is based on your objective, like preservation, balance or growth.

Customized — Build an education savings portfolio of American Funds tailored to your specific needs.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.