What You Need to Know About UGMA Brokerage Accounts for Minors
Your children may still be in diapers, but they don't need suits to become investors today. You can start investing in your children's future and begin building a legacy by turning to the Uniform Gifts to Minors Act (UGMA).
The UGMA allows you to open a custodial brokerage account that holds assets such as stocks, bonds, and cash for the benefit of a minor. The minor is technically the legal owner of the account. But as a custodian, you manage the account and the assets it holds. Once the child reaches the age of majority, he or she is allowed to manage the account.
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Epoch Times
2 days ago
- Epoch Times
What You Need to Know About UGMA Brokerage Accounts for Minors
Your children may still be in diapers, but they don't need suits to become investors today. You can start investing in your children's future and begin building a legacy by turning to the Uniform Gifts to Minors Act (UGMA). The UGMA allows you to open a custodial brokerage account that holds assets such as stocks, bonds, and cash for the benefit of a minor. The minor is technically the legal owner of the account. But as a custodian, you manage the account and the assets it holds. Once the child reaches the age of majority, he or she is allowed to manage the account.
Epoch Times
23-05-2025
- Epoch Times
How to Open a Brokerage Account for a Minor
Yes, your child can become an investor. You can open a brokerage account called a custodial account for a minor, but retain control of it. And when your child reaches the age of maturity, your child can take over the account. But by learning the value of a dollar, saving and investing early on, your child can already be on the path to proper money management and financial wellness. And you have different types of accounts to choose from a variety of brokerage firms that may offer different investment options, competitive fees, and access to human financial advisers. So let's explore your options. Uniform Transfers to Minors Act (UTMA) Accounts The Uniform Transfers to Minors Act (UTMA) accounts are designed to hold a variety of investment options. These may include traditional and alternative investments, such as: stocks bonds mutual funds exchange-traded funds (ETFs) target-date funds (TDFs) precious metals (gold, silver, etc.) real estate works of art A UTMA account is relatively straightforward. You open an account through a brokerage firm and manage the investments. The assets technically belong to the minor. But they can't access these until they reach the legal age of maturity. That's usually age 18 or 21, depending on the state. You have a fiduciary duty to manage the account for the benefit of the minor. But there are some tax rules to keep in mind. This is how the 'kiddie tax' works: The first $1,300 is tax-free. The next $1,300 is taxed at the child's rate (typically 10 percent). Above $2,600, the money is taxed at the parent's marginal tax rate. Uniform Gifts to Minors Act (UGMA) accounts are limited to holding cash, stocks, mutual funds, and insurance policies. 529 Plans A 529 college savings plan is designed to help parents invest in their child's future college education. Contributions grow tax-free, and withdrawals are tax-free for qualified educational expenses like tuition, fees, and supplies required for enrollment. These are sponsored by states and managed by major brokerage firms. Some states also offer tax deductions or credits at the state level based on your contributions. And contribution limits are typically hundreds of thousands of dollars. Your investment options typically include mutual funds and TDFs. Coverdell Education Savings Accounts The Coverdell Education Savings accounts work similarly to 529 plans, but they have stricter contribution and income limits. The maximum contribution to your beneficiary is $2,000 per year. And your modified adjusted gross income (MAGI) can't exceed $110,000 or $220,000 for married couples filing jointly for you to be able to open an account. How to Open an Investing Account for a Minor The process of opening an investing account for a minor, such as an UGMA, UTMA, or 529 plan, is fairly straightforward. It can be done online through a brokerage firm's website in minutes. You generally need the following: Social Security number for you and the beneficiary; personal information like address; and checking account information to fund the account. What to Watch Out For Brokerage firms that offer these accounts vary in terms of quality. They offer different investing options, fees, services, and more. So it'll help to shop around for a firm and type of account that aligns with your overall investing goals. The Bottom Line Opening an investing account on behalf of your minor can be a great way to teach your kids about the value of money and money management. You can start as early as possible, as you would manage the assets. You have options such as UTMA accounts, UGMA accounts, 529 plans, and Coverdell Education Savings accounts. You can easily open one of these accounts online through a brokerage firm. But it would help to explore your options. Weigh points such as investment options, fees, and various services. The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided. Related Stories 4/30/2025 4/24/2025
Yahoo
12-05-2025
- Yahoo
3 Ways Your Kids Can Start Saving for Retirement Now
According to a new survey from Allianz Life, 64% of Americans fear running out of money during retirement more than they do about dying. One of the best ways to alleviate this fear for future generations is to help your kids save for retirement now rather than wait. Discover Next: For You: By helping your kids save for retirement today, they can take advantage of compound interest, allowing them to accumulate a greater amount of wealth. Are you ready to help your kids with their retirement savings journey? Here are three ways to get started today. Also here are the best bank accounts for kids. One of the easiest ways to help your kids start saving for retirement (or any other financial goal) is to open a savings account. There are no age restrictions and you can keep things simple by opening an account wherever you do your banking. Just make sure it's a high-yield account to earn a meaningful amount of interest. Read Next: Most savings accounts will provide joint access for parents so that you can monitor any money coming in and out of the account. While savings accounts might not help grow a retirement account as quickly as other options, they will allow you to teach your kids good money management skills. Custodial accounts can be set up at most banks or with an investment broker and they are another great way to help your kids begin saving for retirement. Choose from a UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act). Through a custodial account, you, as the parent, can invest in stocks, bonds or mutual funds on behalf of your child. Just keep in mind that while you and your child will have access to the account and be able to make decisions, the account is owned by your child. Once they reach a certain age, the account will be transferred solely into their name and they will be free to use the money as they choose. Because contributions into a custodial account are considered gifts, you need to be mindful so you don't trigger a gift tax. In 2025, any contributions under $19,000 (single) or $38,000 (married filing jointly) are exempt from paying a gift tax. Roth IRAs are a great way to save for retirement. You'll pay tax on your contributions today, but can withdraw your money tax-free during retirement. The biggest downside to using a Roth IRA to help your kids get a head start on retirement is that they will need to have earned income. While many people think this requires a traditional W-2 job, other means of income count as well. For example, if your child earns money from babysitting or mowing lawns, this would be considered earned income. Remember that your contributions can't exceed your child's earned income. More From GOBankingRates 6 Used Luxury SUVs That Are a Good Investment for Retirees How Far $750K Plus Social Security Goes in Retirement in Every US Region 7 Overpriced Grocery Items Frugal People Should Quit Buying in 2025 12 SUVs With the Most Reliable Engines Sources Allianz Life, 'Americans Are More Worried About Running Out of Money Than Death.' This article originally appeared on 3 Ways Your Kids Can Start Saving for Retirement Now
