Is there a potential downside of UGMA or UTMA accounts?
Yes. To repeat, you are the custodian, the minor is the owner. When that minor becomes an adult under state law, the account terminates and the account owner gets to spend the funds as he or she wishes. It’s a free country … and it is possible that today’s college fund will become tomorrow’s Corvette. So you do want the owner and the custodian on the “same page” when it comes to the intent of the account, and on good terms as well.5 Another potential issue to consider: if you are custodian of one of these accounts and you pass away before the account terminates, the assets within the UGMA or UTMA account may become part of your taxable estate.3 An underpublicized option worth checking out. UGMA and UTMA accounts may give your family the potential to create a nice pool of money for college while lowering your income taxes in the process. Jacob Warren Warren Wealth Management 111 West Port Plaza Drive, Ste 300, Saint Louis, MO 63146 (866) 463- 0752 ext. 52337 toll free, (314) 819-0464 —
