We often come across clients who have UGMA or UTMA accounts set up for minor children. These are custodial trust accounts that are set up with a minor as beneficiary and parent or guardian as custodian under the Uniform Gifts/Transfers to Minors Act. These are often set up out of good will as a desire to make a gift to a child. When it comes to education planning, however, UGMA/UTMA accounts are often not the best vehicle for savings. This is because deposits to these accounts are considered irrevocable gifts to the minor, and the asset is considered an asset of the child’s for financial aid purposes. Such assets have a high impact on financial aid eligibility, whereas 529 plans, for example, do not. Transfers can be made from UGMA/UTMA accounts to 529s, but one has to title the account correctly when making the transfer.

If you’d like assistance with this and other education planning strategies, contact us today for a complimentary consultation.