Uniform Gifts to Minors Act - UGMA

AAA

DEFINITION of 'Uniform Gifts to Minors Act - UGMA'

An act that allows minors to own property such as securities. The IRS allows persons to give so many thousands of dollars to another person without any tax consequences. If this recipient person is a minor, the UGMA allows the minor to own the assets without an attorney setting up a special trust fund. Under the UGMA, the ownership of the funds works like it does with any other trust except that the donor must appoint a custodian (the trustee) to look after the account.

INVESTOPEDIA EXPLAINS 'Uniform Gifts to Minors Act - UGMA'

The donor can appoint him/herself or another person to be custodian. The custodian, who has a fiduciary duty to manage the minor's assets wisely, can use the funds to buy securities on behalf of the minor. Access to the gift must be given to the minor when he or she reaches the age of majority, either 18 or 21 (sometimes even 25), depending on UGMA state law. Should a donor acting as the custodian die before the custodial property is transferred to the minor, the entire custodial property is included in the donor's taxable estate.

RELATED TERMS
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in ...
  2. Gift

    Property, money or assets that one person transfers to another ...
  3. Kiddie Tax

    A special tax law created in 1986 imposed on individuals under ...
  4. Guardian IRA

    An IRA held in the name of a legal guardian or parent on behalf ...
  5. Uniform Transfers To Minors Act ...

    An act that allows a minor to receive gifts such as money, patents, ...
  6. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
Related Articles
  1. Don't Forget The Kids: Save For Their ...
    Savings

    Don't Forget The Kids: Save For Their ...

  2. Investing In Your Child's Education
    Insurance

    Investing In Your Child's Education

  3. Designating A Minor As An IRA Beneficiary
    Taxes

    Designating A Minor As An IRA Beneficiary

  4. Leaving Inheritance To Children Easier ...
    Options & Futures

    Leaving Inheritance To Children Easier ...

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center