Features of the Uniform Gifts to Minors Act and the Uniform Transfers to Minors Act are that custodians have control of the account until the beneficiary reaches the age of 18 to 21, withdrawals are allowed for expenses that benefit the beneficiary and contributions are unlimited. In addition, the custodian can invest the account’s assets, according to Oppenheimer Funds.
Custodians of UGMA/UTMA accounts must be adults, but they do not have to be the parents of the beneficiaries. Once these accounts are set up, they are irrevocable. The accounts are not tax-deferred, and the reporting of any income in the account depends on the amount of income that it generates and the
minor’s age, states Oppenheimer Funds. When the beneficiary receives the assets, he may use them however he wishes, even if it was the contributors' intent to fund something specific such as an education.
As long as the beneficiary remains the same, a UGMA/UTMA account can be transferred into a 529 college savings plan. However, the custodian cannot gain control of the 529 plan. The advantage of using a UGMA/UTMA for this purpose is that it helps fund a college education while providing tax benefits, explains Oppenheimer Funds. The disadvantage is that because the beneficiary is the owner, it may limit the amount of financial aid available.