Q:

What are some good trust accounts for children?

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Quick Answer

Uniform Transfer to Minors Act, abbreviated as UTMA, and Uniform Gift to Minors Act, abbreviated as UGMA, accounts are custodial trust accounts for minors. These types of custodial accounts transfer automatically to the child at the age of majority, 18 or 21, in the state that governs the account.

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Full Answer

The custodian manages both UTMA and UGMA accounts, before an account transfers to direct ownership by the child, when the child reaches the specified age. UGMA accounts are specific to the transfer of securities, where UTMA accounts can provide a tax-free savings account for the child. Both account types can negatively affect financial aid eligibility. These assets are counted as part of the custodian’s taxable estate. Seek legal advise regarding other trust options, such as a permanent trust account with a child named as a beneficiary.

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