UTMA vs. UGMA: What's the Difference?

What's the difference between a UTMA and UGMA?

UTMA and UGMA are two types of custodial arrangement used to hold assets for a child.

UGMA stands for Uniform Gifts to Minors Act.

UTMA stands for Uniform Transfers to Minors Act.

They work similarly for families using them to hold cash, stocks, bonds, mutual funds, or ETFs. The biggest difference is the types of property they can hold.

What can a UGMA or UTMA hold?

A UGMA generally covers financial assets.

A UTMA expanded the types of property that can be transferred to a minor.

That difference may not matter if you're opening a custodial brokerage account to invest in stocks or funds. Either structure can be used for those.

Who owns the money?

The child does.

You may be the custodian managing the account, but assets transferred into it are held for the child. That distinction matters.

A custodial account isn't the same as keeping money in your own brokerage account and planning to give it to your child later. Once property is transferred into a UTMA or UGMA, you can't simply take it back because you've changed your mind. There are also limits on what the money can be spent on while the child is still a minor.

Can you move the money to another child?

Generally, no.

A transfer into a custodial account is an irrevocable gift to that child.

If you have three children, you can't take assets already transferred to one child's custodial account and reassign them to a sibling because their balances are different. The custodian manages the assets for the child who owns them.

When does your child get control?

Both UTMA and UGMA arrangements eventually transfer control to the child.

The timing depends on applicable state law, the type of custodial arrangement, and how it was established. That makes the transfer age worth checking before you open an account.

When the custodianship ends, your child receives control of the assets and can decide what to do with them. There's more on how that handover works.

Are UTMA and UGMA accounts taxed the same way?

Both can generate taxable income for the child.

Depending on the child's income and other circumstances, the federal kiddie-tax rules may apply to unearned income such as interest, dividends, and investment gains.

The specific tax result depends on your situation. A tax professional can help if you're deciding how a custodial account may affect your child's taxes.

How do UTMA and UGMA accounts affect financial aid?

For the FAFSA, UGMA and UTMA accounts owned by the student are reported as student assets.

That's different from some education savings accounts. A 529 for a dependent student is generally reported as a parent asset when parent information is required on the FAFSA.

Financial-aid rules can change, so check the current FAFSA instructions when your child applies. We cover the mechanics in custodial accounts and financial aid.

Which one do you have?

Check the account registration on your brokerage statement or account details.

It should identify the custodial arrangement as UTMA or UGMA.

If you're opening a new custodial account, the financial institution should also tell you which structure applies.

For most families investing in ordinary brokerage assets, the more important questions are what the account can hold, when control transfers, and whether a custodial account fits the purpose of the money.

Where MemoryBank fits

MemoryBank can connect supported custodial accounts you've already opened and give your child a simpler way to see what they own. You still use your brokerage to contribute, invest, trade, and eventually transfer control of the account. You can see what's worth tracking in one.

MemoryBank is not a brokerage. It cannot receive, keep or transfer securities.

What should you do next?

If you already have a custodial account, check your statement to see whether it's registered under UTMA or UGMA. Then find the transfer rules that apply to your account and state.

If you're deciding whether to open one, compare a custodial account with other options such as a 529 or a custodial Roth IRA, based on what the money is for.

A financial advisor or tax professional can help with account and tax decisions specific to your family.

Frequently asked questions

What is the difference between a UTMA and UGMA account?

The main difference is the property each arrangement can hold. UGMA generally covers financial assets such as cash, stocks, bonds and funds, while UTMA allows a broader range of property to be transferred to a minor. For an ordinary custodial brokerage account holding stocks or funds, either structure works the same way.

Can I take money back from a UTMA or UGMA?

A completed transfer into a UTMA or UGMA is generally an irrevocable gift to the child. The custodian must manage the assets for that child's benefit, and the money can't be reclaimed for yourself or reassigned to a sibling.

What can UTMA money be used for?

Generally for the benefit of the child who owns it, rather than for ordinary parental obligations. What counts varies by state, so check the rules that apply to your account before spending from it, and keep records of what the money went toward.

Can I change the custodian on a UTMA?

Usually yes. Custodial accounts generally allow a successor custodian, and brokerages have their own forms for naming or changing one. It's worth setting a successor when you open the account, so the arrangement doesn't stall if something happens to the current custodian.

Can grandparents open a UTMA for a grandchild?

Yes. A grandparent can open a custodial account and serve as its custodian. They'll need the child's Social Security number, which means involving the parents. Adding money to an account someone else already controls goes through that custodian instead.

Can I track a UTMA or UGMA through MemoryBank?

Yes, if the financial institution is supported. MemoryBank can display the custodial account in your child's dashboard while the assets remain at the brokerage where you opened the account.