what is the uniform transfers to minors act utma 
the term uniform transfers to minors act utma refers to a law that allows a minor to receive gifts without the aid of a guardian or trustee gifts can include money patents royalties real estate and fine art a utma account allows the gift giver or an appointed custodian to manage the minor s account until the latter is of age it also shields the minor from tax consequences on the gifts up to a specified value understanding the uniform transfers to minors act utma the utma is similar to the original version of the uniform gift to minors act ugma it allows minors to receive gifts and avoid tax consequences until they become of legal age in the state in which they live typically 18 or 21 years of age the utma incorporates the language of the ugma and extends the original definition of gifts beyond cash and securities to include real estate paintings royalties and patents 1the utma provides a convenient way for children to save and invest without carrying the tax burden the internal revenue service irs allows for an exclusion from the gift tax of up to 18 000 per person for 2024 a 1 000 increase from the previous year for a qualifying gift including gifts to minors 2the minor s social security number ssn is used for tax reporting purposes on utma accounts 3 because assets held in a utma account are owned by the minor this may have a negative impact when the minor applies for financial aid or scholarships 4each state has the option to adopt or amend the utma for its residents 1 for example south carolina has not adopted the utma for its citizens and florida passed a statute in 2015 that allows any property to be held by the utma custodian until the minor is 25 if desired 5any earnings that are generated within a utma are taxed at the kiddie tax rate by the irs up to the allotted threshold of 2 500 6 earnings after that are taxed at the adult donor s marginal tax rate 7special considerationsthe utma allows the donor to name a custodian who has the fiduciary duty to manage and invest the property on behalf of the minor until that minor becomes of legal age 8 the property belongs to the minor from the time the property is gifted 9 if the donor dies while serving as custodian the value of the custodianship property is included in the donor s estate 10the assets in a utma are counted as part of the donor s taxable estate until the minor takes possession 11uniform transfers to minors act utma vs uniform gift to minors act ugma as noted above the utma is similar to an earlier version of the ugma in fact it is an extension of the ugma the ugma was developed in 1956 and revised in 1966 it is limited to the transfer of cash or securities the utma was finalized in 1986 both laws were approved by the national conference of commissioners on uniform state laws and adopted by most of the 50 states but each state can modify its statute 1the ugma and utma provide a way to transfer property to a minor without the need for a formal trust they allows assets to be managed by a custodian who is appointed by the donor the assets are then turned over to the minor when they become of legal age in the state where the gift was made the primary difference between the ugma and the utma is in the assets that are allowed in these accounts ugmas are limited to cash and securities but many types of property can be transferred to minors in the utma including contributions to a ugma or utma are made using after tax dollars which means donors don t receive a tax deduction for making them just like a utma gifts made to a ugma are tax free up to 17 000 per person for 2023 and 18 000 per person for 2024 2can a minor receive gifts or assets without a guardian or trustee yes a minor can receive gifts or assets without a guardian or trustee as it is stipulated in the uniform transfers to minors act the utma is a law that governs the transfer of assets from adults to minors it provides parents and other adults with a tax advantaged way to pass on gifts to minors without needing to create a formal trust in doing so the adult who donates the gift would typically act as the custodian for those assets until the minor reaches legal age alternatively the donor can also appoint a third party to serve as the custodian of those assets 1