Close this search box.

Table of Contents

Uniform Transfers to Minors Act (UTMA)


The Uniform Transfers to Minors Act (UTMA) is a U.S. law that allows minors to receive gifts, such as money, patents, royalties, real estate, and fine art, without the aid of a guardian or trustee. Under UTMA, the gift giver or an appointed custodian manages the minor’s account until the latter is of age (usually 18 or 21). The law, which aims to simplify the transfer process, exempts the minor from tax on the gifted assets.


The phonetic spelling for “Uniform Transfers to Minors Act (UTMA)” is: “Yoo-ni-form Tranz-furz too Mi-norz Akt (yu-tee-em-ey)”

Key Takeaways

<ol><li>The Uniform Transfers to Minors Act (UTMA) is a law that allows minors to own property such as securities.</li><li>Under the UTMA, a custodian is appointed to manage and invest the property on behalf of the minor until the minor becomes of age, generally 18 or 21 depending on the state.</li><li>Contributions made under the UTMA are irrevocable, meaning once the gift is made, it cannot be taken back or changed. Moreover, these contributions are considered the assets of the minor, which may affect their financial aid eligibility when pursuing higher education.</li></ol>


The Uniform Transfers to Minors Act (UTMA) is an essential legal act in business/finance as it allows minors under a certain age, typically 18 or 21, depending on the state, to receive gifts such as money, patents, royalties, real estate, and fine art, without needing the aid of a guardian or trustee. The UTMA simplifies the gifting process by creating a custodial account for the minor in which all gifted properties are held. This action prevents direct access to the assets by the minor but allows financial growth or investment of the assets by an appointed custodian until the minor reaches adulthood. This law fosters an environment for financial growth and planning for children, which can greatly benefit their future financial health and stability.


The Uniform Transfers to Minors Act (UTMA) is a law in the United States which allows adults to transfer assets to minors without necessitating the establishment of a special trust. The main purpose of the UTMA is to simplify the transfer process and make it easier and less costly for individuals to leave or gift assets to minors. The Act allows individuals to appoint a custodian to manage and invest the property on behalf of the minor until the minor reaches a certain age, typically 18 or 21, depending on the state. These assets can include anything from real estate to intellectual property.The UTMA is often utilized as a means of reducing estate taxes or for adults to gift to minors in a financially responsible way. For example, grandparents can use UTMA as an estate planning tool, transferring money or assets to their grandchildren in a manner that minimizes estate taxes. Moreover, the parents of a minor can contribute and allocate financial assets to secure the child’s future needs while maintaining control over how the funds are spent until the child becomes a legal adult. Thus, the UTMA provides a simplified, tax-effective method for adults to contribute towards a minor’s financial wellbeing and future.


1. College Savings: Maria wants to save money for her son’s college education, but she doesn’t want to restrict the usage of funds to only education-related expenses (like a 529 plan). She opens an UTMA account, which not only allows her to start saving for her son’s future, but also gives her the flexibility to use the money for any expenses that benefit her son, like buying a car or paying for medical bills. 2. Estate Planning: John, a wealthy grandfather, wants to reduce his taxable estate by gifting assets to his grandchildren. He decides to transfer stocks to his grandkids under the UTMA. This move not only shrinks his taxable estate but also enables his grandchildren to take advantage of their lower tax rates. 3. Life Insurance Proceeds: After the tragic loss of a child’s parents, the life insurance payouts must be managed in a responsible way. If the parents had named the child as the beneficiary, an UTMA account can be set up to hold and manage the funds until the child reaches legal adulthood. A trusted adult could be named as the custodian of the account.

Frequently Asked Questions(FAQ)

What is the Uniform Transfers to Minors Act (UTMA)?

The Uniform Transfers to Minors Act (UTMA) is a law that allows minors to receive gifts, such as money, patents, royalties, real estate, and fine art, without the aid of a guardian or trustee.

How does a UTMA account work?

A UTMA account is a custodial account set up at a financial institution, where a minor is the beneficiary and an adult is the custodian. The custodian manages the account until the minor reaches the age of majority, which varies by state.

How is UTMA different from the Uniform Gifts to Minors Act (UGMA)?

UTMA is an expansion of UGMA and includes additional property types like real estate and fine art. Unlike UGMA, UTMA accounts do not necessarily terminate when the minor reaches the age of majority.

Can a UTMA account be used for anything?

The funds in a UTMA account should be used for the benefit of the minor. While there’s some flexibility with respect to what constitutes benefit, uses typically include things such as education expenses, medical costs, housing, and transportation.

What are the tax implications of a UTMA account?

The earnings on a UTMA account are subject to federal income tax. The first $1,050 in earnings is considered tax-free, the next $1,050 is taxed at the child’s tax rate, and any amount over $2,100 is taxed at the parent’s tax rate.

Can the beneficiary of a UTMA account be changed?

No, once a beneficiary is named in a UTMA account, it cannot be changed. The property is considered an irrevocable gift to the beneficiary.

Can a UTMA account affect eligibility for financial aid?

Yes, a UTMA account can impact a beneficiary’s eligibility for financial aid. The account is considered an asset of the student, not the custodian, and thus could potentially decrease the amount of financial aid the student qualifies for.

Can funds from a UTMA account be used to fund an education savings account like a 529 plan?

Yes, funds from a UTMA account can be transferred to a 529 education savings plan. However, the 529 account would need to be set up as a custodial 529 account and the funds would remain the property of the minor.

Related Finance Terms

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More