Volume 18: The Lockshield Letter
Oct 1, 2026
Episode 23: UTMA Accounts
The Basics of UTMA Accounts
Episode Description
In this episode, we break down UTMA accounts, or accounts established under the Uniform Transfers to Minors Act, and how they can be used to give and invest money for a child. UTMA accounts are relatively flexible and allow an adult to serve as custodian of assets that ultimately belong to a minor. Unlike accounts such as a 529, there isn't a special federal income tax deduction for contributing to an UTMA, and the money isn't restricted specifically to education.
While the child is still a minor, the custodian manages the account and can request distributions as long as the money is used for the benefit of the child. We also discuss how investment income in an UTMA is taxed and why the "kiddie tax" rules can become important depending on how much income the account generates.
Finally, we explain what happens when the child reaches the applicable age and takes control of the account. At that point, the custodian is removed and the assets belong entirely to the child, meaning they can ultimately decide how the money is used. UTMA accounts can provide families with a flexible way to invest for a child's future, but that flexibility also comes with giving up control of the assets once the child reaches the required age.
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