27 Aug Where to save wedding funds for your kids

Q. I already save for college, but I also want to start an account to help my kids with their eventual weddings. Is it worth using an UTMA, or should I save the money somewhere else?

A. It’s admirable that you want to save for your children, but a Uniform Transfer to Minors Act (UTMA) account or a Uniform Gift to Minors Act (UGMA) account may not be the most advantageous place to save.

Vince Pallitto, a certified financial planner and certified public accountant with Summit Asset Management in Florham Park, said he wouldn’t recommend using a Uniform Gift to Minors account for two reasons.

First, he said, when your child reaches the legal age you lose control of the account.

“Your child may want to use it for a car or in the worst case, for a drug or gambling addiction rather than a wedding or a deposit on a new home,” Pallitto said.

Second, Pallitto said, UGMA assets are the child’s assets for college financial aid purposes, so having money in that kind of account could reduce potential aid.

So where to save?

“Depending on the child’s age, I would dollar cost average into an appropriate mutual fund in your name,” Pallitto said.

Then you keep the control, and while you lose potential tax savings from the custodial account, you won’t have to worry as much about unintended consequences from the funds.

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This story was first posted in August 2015.