My son turns 21. What happens to his UTMA account?


Q. My son is turning 21 and there is $2,200 in an UTMA account. I know something changes with the account when he’s no longer a minor. What changes and what do we have to do?
— Mom

A.  Congrats to your son on his big birthday!

UGMA and UTMA accounts used to be very popular for college savings because of favored tax laws. (The so-called “kiddie tax” changed with the new tax plan, and more changes are expected. You can learn more about that here.)

After the first amount of money in income is sheltered from higher taxes, excess income used to be taxed at the parents’ marginal tax bracket, but now it’s taxed at the higher trusts/estates tax rate.

These accounts typically allow stock, bond, and mutual fund investments, but not higher-risk investments like stock options or buying on margin, said Bill Connington of Connington Wealth Management in Fairfield.

A custodian can initiate a withdrawal for the benefit of the child as long as the expenses are for legitimate needs, Connington said.

“Custodial accounts are considered an asset of the child and are counted against financial aid,” he said. “Approximately 20 percent of these assets will be expected to be used toward funding a student’s education in any given year.”

But when your child reaches the age of majority – 18 or 21, or even older, depending on the state – you, as the custodian, lose all control over the account.

The funds then belong to your child, and the child is the only one who can decide what happens to the money. Speak to the company that holds the funds to see what rules your account will need to follow.

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This story was originally published on June 17, 2019. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.