Can you use an UTMA account to buy a car?

Can you use an UTMA account to buy a car?

“Withdrawals from an UTMA account can be used to pay for non-educational expenses so long as they are used for something that is for the benefit of the minor. A car would fall into this category,” she said.

What is UTMA and UGMA?

The state legislation that allows for gifts to children is the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). One or both of those acronyms are often associated with custodial accounts.

Can I buy my child a car with UTMA?

Can I use the account to buy a car for my child? Or to send the child to private school? Yes, you are allowed to use UTMA accounts for items included in a support obligation, regardless of what you read elsewhere.

What happens to a UTMA account when the child turns 18?

Finally, the age of majority for an UGMA is normally lower than that of an UTMA. In most states, the custodianship of an UGMA account will end when the beneficiary reaches either 18 or 21. With an UTMA, it’s more common for the custodianship to last until age 21 — if not longer.

Can parent take money out of UTMA account?

Parents can take cash out of a UTMA or a UGMA account as long as the money is spent for the benefit of the child, who is the account’s beneficiary.

Is UTMA a good idea?

Flexibility gives UTMA accounts an advantage over some other savings strategies, such as 529 Plans and Coverdell Education Savings Accounts (ESAs), which can be used only for qualified education expenses. Another difference: An UTMA account can hold more than just cash and securities.

Can you use UTMA funds to buy a house?

Any expenditures from an UGMA / UTMA are legally required to be for the benefit of the child and – importantly – not be considered part of parental obligations. Parents are obligated to feed, house and clothe their children. Therefore you cannot use UGMA / UTMA money for food, housing and clothing.

Can UTMA be used for college?

You can use the money in an UGMA or UTMA account for any purpose, not just to pay for college. 529 plan distributions are subject to a 10% tax penalty if you don’t use the money to pay for qualified expenses.

Who pays taxes on a UTMA account?

Because money placed in an UGMA/UTMA account is owned by the child, earnings are generally taxed at the child’s—usually lower—tax rate, rather than the parent’s rate. For some families, this savings can be significant. Up to $1,050 in earnings tax-free. The next $1,050 is taxable at the child’s tax rate.

Can I cash out a UTMA account?

Can You Withdraw Money From an UTMA Account? It’s possible to withdraw money from an UTMA account. However, there’s one essential rule you’ve got to bear in mind — all withdrawals from a custodial account must be for the direct benefit of the beneficiary.

Can UTMA be cashed out?

Tips. Parents can take cash out of a UTMA or a UGMA account as long as the money is spent for the benefit of the child, who is the account’s beneficiary.

How do I get my money out of UTMA?

Key Takeaways. Under the Uniform Transfers to Minors Act (UMTA), money deposited into a UTMA account typically can’t be withdrawn except by the child at the appropriate age. A UTMA custodian may be able to use some custodial assets for the “use and benefit of the minor.”

Is UGMA better than 529?

A 529 plan is the best option if the child will go to college, while an UGMA or UTMA account provides more flexibility if the child will not be going to college. The choice between a 529 plan and another type of investing vehicle may change when college enrollment is just a few years away.

Do I report UTMA on taxes?

As the adult custodian or a UGMA or UTMA account, you’re responsible for reporting any taxable gains or taxable income. If a child’s custodial account has generated unearned income, you’ve got to report it to the IRS using Form 8615.

Do kids pay taxes on UTMA accounts?

Does UTMA grow tax free?