Uniform Gifts for Minors Act - Explained
What is the Uniform Gifts for Minors Act?
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What is the Uniform Gifts to Minors Act?
There are certain acts in the United States that cater for the well being of minors. The Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) are laws in the United States that enable minors receive gifts in terms of assets of securities without the help of their guardians. These acts allow donors to give gifts (money, patents, royalties, real estate) to minors. Guardians of minors or individuals can open UGMA or UTMA accounts for them, this will remove the need for a trustees or an attorney when the minor is to receive assets or securities.
How Does the Uniform Gifts to Minors Act Work?
Typically, UGMA gifts, assets or securities are meant to cater for a minors education and other necessary needs. Donors in a UGMA arrangement have no limitations, any individual can contribute. Individuals can open UGMA accounts for minors in a bank or brokerage institution. Under the UGMA law, custodians will be in possession of the gifts or assets that a minor receives till the minor is of age. The purpose of this is for accountability and to enable guardians make certain withdrawals for minors expenses. However, a donor is also permitted to select a custodian for the minor or assume the role in person. Once a minor becomes of age, all the gifts, assets and securities are in his possession.
UGMA Tax Implications
Although, a minor has a full possession of all income orb assets realize through a UGMA account, these income are still subject to federal taxation to a certain degree. There are certain tax reporting requirements that beneficiaries of UGMA accounts are to oblige to. UGMA accounts are taxed based on the income they generate. Also, the beneficiary can either be taxed directly or the parent (guardian), if they choose to report the UGMA account under their personal tax returns. Also, for federal tax purposes, the custodial of a minor UGMA account can be relinquished to the donors taxable property. This occur in cases whereby the donor is the custodian of the account and the donor dies before the minor claims ownership of the account.
- Succession Planning
- Chartered Trust and Estate Planner
- Cy Pres Doctrine
- Exordium Clause
- Non-Contestability (No Contest) Clause
- Per Stirpes
- Elective Share
Qualified Domestic Relations Order (QDRO)
- Declaration of Trust
- Uniform Gifts for Minors Act
- Acceptance of Office by Trustee
- Beneficial Interest
- Asset Protection Trust
- Bare Trust
- Blind Trust
- Charitable Lead Trust
- Credit Shelter Trust
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- Generation Skipping Trust
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- Qualified Domestic Trust (QDOT)
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- ABLE Account
- Accumulated Income Payments (Canada)
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