UGMA / UTMA
Certified Financial Planner glossary · Certified Financial Planner
Definition
Custodial accounts that transfer legal ownership to the child at the age of majority under state law.
UGMA / UTMA in plain English
A grandparent funds a brokerage account "for the kids" and assumes they can keep steering it forever. UGMA and UTMA custodial accounts transfer legal ownership to the child at the age of majority under state law. Until then a custodian manages the assets, but the child eventually owns them outright and can spend for non-education purposes. Aid formulas often count these accounts more harshly than parent-owned 529s, so labeling a custodial account as if it were a 529 is a classic trap.
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