20+ Difference between UGMA and UTMA

The functioning and goal of each of these accounts are pretty similar. However, UGMA accounts vary in a few significant ways from UTMA accounts.

Asset allocation is the major differentiator between these two accounts. Products were other than cash, stocks, mutual funds, bonds, other securitized instruments, and insurance policies cannot be held in a UGMA account.

Real estate and other physical assets are only two examples of the kinds of property that may be held in a UTMA account.

Comparison Between UGMA And UTMA

Full formThe abbreviation “UGMA” refers to the term “Uniform Gift to Minors Act”; however, the full word is still used occasionally.The “Uniform Transfer to Minors Act” (also written as “UTMA”) is another possible meaning for the abbreviation “UTMA.” The full name of this law is the Uniform Transfer to Minors Act, which this abbreviation shortens. Because of this, the full name of the legislation is the Uniform Transfer to Minors Act.
MeaningA UGMA is a kind of savings plan that is an alternative for parents to consider while setting aside money for their young children. This program is tailored to meet the needs of young people under the age of 18 in particular.When a child is still considered a minor, their parents can open a “UTMA” savings account for them, which is a specialized kind of savings account. This account allows youngster access to their money even after they reach the age of majority (18).
DonationContributions to UGMA may be made using a wide range of financial assets, such as stocks and bonds, amongst other options. You have the opportunity to use any of them.Donations that are made via a UTMA account may be made in the form of a wide variety of assets, including cash, stocks, annuities, life insurance policies, vehicles, real estate, works of art, patents, and so on. Donations can also be made in the name of a beneficiary.
TerminationWhen a person reaches the age of majority, which in this instance is 18, they are eligible to apply for an account with UGMA and may do so as soon as the chance presents itself.The grace period that the UTMA provides is much longer than that which is provided by the UGMA up to the date of maturity. At least 25 years of age is required of the beneficiary for them to be eligible for compensation. This is a prerequisite age requirement that must be met.

Major Difference Between UGMA And UTMA

What exactly is UGMA?

Traditionally, parents and their children have used the protections afforded by the Uniform Gifts to Minors Act (UGMA), enacted in 1956 and updated in 1966, to make gifts and transfers of property to minor beneficiaries. Up to a certain limit, the gift is not taxable.

Instead of hiring an attorney to set up a separate trust fund, the money is frequently put into a UGMA account so that the minor can access it. Funds held in a UGMA account get preferential tax treatment.

Key Difference: UGMA

  • The regulation being addressed in this article is called the “Uniform Gift to Minors Act,” an acronym.
  • According to the UGMA, the majority’s age is considered eighteen years old in this particular case.
  • Donations made via a UGMA are restricted to the essential aspects of an asset’s overall value.
  • The UGMA operates in the capacity of a backup system for mission-critical tasks.

What exactly is UTMA?

UTMA stands for the Uniform Transfers to Minors Act, a piece of legislation that removes the need for a guardian or trustee when a minor receives a gift. Patents, royalties, real land, and works of art are some other things that may be given as gifts.

The donor or the minor’s legal guardian may oversee the minor’s UTMA account until the beneficiary reaches legal age. The gifts to the minor are likewise exempt from taxation up to a certain amount.

Key Difference: UTMA

  • The entire name of this kind of legislation is the “Uniform Transfers to Minors Act,” and the term “Uniform Transfers to Minors Act” is the abbreviation for the law’s full name.
  • However, the laws for how long a UTMA may be kept before it must be transferred to the recipient differ from state to state. UTMA can be retained for up to 25 years.
  • The Uniform Transfer of Municipal Assets Act (UTMA) is a piece of legislation that makes it legal to donate a wide variety of various kinds of real estate.
  • In addition to alimony and child support, the Uniform Temporary Maintenance Act (UTMA) may also be applied to various other sorts of payments.

Contrast Between UGMA And UTMA


  • UGMA- Even though it was the first organization of its type to be established in 1956, the UGMA has continued to operate ever since, even though its restrictions have become much more restrictive.

    This is because the UGMA was the first organization of its kind. Most people get ready for retirement by putting money aside in some investment vehicles, such as stocks, bonds, or mutual funds. This is how they plan for their golden years.
  • UTMA- Since it was initially founded in 1996, the UTMA has seen a substantial expansion in terms of the breadth and depth of the many different kinds of property that are now permitted to be kept within its boundaries.

    In modern times, vehicles, works of art, and real estate are all considered to be examples of this kind of property.

Financial Assets:

  • UGMA- UGMA accounts, the very first kind of custodial account ever invented, can store a broad range of financial assets. These assets include insurance policies, stocks, bonds, mutual funds, etc.
  • UTMA- Both a UGMA account and a UTMA account can hold any and all assets that are permitted to be stored in a UTMA account.

    The format of the accounts is the only thing that differentiates the two options available. Both the UGMA accounts and the UTMA accounts are completely compatible with one another and will not cause any problems if used together.

    However, if a trust is established, the ownership of physical assets like as real estate, works of art, and other movable property may be transferred into the hands of the trust.


  • UGMA- Congress passed the United Grace Mission Act (UGMA) in the 1950s as a means to assist low-wealth families in evading the limits of trust funds.

    It was during this time period that unique UGMA programs were initiated in the majority of states.
  • UTMA- In the 1980s, new legislation was presented and called the UTMA; since then, all states have approved the modified UTMA except for South Carolina.

    The UTMA was first proposed in the 1980s and given its current name in the 1990s. The most significant change that was made to the UTMA was to expand the types of assets that may be transferred from a custodian to a juvenile. This was done to protect the rights of minors.


  • UGMA- There is only one goal that may be accomplished with a custodial account that has been set up in conformity with the Uniform Gifts to Minors Act. That goal is to be of financial assistance to the recipient.

    This is the situation as a direct result of the act making it abundantly apparent that this is the one and only objective of an account of this kind.
  • UTMA- The custodial account that may be utilized for support or other reasons is governed by the Uniform Transfer to Minors Act. 

    This account might be used for a variety of other purposes as well. This account has the potential to be used for a variety of additional purposes as well, including a broad range of chores.

Frequently Asked Questions (FAQs)

Q1. What are the advantages of having a UGMA account?

If the funds in the account aren’t utilized to pay for higher education, there isn’t a penalty as there is with college savings programs.

When the minor reaches the majority age, the assets, including the money, are transferred to the minor.

The minor will then have complete authority over the assets and can utilize them for any purpose, including education.

Q2. Is it possible to get your money out of UTMA?

The Uniform Transfers to Minors Act (UMTA) states that any money that is placed into a UTMA account cannot normally be taken from the account by anybody other than the kid themselves after they reach the legal age.

A UTMA custodian may be permitted to utilize part of the property under their care for the “use and benefit of the child.”

Q3. Who is responsible for ensuring that the taxes owed on UGMA accounts are paid?

Because the money that is put into a UGMA or UTMA account belongs to the child, the earnings from such accounts are ordinarily taxed at the child’s rate, which is typically a lower rate than the rate that the parent is liable to.

This may result in significant tax savings for the child. This is a potential possibility for significant cost reductions for certain households.

Q4. Where may money from a UTMA account be used?

The custodian of the UTMA account has complete discretion over how the money is spent or invested as long as it is done for the child’s benefit.

This covers various costs, such as the beneficiary’s schooling, transportation, and extracurricular activities like music lessons or summer camp.

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