The Future

Teaching Children About Investing

Why do experts at feel that opening UTMA accounts may not be such a great idea?

Experts at feel that creating UTMA accounts for children may not be such a great idea because, over the long term, the account may incur a large tax burden. Before UTMA replaced the Uniform Gifts to Minors Act, parents could enjoy a sizable tax advantage by transferring money to their kids. But under UTMA, a child will enjoy the first $1,000 of earned income tax-free but the second $1,000 of earned income is taxed at 15%. Please consult with a tax adviser to further understand the tax implications of gifting or transferring money to minors, including any updates to the current code.


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