UGMA vs UTMA

UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) are two laws that allow adults, usually the parents or other relatives, to transfer assets to a minor without having to set-up a special trust. An adult is specified to be the appointed guardian and manages the asset until the minor is old enough to manage it on his own. The main difference between UGMA and UTMA is their age and scope. UGMA was created in 1956 and it was adopted by many states. But 30 years later, UTMA was created as an extension of UGMA with a few changes. The states that have adopted UTMA have repealed UGMA since they both serve the same purpose and the differences between the two may lead to confusion.

The first thing that was changed in UGMA to UTMA is the aged of majority or the age where the minor would be considered an adult and would be able to manage the assets that were given to him. In UGMA, this was set at just 18 years old. In UTMA, the aged of majority has been increased to at least 21 years old, giving the kid a chance to mature before being handed control over what would be a sizable asset. It can even be delayed by up to four years to 25 years old by the discretion of the donor.

Another change in UTMA is the inclusion of more types of assets that were not previously included in UGMA. In UGMA, most of the assets that can be given are monetary in nature; like cash, securities, mutual funds, and insurance policies. In UTMA, the types of assets have been increased to encompass just about any type of asset. This includes real estate and other non-monetary properties.

There is really no major difference between UGMA and UTMA and they can both do the intended purpose. There is also really no choice between UGMA and UTMA as states that have UTMA no longer allow you to use UGMA. And in states that do not have UTMA, you have no other alternative except UGMA.

Summary:

1. UTMA is an extension of UGMA
2. States that adopted UTMA has repealed UGMA
3. In UGMA the age of majority is 18 while it’s anywhere from 21 to 25 in UTMA
4. UTMA allows more types of assets to be transferred than UGMA

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