Many of these replies suggest children of wealthy parents. Keep in mind that depending on what the timeline is for intended use of the UTMA funds, your child may be better off inheriting shares directly from you with a corresponding step up in cost basis.

I.e. if you're wealthy enough to be funding substantial UTMAs, you may also be wealthy enough to directly assist with your kids' cash needs in their 20s, rather than having them realize taxable gains in their UTMAs at that point.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:13 yo

He has 12k in utma
30k in Roth
300k in 529.

How did a 13 year old earn money + contribute according to the annual limits for a Roth now worth $30k

Side jobs such as cleaning service for rental properties.

How many times did a kid do this? For how long and what rate? With no oversight (which means even $10 an hour is a loss)? Even an apartment complex doesn’t usually have massive turnover. Is this essentially completely faked?

My kids don’t, but I did as a kid. My parents took me to the bank in my 18th birthday age I had full access to it. It was about 100,000 in 1993 and was supposed to be for college which was about that much for 4 years. Instead, I lived my best life shopping and ran out of money my last year of school. My parents didn’t make a lot of money and it disqualified me from getting any sort of aid. Would never get one of these for my kids now. It was my money and I could spend it as I wanted. Just because it’s supposed to be for college or a car, they can do what they want with it. Use a trust instead.

Anonymous wrote:

Anonymous wrote:We didn’t bother. We did a 529 for savings when they were young and then when were able to cash flow part of college education we let the kids withdraw from the 529 and put it in a brokerage account.

That is not a legal use of a 529 withdrawal and you will incur a penalty

Sure it is. You are allowed to withdraw the amount spent on qualified expenses. There’s no rule that the money has to go to the school.

Anonymous wrote:

Anonymous wrote:13 yo

He has 12k in utma
30k in Roth
300k in 529.

How did a 13 year old earn money + contribute according to the annual limits for a Roth now worth $30k

Side jobs such as cleaning service for rental properties.

In Maryland, I think they get their accounts when they turn 21.

Anonymous wrote:

Anonymous wrote:We didn’t bother. We did a 529 for savings when they were young and then when were able to cash flow part of college education we let the kids withdraw from the 529 and put it in a brokerage account.

That is not a legal use of a 529 withdrawal and you will incur a penalty

The IRS cares about whether you had expenses in the year you made a withdrawal, they don’t care about tracing the withdrawal from the 529 to the college.

Anonymous wrote:

Anonymous wrote:Be sure UTMA/UGMAs are appropriate for your family before using them.

If you're likely to be donut hole, UTMA/UGMAs are treated as the kid's assets for FAFSA/CCS purposes.

See https://howtopayforcollege.com/blog/utmas-and-the-fafsa


Also, above a fairly low income (can't remember the amount), the income gets taxed at the parent's rate.

Whatever on the FASFA. Most DCUM posters' kids will never qualify for needs-based aid anyway. It's merit-based scholarships, sports scholarships, or ROTC/ Military Academy which are not impacted by the FASFA.

True for "most" on here but a warning might just keep some random prole who wanders into this thread from wasting every dime they (or some generous friend/ancestors) put into one.

Anonymous wrote:13 yo

He has 12k in utma
30k in Roth
300k in 529.

How did a 13 year old earn money + contribute according to the annual limits for a Roth now worth $30k

My 17/18 yo kids each have UTMA accounts. They do know about them but don't really pay attention to them. The UTMAs currently have about $50K each initially funded with a small inheritance and have grown quite well from investment returns since then. We opened Roth IRAs for them when they started teenage jobs and contribute money from their UTMA accounts into their Roths before April 15th based on their earned income the previous year. Their Roths are now worth over $50K themselves from great investments.

Anonymous wrote:Be sure UTMA/UGMAs are appropriate for your family before using them.

If you're likely to be donut hole, UTMA/UGMAs are treated as the kid's assets for FAFSA/CCS purposes.

See https://howtopayforcollege.com/blog/utmas-and-the-fafsa


Also, above a fairly low income (can't remember the amount), the income gets taxed at the parent's rate.

Whatever on the FASFA. Most DCUM posters' kids will never qualify for needs-based aid anyway. It's merit-based scholarships, sports scholarships, or ROTC/ Military Academy which are not impacted by the FASFA.

My two kids have UTMAs we opened when they inherited $28K each from their great grandmother. We've invested those funds and they're now worth over $100K. We're custodians until their 25th birthday. We've advised them to use the funds to get their foot in the housing market starting with a condo or townhome. They're college and graduate school are already paid for via other means.

Anonymous wrote:We didn’t bother. We did a 529 for savings when they were young and then when were able to cash flow part of college education we let the kids withdraw from the 529 and put it in a brokerage account.

That is not a legal use of a 529 withdrawal and you will incur a penalty

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:honestly i just don't see to point in contributing to these accounts. not worth the hassle for how low the contribution limit is.

huh? the split gift maximum is 38k before git tax is triggered. Your idea of “low” is not mine.

That is what I was thinking.
12 yr old's is just under 100K and 16 yr olds is at 125K. no idea when we'll transfer as their financial decision or making is horrible right now. They also have a regular bank account and their spending habits are not great. Upside is they are generous with friends?

If the money is in an UTMA it does to them at 18 years old.

My mom set up UTMA’s for my nephews when they were little.
They turn 18 this year and we’ve realized what a horrible idea that was. Live and learn.

You’ve got to know your kids. Some can handle this and others can’t. Also, you make it clear you’re paying attention to how they handle the money and it will influence future gifts and inheritance.

13 yo

He has 12k in utma
30k in Roth
300k in 529.