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When it comes to saving for your child’s future, choosing the right financial tools can make all the difference. Uniform Gifts to Minors Act (UGMA) accounts have long been a favored method for parents and grandparents to transfer wealth to younger generations. However, navigating UGMA account limits and tax implications can be challenging without a solid understanding of the rules.

This comprehensive guide will break down all you need to know about UGMA accounts, including their contribution limits, tax considerations, and why they might be the right choice for securing your child’s financial future.

What Is a UGMA Account?

A UGMA account is a custodial account that allows an adult (usually a parent or grandparent) to transfer financial assets to a minor without the need for a trust. These accounts are governed by the Uniform Gifts to Minors Act and provide a straightforward solution for transferring assets while taking advantage of certain tax benefits.

Key Features of a UGMA Account:

Ownership: The assets in the UGMA account are legally owned by the minor, but a custodian manages them until the child reaches the “age of majority.”
Flexibility: Unlike 529 plans, UGMA accounts are not restricted for education expenses. The funds can be used for any purpose that benefits the child.
Irrevocable Contributions: Once assets are deposited, the transfer is permanent—you can’t take the money back.

What Are the Contribution Limits for a UGMA Account?

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