Uniform Gift/Transfer for Minors Account (UGMA/UTMA)
These investment accounts let you, as custodian, set aside money on behalf of the child in the child's name. The assets automatically transfer to the child when he or she reaches legal age, as defined by the state in which you live. Contributions are considered irrevocable, and there are no restrictions or guidelines on how the child may use the money. In other words, the child does not have to use the assets in an UGMA or UTMA for college expenses.
There are no contribution limits or eligibility requirements for UGMAs or UTMAs. And there aren't many tax advantages, either. Earnings and withdrawals are taxed at the child's tax rate, and the money in the custodial account is considered part of the child's assets for purposes of financial aid calculations.
