The UGMA and How it Affects Taxes for Minors

List: Posted: 02/25/11

When you are dealing with an inheritance or securities donation to your child from a grandparent or other individual, you need to understand how tax laws work.  Minors do not have to pay taxes, of course, but receiving gifts for your child can affect your own taxes.  Let's look at the Uniform Gifts to Minors Act, or the UGMA.

The UGMA is an act that is recognized in many states that lets a donor put assets into the name of a parent or beneficiary to be held for a minor until they reach the age of maturity.  What makes the UGMA unique is that it does not require the establishment of a trust fund.  Better still, it may even offer tax benefit for the parents in charge of the account.

When an UGMA has been established for your child, you will find that the tax rate on the account is assessed by your child’s income tax bracket, rather than your own.  This can certainly help avoid a great deal of taxes that could be due on the account.  While contributions may be taxed according to the Gift Tax, you will typically find that you can give up to the exclusion on that tax with no penalty.

The UGMA is certainly a very unique act, and it is one that can offer great future benefit to children.  If you are dealing with an inheritance due to your child, this can be an excellent option to your consider.

Tax Return Preparation, State & Income Taxes

    We look at your life through tax - and find ways to help. H&R Block is a global consumer tax services provider that prepares one in every seven U.S. tax returns. H&R Block is global leader in tax preparation services - we've prepared more than 700 million tax returns through retail locations and at-home, digital solutions since 1955. And with approximately 12,000 tax offices in all 50 states, as well as U.S. territories, military bases and abroad, we're always available to help you file your taxes. Find your local Ashburn tax office and schedule an appointment today.

    • 44110 Ashburn Shopping Plz Unit 198 Ste 198
    • Ashburn, VA 20147
    • (703) 723-9530

      We look at your life through tax - and find ways to help. H&R Block is a global consumer tax services provider that prepares one in every seven U.S. tax returns. H&R Block is global leader in tax preparation services - we've prepared more than 700 million tax returns through retail locations and at-home, digital solutions since 1955. And with approximately 12,000 tax offices in all 50 states, as well as U.S. territories, military bases and abroad, we're always available to help you file your taxes. Find your local Broadlands tax office and schedule an appointment today.

      • 43150 Broadlands Ctr Ste 122 Ste 122
      • Broadlands, VA 20148
      • (571) 291-2216
      • 44081 Pipeline Plz Ste 215
      • ASHBURN, VA 20147
      • (703) 723-6388

        Blue Ridge Tax, Inc. is a licensed CPA firm in Virginia. The firm provide tax services to individuals and businesses. IRS audit representation service.

        • 42779 Chatelain Cir
        • Ashburn, VA 20148
        • (571) 201-5268

        The material in this article is for informational purposes only. The views expressed in this article are those of the author and do not necessarily reflect the views or opinions of Local.com. See Additional Information

        More about local.com Features

        Socialize With Us
        Business Top Searches
        Recently Added Coupons

        Copyright 2017 Local.com Ltd - US Patent 7,231,405 - Privacy Policy - Terms of Service
        Advertise with Us - Claim Your Business Listing - Contact Us - FAQ - Site Map - Some data provided by Acxiom.