What is a UTMA Account—and How Does it Work in Virginia?
If you’re a parent, grandparent, or loved one looking to gift money or property to a child, Virginia’s Uniform Transfers to Minors Act (UTMA) offers a simple way to do so—without setting up a formal trust.
What Is a UTMA Account?
A UTMA account allows you to transfer assets—such as cash, investments, or real estate—to a custodian, who manages them for a minor until they reach a specified age: 18, 21, or 25. This makes UTMAs a popular option for funding education or future life goals.
UTMA vs. Trust: Which Is Better?
While UTMAs are easy to set up, they come with important limitations—especially when large amounts are involved:
- The minor automatically receives full control of the assets at 18, 21, or 25—even if they aren’t ready to manage it wisely.
- Trusts provide more control, allowing you to stagger distributions, set conditions, and appoint a long-term trustee to guide the process.
For larger gifts or inheritances, using a trust is often the more protective, strategic choice.
What About Taxes?
Income earned within a UTMA account is usually reported on the minor’s tax return. However, there are cases where the parent may be taxed—particularly if the income is used to meet a support obligation. This is something to review carefully with your attorney and tax professional before setting up an account.
Bottom Line:
UTMAs are useful for modest gifts and short-term needs, but may fall short when it comes to protecting a child’s inheritance over time. A well-crafted estate plan—potentially including a trust—can give you greater peace of mind and flexibility.
Want to give wisely, not just generously?
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