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What is a UGMA account?

A UGMA (Uniform Gifts to Minors Act) investment account is a financial tool that allows a custodian (i.e.: parent, guardian, etc.) to invest on behalf of a minor child (“minor” or “child”). It provides a way to hold and manage assets until the child reaches adulthood. The account is held in the child's name, but the custodians have control over the investments until the child reaches the age of majority, age 18-21, depending on your state. It might offer a tax advantage by allowing the child to potentially pay lower taxes on investment gains or losses.

When can my kids legally access their account?

What are the UGMA tax benefits?*

UGMA accounts are taxable accounts, but they are typically taxed at the minor’s tax rate, which is generally lower than the parent’s tax rate. Typically, the first $1,250 of unearned income each year in the account is treated as tax-free. The next $1,250 in unearned income is taxed at the child’s rate. Anything above $2,500 in annual earnings from the account would be taxed at the parent’s tax rate. So in most cases, there are no taxes paid each year, or taxes will be much less than in a standard investment account. Here is an example:

Little Johnny receives $1,500 in dividends and capital gains from investments in his UGMA account. The first $1,250 is tax-free. The remaining $250 would be subject to tax at Johnny’s tax rate. Since Johnny is in the lowest tax bracket (10%), he would only owe $25 in taxes on the $250 of income.

Now, let's consider the same $1,500 of investment income held in a regular taxable account without the benefit of the child's lower tax rate. If Johnny’s parents are in a 30% tax bracket, they would owe $450 in taxes on the entire $1,500 of income at their higher tax rate.

In this example, the UGMA account allows for potential tax savings compared to a regular taxable account, as the child's lower tax rate results in a lower tax liability on the investment income.

‍*Fabric by Gerber Life and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

What can the money in the UGMA account be used for?

Prior to the age of majority, the money is available for anything that directly benefits the minor. Whether you want to invest now for future education costs, astronaut camp, or band equipment, for example, the money in the UGMA account will be available when you need it. Once the minor reaches the age of majority, there are no restrictions on how the money can be used. It could be used for college expenses, a down payment on a house, or an emergency fund, for example.

What is the difference between a UGMA and a 529 account?

UGMA account and a 529 account are both popular options for saving and investing for a child's future. However, a UGMA account offers greater flexibility and control over the funds. A 529 account is generally designed for educational expenses and, in certain circumstances, can be used to jumpstart retirement saving. In contrast, a UGMA account allows funds to be used for anything that directly benefits the minor. When they reach the “age of majority” (18-21, depending on your state), UGMA funds can be used for a wider range of purposes, such as buying a car or starting a business, for example. Additionally, UGMA accounts have no contribution limits, providing the opportunity to save larger amounts (be sure to check Federal and State gifting limits before contributing). While both accounts have their advantages, a UGMA account can be a versatile tool for parents seeking financial flexibility for their child's future.

Note that a UGMA account could potentially impact a student’s eligibility for financial aid, including federal aid through FAFSA, as the UGMA is considered the child’s asset. Additionally, 529 accounts may come with certain tax deductions or tax credits that vary by state.

Who is Fort Washington Investment Advisors and what is their role?

Fort Washington Investment Advisors, Inc. (“Fort Washington” or the "firm”) is an SEC-registered investment adviser* under the Investment Advisers Act of 1940 (as amended). The firm has over 30 years of experience and more than $70 billion in assets under management. Fort Washington develops and manages the model portfolios from which customers can select based on the investment. For more information on Fort Washington, visit https://www.fortwashington.com to obtain copies of the firm’s Form ADV Part 2A and Appendix 1 brochures.
‍
*Registration as an investment advisor does not imply any level of skill or training.

How much does this cost?

Clients pay a monthly fee in advance for one UGMA account at a rate of $3.00 per month for one account or $5.00 per month for more than one account. All custodial fees, brokerage commissions, stock transfer fees, and other similar charges incurred in connection with transactions for the account will be paid out of the monthly fee and not the assets of the account. This money will be billed from your bank account so all deposits and contributions into the child’s account are not impacted by the monthly fee.

What information will I need to open an account?

Opening an account only takes a few minutes, but it can be even quicker if you already have the following information:
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- Child’s name, address, birthdate, and SSN
- Custodian’s name, address, and SSN

‍Social security numbers (SSNs) are used to verify your identities and prevent fraud. We use bank-level encryption for your protection.

‍Social security numbers (SSNs) are used to verify your identities and prevent fraud. We use bank-level encryption for your protection.

How can I contribute to a UGMA account?

A custodian (i.e., parent, guardian, etc.) can contribute through monthly deposits into an active UGMA account.

Is there a minimum amount I need to contribute?

The minimum amount that you can contribute is $20/month, excluding administrative fees.

How much does this cost?

It’s only $3/mo for an account with one child, or $5/mo for accounts with more than one child (that’s a flat $5/mo no matter how many additional children are on the account). This money will be billed from your bank account so all deposits and contributions into the child’s account are not impacted by the monthly fee.

Fabric by Gerber Life is a brand of Western & Southern Financial Group, Inc. Western & Southern Financial Group, Inc. is the parent company of Fort Washington Investment Advisors, Inc.

Investment advisory services tied to the Fabric by Gerber Life platform are provided by Fort Washington Investment Advisors, Inc., an SEC registered investment adviser. Registration as an investment advisor does not imply any level of skill or training. Custody, brokerage, and clearing services are provided by Apex Clearing Corporation, a registered broker-dealer and member FINRA/SIPC. As a member of the Securities Investor Protection Corporation (“SIPC”), funds are available to meet customer claims up to $500,000, including a maximum of $250,000 for cash claims. For additional information regarding SIPC coverage, including a brochure, contact SIPC at (202) 371‐8300 or visit www.sipc.org. Please consider your objectives before opening an investment account. Investments in securities involve the risk of loss. A diversified portfolio does not ensure a profit or protect against a loss. Past performance does not guarantee future results.

Plan like a parent. is a trademark of Fabric Technologies, Inc.

Gerber Life is a registered trademark. Used under license from Société des Produits Nestlé S.A. and Gerber Products Company.

In the State of California, Gerber Life Agency, LLC is known as and does business as Gerber Life Insurance Agency, LLC.

Save for education... and so much more

STEP 1

Choose your portfolio

STEP 2

Tell us about yourself

STEP 3

Set it and forget it

STEP 4

Watch for growth

What is a UGMA investment account?

How might $1/day
turn into over $10,000?

An account that grows with them

When they’re minors

USE THEIR ACCOUNT FOR:

When they’re in college

USE THEIR ACCOUNT FOR:

When they’re adults

USE THEIR ACCOUNT FOR:

For education...and beyond

Family & friends can send gifts

By parents, for parents

Small fees for a large impact

Got questions? We’ve got answers.

Save for education... and so much more

STEP 1

Choose your portfolio

STEP 2

Tell us about yourself

STEP 3

Set it and forget it

STEP 4

Watch for growth

What is a UGMA investment account?

How might $1/day turn into over $10,000?

An account that grows with them

When they’re minors

USE THEIR ACCOUNT FOR:

When they’re in college

USE THEIR ACCOUNT FOR:

When they’re adults

USE THEIR ACCOUNT FOR:

For education...and beyond

Family & friends can send gifts

By parents, for parents

Small fees for a large impact

Got questions? We’ve got answers.

How might $1/day
turn into over $10,000?