What can you do with UGMA & UTMA accounts?

Upcoming Workshops in the Quad Cities and Rockford

CFS will be holding free workshops in Moline and Bettendorf at the end of the month.

Tuesday, January 29th, 7pm
Moline Public Library, 3210 41st St, Moline, IL

Thursday, January 31st, 7pm
Bettendorf Public Library, 2950 Learning Campus Dr, Bettendorf, IA

Scott Anderson will also be teaching at Rock Valley College in Rockford, IL on Saturday, January 26th at 10am. Contact Rock Valley College and ask about the Maximizing Money for College class.


What can you do with Custodial Accounts?

Custodial accounts (UGMA & UTMA) have been common methods for saving money for college. UGMA stands for Uniform Gift to Minors Act and was implemented in the 1950’s. UTMA stands for Uniform Transfer to Minors Act, was implemented in 1986, and supercedes the UGMA rules in all states except South Carolina and Vermont. UGMA & UTMA accounts are students’ monies and cannot be transferred to parents or other siblings. These accounts are common, but they can be sources of a lot of confusion. Worse yet, these accounts are penalized at the highest level in the financial aid process.

To maximize your opportunities for various monies from the colleges and government, it is important to get as much money as possible out of your student’s custodial accounts. So what can you do with them?

The first thing you can do with them is spend the money. UGMA & UTMA monies must be spent on behalf of the student, but cannot be spent on items considered “parental obligations”, or those items which are normal to the raising of any child. This means you cannot spend the money on a student’s clothes, food, shelter, health care, etc.

You can spend the money on those items for the child which are not considered normal, everyday expenses associated with raising any child. These items can include cars, computers, college tuition, summer camp, musical instruments, special school expenses, private school tuition, paying taxes on the UGMA or UTMA account, etc.

Parents often ask if they can be reimbursed for previous expenses out of their child’s UGMA or UTMA account. This is kind of a grey area. The expense at the time may have been for the benefit of the child. But is the reimbursement after the fact for the benefit of the child or the parent. Timeliness is probably the key in this instance. How timely is the reimbursement to the expense. If the parent wants a reimbursement for their child’s summer camp expense five years ago, that’s probably not going to be kosher. If the parent is taking a reimbursement in the fall for a car purchased over the summer, that would probably be ok.

No matter what , always make sure you have a written permanent record of the expenses paid out of the custodial account. If you don’t have a written permanent record, woe unto you if you ever have a run-in with the IRS.

The second thing you can do with the money in UGMA & UTMA accounts is shelter it. In sheltering, you keep the money in the student’s name, but you move the money to assets which are not penalized in the financial aid process. It is recommended that you shelter monies when you still need the student’s money while in college, or you want to keep the money around after the student graduates.

Sheltering can be fairly complex. Please contact us for further information.


Michigan State University
East Lansing, MI www.msu.edu
Next stop on the campaign trail…

Cost of Attendance

In-State

Cost of Attendance

Out-State

Family Need Met

Free Money

Self-Help

$18,658

$32,518

82%

53%

47%

Known internationally as a major U.S. public university with global reach, Michigan State University has been advancing knowledge and transforming lives through innovative teaching, research, and outreach for over 150 years. MSU is a member of the Association of American Universities, the National Association of State Universities and Land-Grant Colleges, and the Big Ten athletic conference.

Michigan State University holds a unique position in the state's educational system. As a respected research and teaching university, it is committed to intellectual leadership and to excellence in both developing new knowledge and conveying that knowledge to its students and to the public. And as a pioneer land-grant institution, Michigan State University strives to discover practical uses for theoretical knowledge, and to speed the diffusion of information to residents of the state, the nation, and the world. In fostering both research and its application, this university will continue to be a catalyst for positive intellectual, social, and technological change.


St. Anselm College
Manchester, NH www.anselm.edu
Last stop on the campaign trail…

Cost of Attendance

Family Need Met

Free Money

Self-Help

$38,690

87%

54%

46%

Saint Anselm is located on a hilltop overlooking Manchester, N.H., within an hour of the seacoast, Boston, the White Mountains, and New Hampshire's Lakes Region.

Founded in 1889 by the world's oldest religious order, the Benedictines—a Catholic order that has endured and thrived for more than 1,500 years—we have spent 118 years shaping an academic community designed to meet your expectations.

Whether you want to be a doctor, teacher, nurse, or lawyer; start your own business or make films—or you simply know you want to make a difference and you want to figure out the best way to do it, Saint Anselm will give you the options, experience, and mentors to connect, solve, to serve, lead and especially to do the right thing.

Named one of the country's "Colleges with a Conscience" by The Princeton Review, Saint Anselm shapes the kind of leader the world is hungry for; not only smart, but good. We invite you to be one of them.