UGMA account

What It Means

A UGMA account is a custodial accountCustodial accountAn account an adult manages for a minor, usually under state UGMA or UTMA law, where the money legally belongs to the child from the day it goes in. See more set up under a state's Uniform Gifts to Minors Act. An adult custodian manages gifts made to a child, and FINRA explains that a UGMA can hold only cash, securities such as stocks, bonds and mutual fundsMutual fundAn SEC-registered fund that pools money from many investors to buy stocks, bonds or other securities, with shares you can sell back to the fund each business day. See more, and insurance policies. The gift can't be undone, and the child gains control at the age of majority or another age set by state law.

How People Say It

• "We opened a UGMA for the birthday money from Grandpa."
• "Is his account a UGMA or a UTMA?"
• "The UGMA money is hers once she's of age."

The Breakdown

Worked example. A grandmother wants to give her granddaughter three things this year.

A UGMA can take the $1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more,000 of cash and fund shares. The land falls outside what FINRA says a UGMA can hold, so it would need a UTMA account, if her state's law offers one, or another arrangement a lawyer can set up. Her $10,000 is also under the IRS annual gift exclusion of $19,000 per recipient for 2026.

What the result means. The two laws do the same basic job, holding a child's gifts under a custodian, and the difference is what they can hold. FINRA notes that some states have UTMA laws and others UGMA, so the account you can open depends partly on where you live.

UGMA or UTMA, side by side

Good to Know

Because the money belongs to the child, the 2026-2027 Federal Student Aid Handbook says a UGMA owned by the student counts as the student's asset on the FAFSAFAFSAThe Free Application for Federal Student Aid, the U.S. Department of Education form a student files each year to apply for federal aid for college or career school. See more, whatever their dependency status. Bank deposits in a UGMA are insured by the FDIC as the child's single account, up to $250,000 per bank. The transfer age is set by state law, so check your state's rule before opening one.

Related Terms and Categories

• UTMA account

  A custodial account set up under a state's Uniform Transfers to Minors Act, which can hold almost any kind of asset for a child, including real estate.

• Custodial account

  An account an adult manages for a minor, usually under state UGMA or UTMA law, where the money legally belongs to the child from the day it goes in.

• 529 plan

  A state-sponsored, tax-advantaged account for education costs, where growth is free of federal income tax when spent on qualified expenses.

• Kids savings account

  A bank or credit union savings account opened for a child, usually jointly with a parent or as a custodial account, where the child's money earns interest.

• Brokerage account

  An account at a brokerage firm that holds your cash and the stocks, bonds, funds and ETFs you buy and sell through that firm.

• Mutual fund

  An SEC-registered fund that pools money from many investors to buy stocks, bonds or other securities, with shares you can sell back to the fund each business day.

Saving and investing basics