If you are looking to provide your children with a financial boost for their future, you might want to explore the benefits of opening an account that offers the flexibility to align the funds with their goals. A Uniform Transfers to Minors Act (UTMA) savings account might be precisely what you need.
An UTMA savings account is an irrevocable custodial savings account held for the benefit of a minor. This type of savings account is established by a designated custodian who is responsible for managing any funds, investments, or assets until the minor reaches the age of majority. The account can hold various assets, including cash, stocks, bonds, and even real estate.
When opening an UTMA account, you can opt for a traditional savings account or explore alternative savings products that may offer higher rates. Certificate accounts for example, can be an excellent choice for those who are looking to earn higher dividend rates over a specific period of time. Another option to consider is a money market account (MMA), which is a dividend-bearing deposit account that offers a higher rate compared to regular savings accounts. MMA's are suitable for those who want to earn a competitive rate while maintaining easy access to their funds. These options provide the versatility to tailor your approach, ensuring you make the most of the UTMA account for your child's future.
Notably, one of the significant advantages of an UTMA account is its inherent flexibility. Unlike a 529 college savings plan, there are no restrictions on how the funds can be used for the benefit of the minor. Nevertheless, it's important to note that until the account is transferred, the minor beneficiary does not have the ability to transact or manage the account. Only the custodian, who oversees the account will have this authority. Once the account is transferred to the beneficiary, they will have the freedom to use the funds for any purpose that benefits them. Whether it's funding education expenses, buying a car, or addressing other financial needs, the UTMA account provides the freedom to cater to a broader range of potential scenarios. Additionally, UTMA accounts may offer potential tax benefits, as contributions made to the account are typically taxed at the minor's tax rate. Furthermore, the funds contributed to the account may be exempt from gift tax, providing a favorable advantage. Beyond the financial benefits, UTMA accounts can help teach children good money habits. By involving them in financial decision-making and educating them about the importance of saving and investing, you can instill positive financial habits that they'll use for the rest of their lives. After all, it’s never too early to prepare for your child’s future!
When choosing the best option for your kids, it's important to consider any specific goals, preferences, and the needs of your children. For example, if the purpose of the savings is to provide a college fund, then a 529 college savings plan may be a more suitable tool. However, if you're looking for a more versatile option, the Logix UTMA, Launch Pad, savings account is a well-rounded option for long-term financial planning. We take security and privacy seriously, so you can be sure Logix UTMA, Launch Pad, savings accounts are secure. As an added layer of protection, your deposits at Logix are federally insured by the National Credit Union Administration (NCUA) up to at least $250,000 per individual depositor.
Please contact Logix at (800) 328-5328 or visit www.lfcu.com if you have any questions about this topic or would like to consider opening an account.
The content is provided for informational purposes only, and not intended to provide investment or tax advice. Please consult your tax advisor for information and advice on the tax implications of a custodial account. Logix membership is required, including opening a savings account with a minimum $5 deposit. Limit one free children’s snack bag per child, while supplies last. Logix Smarter Banking is a registered trademark of Logix Federal Credit Union.