FFM - College Funding & UGMA

“Like any other investment strategy, UGMA accounts have certain advantages and disadvantages it largely depends on the person's circumstances and goals. Our experience in this area indicates that more and more parents are unwilling to accept the fact that Junior gets his hand on the money at 18 or 21, regardless of his (or her) circumstances. To that end, they prefer to control both the monies and the tax advantages through alternative forms of investing.”

Mark R. Fielder
President, FFM, LTD.

College Funding & The Uniform Gift (Transfer) To Minor's Act (UGMA/UTMA)

Under current law, the UGMA allows you (typically also the custodian) to establish such a plan for the benefit of a young one, for such purposes as college, etc.

The incentive lies in the tax treatment of such a strategy, although be it rather small.

Under 1997 tax laws, the first $650.00 (six hundred and fifty dollars) of unearned income is tax exempt. The next $650.00 is taxed at 15% and anything over $1,300.00 is taxed at the parent's rate. This is commonly known as the "kiddie tax."

Two severe disadvantages to the UGMA strategy is that it cannot be reversed or cancelled once established and when the child turns 18 years of age (21 in some states) the assets become theirs.

Therefore, if Junior values fast cars or other materialist items more than a higher education, you are simply out of luck!

Good possible alternatives or compliments to UGMA, without the restrictions and loss of control are Tax Efficient Mutual Funds and Variable Universal Life.

Action To Take

If you would like to learn more about UGMA Accounts please click HERE.

Action To Take

To review the Variable Life Funding Strategy, please click HERE.

Action To Take

To review Tax Efficient Mutual Fund Strategies, please click HERE.

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Mark R. Fielder, Registered Principal. CA. Insurance Lic. # 0690576.