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are the pros/cons of a UGMA account?
By The-Adviser.com -
- A UGMA or ("Uniform Gifts to Minor Account") is
available in all states under various statutes or through the
Uniform Transfers to Minors Act. The main benefits of the
account are as follows:
The following is a summary of the key UGMA drawbacks:
Those eligible for financial aid may actually not benefit from a establishing a UGMA. Colleges and financial scholarships generally assume that 35% of assets in a child's name be used to pay tuition before calculating any award of financial need. This figure is approximately 6% of assets for parents' assets. Hence, any tax savings could be significantly offset by the loss of financial aid given by the school.
To combat this financial aid conflict, many parents sent up UGMA accounts and then plan on using the assets for the benefit of the child prior to completing financial aid forms; hence, they receive the tax benefit and avoid losing financial aid.
Your Independent Fee-Only Financial Adviser can help you set up a UGMA account.
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