What is the difference between an UTMA and a 529 plan?

While both accounts are tax deferred and for the benefit of minors, they have several differences.  An UTMA (Uniform Transfer to Minors Act) account allows for an individual to irrevocably gift money to a child.  Irrevocable means that once you gift the money to the account you absolutely can’t take it out unless you can prove that it is for the benefit of the child.  The minor can also own equities and real estate inside the account.  The common concern that people have with UTMA’s in Tennessee is that the minor will become the owner at 18 years of age.  529 plans allow for anybody to contribute money into an account usually invested in mutual funds for a minor to be used for post-secondary education (college, university, trade school, community college, etc.).  The parent or loved one remains the owner while the child will stay as a beneficiary even into post-secondary education.  Contact me today to see which account makes sense for your child.

Authored by: Scott Flowers, Wealth Advisor

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