Uniform Transfer to Minor Act / Uniform Gift to Minors Act (UTMA/UGMA) establishes a type of account designed to pass assets to a minor where the transfer/gift is irrevocable. Until the age of majority (18 years old in most cases) the account is controlled by an adult, the custodian. In some cases, this control can extend to age 25. The custodian can use those assets in the account for nearly any purpose as long as the funds are used for the minor’s benefit. When the minor reaches the age of majority they become the owner of the account. The amount that can be contributed to this account is unlimited, however, any amount over the annual gift tax limit (Gift Tax Exclusion) may be taxable to the donor.
The custodian of the account must be an adult. There is no limit to the number of accounts that are set up for that minor. For example, each parent, grandparents etc. can set up a separate account for the same minor and each transfer/gift the maximum allowed amount each year. While the account can be used for a variety of purposes, its primary perceived benefit is its ability to shelter a certain amount of the capital gains within the account from taxation.