Custodial Accounts (UTMA)

UTMAs allow minors to invest for any purpose—including education.

Uniform Transfers to Minors Act (UTMA)

UTMAs allow minors to invest for any purpose—including education—and take advantage of children's taxation rates (see table below).

UTMA accounts allow assets to be transferred to a minor child with an adult "Custodian," who controls the assets for the benefit of the minor until they reach the age of majority in their state. By law, the transfer of the assets is irrevocable and must be used for the minor's benefit.1

You can choose any American Century Investments® funds for an UTMA account (fund minimums apply).

Get to Know UTMA

How can I use the money?

Are there account minimum or maximums?

What are the tax considerations?

Who owns and controls the account?

Are there any income restrictions?

Are the accounts only for kids?

Can the account be transferred to another person?

Are there any fees?

How will the plan money affect financial aid?

Children's Federal Taxation Guidelines

With a UTMA account, earnings, distributions and transactions are reported to the IRS under the minor's Social Security number and are taxed at the same rates for estates and trusts as shown below. Taxes on long-term capital gains and qualified dividend distributions will be taxed at the reduced long-term rates as shown below.

Federal Taxation Guidelines: 2019 Tax Year2,3

Unearned Ordinary Income

Tax Rate Taxable Income
10% $0 to $2,600
24% $2,601 to $9,300
35% $9,301 to $12,750
37% Over $12,750

Long-term Capital Gain and Qualified Dividend Income

Tax Rate Taxable Income
0% $0 to $2,650
15% $2,651 to $12,950
20% Over $12,950


1 South Carolina uses the Uniform Gifts to Minors Act (UGMA) account type. Since UGMA/UTMA provisions vary by state, the custodian should consult a legal advisor regarding obligations. American Century Investments does not have knowledge of the source of contributions and assumes that the custodian is releasing control of the account in compliance with source guidelines. American Century Investments strongly recommends consulting your financial planner or tax advisor to determine what would be best for your individual financial situation.

2 The dollar limits may change annually.

3 The Tax Cut and Jobs Act passed in late 2017 changed many of the tax provisions in the tax code, in an effort to simplify the tax code. Please note that some of these provisions will sunset after 2025, which means those provisions revert back to "pre-Act" rates after that date, unless Congress acts again to extend them or make them permanent.

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IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.