Type of Account for a Minor
- Traditional IRA
- Roth IRA
The Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) allow an adult to give a gift, such as shares of a mutual fund, to a minor. There is one custodian and one minor allowed for each UTMA/UTMA account, and the custodian directs transactions for the minor.
Accounts are registered to the minor's Social Security number for tax reporting purposes and offer some tax advantages.
UGMA/UTMA provisions vary by state. The custodian should consult a legal advisor regarding obligations.Account Details
A traditional IRA offers the opportunity to make tax-deductible contributions if you meet certain income guidelines as indicated by the IRS. Contributions and earnings grow tax-deferred until eligible for qualified withdrawals, usually when you reach age 59 1/2. Mandatory withdrawals must begin after you turn 70 1/2, and you cannot contribute after age 70 1/2.
A Roth IRA offers the opportunity to contribute on an after-tax basis. Earnings on contributions grow tax-free until eligible for qualified distributions, usually when you reach 59½. You may contribute at any age, provided you meet the income requirements. There are no mandatory withdrawal requirements.