Uniform Gifts to Minors Act Accounts (UGMA)
These are custodian accounts where an adult opens and manages the account for a minor. There can be only one custodian and one minor. The minor and custodian do not need to be related, but the custodian must be an adult. The minor is the official owner of the account and its assets; the custodian is responsible for managing the account. The account is opened using the minor’s Social Security number.
Custodians have third-party trading authorization, allowing them to make trades in the accounts. Because minors are not old enough to make trades, they cannot trade in the account. Full rights to the assets in UGMA accounts are transferred over to the minor once the minor reaches the age of majority in his state of residence. The minor is the legal owner of the account, however.
Earnings up to $1,050 are not taxed. Earnings in excess $1,050 are taxed at the child’s rate, up to