Financial Dictionary
Uniform Gifts to Minors Act (UGMA)
- Uniform state laws that facilitate irrevocable gifts to a minor by eliminating the requirement of a guardian or trust. A custodian, who may be the donor, is appointed to manage the gift, but full rights to the principal and income reside with the minor. Under 1986 tax reform, only the first $1,000 of income from these custodial accounts will be taxed at the child's rate if the child is under 14 years of age. Income above $1,000 is taxed at the donor's rate. When the child turns 14, all income from the trust is taxed at the child's rate.
