Many grandparents are looking for ways to help their children and grandchildren with the increasing costs of continuing education. Have you considered giving the gift of college funding?
A recent piece in ElderLawAnswers.com titled “Gifts to Grandchildren: What Do UGMA and UTMA Have to Do With Grandma?” examined the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA). Typically, these tried-and-true “granddaddies” of college savings accounts are established by parents on behalf of their children, and then the parents and grandparents can then make gifts to the accounts to create a powerful college fund.
Nevertheless, look before you leap. For example, “uniform” is something of a misnomer when it comes to UGMA and UTMA, since state law dictates the details. For instance, some states restrict the types of assets that can be used to fund the accounts. Accordingly, competent legal counsel is a must.
One important potential drawback is the length of time the accounts remain “custodial” under the watchful eye of the adult custodians. Once the grandchild reaches the age of majority (18 to
21, again in accordance with applicable state law), the newly minted “adult” can do as they please with the account. So, will the hard-earned savings of parents and grandparents be spent on consumerism or college tuition after the funds are cut loose?
If you do take the UTMA/UGMA approach to college funding (and there are other great approaches out there), be sure to share with your grandchildren why you are putting these funds aside from them. In the end, they may have the final say about how the funds are spent, but planting your values in their hearts may bear wonderful fruit down the line.
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