Resources: Education Saving: UTMA
Accounts set up under the Uniform Transfer to Minors Act (UTMA) are custodial accounts that can be used to transfer money to a child and obtain certain tax benefits. UTMAs are not tax-deferred, but they can serve as viable college planning options because the minor is the owner of the account and, in general, the minor's tax rate determines taxes due on the assets. The main features of UTMAs are listed below:
| Benefits | Additional Considerations |
|---|---|
| Virtually unlimited contribution limits and investment selections | Custodian loses control once beneficiary reaches age of majority or specified age as determined by state law |
| No donor income limits | Counted as student's assets for financial aid purposes |
| Virtually unlimited use of proceeds | Limited tax benefits compared to ESA and 529 plans |
| Estate tax planning opportunities | One owner (the minor) per account |
| Initial custodial control | Gift is irrevocable |
With an UTMA funded with Principal Funds, you can take advantage of low investment minimums to select among highly diversified "fund of funds" portfolios or individual equity, fixed-income, and money market funds.
Low Investment Minimums and Automatic Investment Plans
An UTMA allows you to invest with a minimum initial investment of $1,000 or $100 with $100 systematic purchases.
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To obtain a prospectus, download online or call Customer Service at 1.800.222.5852
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