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Education Saving

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:

BenefitsAdditional Considerations
Virtually unlimited contribution limits and investment selectionsCustodian loses control once beneficiary reaches age of majority or specified age as determined by state law
No donor income limitsCounted as student's assets for financial aid purposes
Virtually unlimited use of proceedsLimited tax benefits compared to ESA and 529 plans
Estate tax planning opportunitiesOne owner (the minor) per account
Initial custodial controlGift 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

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. For more information about our funds, including their full names, please see the Principal Funds, Inc. prospectus or call Customer Service at 1.800.222.5852.

A mutual fund's share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost.

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