If you wish to give assets to a child without going through the complex process of setting up a trust, UGMA (Uniform Gift to Minors Act) and UTMA (Uniform Transfers to Minors Act) Accounts can benefit you. Both are excellent tools for transferring assets to minors because a custodian is appointed until a child reaches legal age and takes control of the account.
Because UGMA and UTMA Accounts are taxed at a child’s rate, they can create considerable tax savings. For children younger than age 19 and dependent, full-time students younger than 24, the first $950 of investment income is tax-free, and the next $950 is taxed at the child’s rate. Investment income above $1,900 is taxed at the parents’ top rate. For children older than age 19 (who are not dependent, full-time students) and for children older than 24, all investment income is taxed at the child's rate.
Anyone who would like to gift assets to a child may take advantage of a UGMA or UTMA Account. Though commonly used to set aside funds for college, withdrawals can be used for the general benefit of the minor.