Converting Your UGMA or UTMA Account to a Section 529 Plan

For years, custodial accounts were the go-to college saving option for most parents. But with the advent of Section 529 accounts in 1996, many parents have begun converting their UTMA and UGMA accounts to Section 529 accounts.

The primary benefits of a UGMA-529 or a UTMA-529 conversion are:

The possibility of avoiding further taxation on any income or gains.

An increase in your financial aid eligibility.

However, it is also crucial to consider the downsides of a conversion:

It cannot be used to help you avoid handing over the assets to your child at age 18 or 21.

Your investment options will be go from thousands of choices to a couple of dozen.

For more information on the details surrounding the conversion of a custodial account to a Section 529 plan, take a look at this article on UTMA / UGMA to Section 529 conversions.

For more tips on college savings accounts, be sure to sign up for our free weekly E-Newsletter.