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Meet college expenses with a gift.

UGMA/UTMA stands for Uniform Gift to Minors Act and Uniform Transfer to Minors Act. In short, they are custodial accounts created for the benefit of a child under the age of 18 (or 21, depending on the state). They can be opened – and contributed to – by anyone: family, relatives or friends.

The person who opens the account remains the custodian and manages the assets until the child reaches the appropriate age and takes control of it himself, or herself.

For additional ways to save for college, consider a Uniform Gift to Minors Act (UGMA) account or Uniform Transfer to Minors Act (UTMA) account. These accounts allow you to set aside money for the benefit of a minor. Here's how it works:

• Money placed in the account is irrevocable and becomes the property of the child. Because the assets belong to the child, they may limit the amount of financial aid that the child is eligible for.
• As the custodian of the child's account, you manage the assets until the child is old enough to assume control of the account, typically either 18 or 21 depending on the state in which the account is held.
  
  
  • At that time, the child takes full control of the assets and can use them for education, or any other purpose.
• Custodians may only withdraw money for items or activities that specifically benefit the child, not regular parental expenses.
• Regular gift-tax rules apply - currently each giver may gift $12,000 per year tax-free.

The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.