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These rates are applied (without any connection to UTMA account type) to stocks and bonds on her account - not to money market account or CD.

On the other hand, UTMA account will be terminated when the minor attains age 18 and all will be transferred to the regular account.

Someone who has contributed to a Section 529 account can access the money at any time for any reason.

While you can’t use it for food or clothing, as you can with a UGMA or UTMA account, you can use it for other educational costs before college.

If the money is used for “qualifying” educational expenses, the money can be withdrawn completely tax-free.

If it is not used for qualified education purposes, the portion of the distribution that represents a gain is taxed to the beneficiary (child) as income and is also subject to an additional 10 percent penalty.

The custodian must be able to prove that the minor directly benefits from the use of the money.

There are no IRS penalties on taking money out of a UGMA or UTMA account, but the investments purchased may have a surrender charge or exit fee if held less than a certain amount of time.

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