As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:
Question (Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99):
Which of the following is true of UGMA/UTMA accounts?
I. Only family members may contribute to a UGMA/UTMA
II. Annual contribution limit of $13,000 per year, per child
III. Assets may only be used for education expenses
IV. Earnings reported under adult custodian’s tax identification
Answers:
A: I, II
B: III, IV
C: II, III
D: None of the choices listed
Correct Answer: D
Rationale: Anyone may contribute to a Uniform Gifts to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account and there are no contribution limits. Assets in UGMA/UTMA accounts may be used for any purpose and earnings are reported on the minor’s social security account, not the custodian’s.
*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.