Ask Terry Questions Financial Aid and UGMA accounts

Financial Aid and UGMA accounts

By Terry Savage on January 21, 2023 | College Savings / Student Loans

Hi Terry…I have three kids (ages 14, 13 and going to be 10) and each has a TD Ameritrade account. I am the “custodian” for each account. The account type for each is noted as “UGMA/UTMA.” Is this going to hurt them when I apply for college financial aid? If yes, what do I need to do (take their names off of each account?). Also, will it hurt them to have a savings account?
Thanks for all that your do!

Terry Says

Ugh, are you just finding out that UTMA/UGMA accounts weigh 7x more heavily against you in the financial aid formula for college?
There are so many complications in the answer to this question — taxes, capital gains, the “kiddie” tax –as well as the aid impact. All are covered completely in this article from I urge you to read it all the way to the end.

One thing I can say for sure. Do NOT save any more in the UGMA accounts. Open a 529 plan for new contributions, and if you live in a state like Illinois, you may also get a tax deduction.



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