Custodial Accounts

Custodial accounts conform to your state's Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) and provide tax-advantaged savings for educational and other needs.

How They Work

You name a custodian and make an irrevocable gift to an account for a minor child. Typically, the account will be created at a bank, brokerage firm or mutual fund company.

The custodian is responsible for overseeing the investment until the child reaches the age of majority, which varies by state (usually 18, 21 or 25). After that, the child is entitled to all the money in the account without restriction. Before then, withdrawals can be made as long as they are used for the child's benefit.

How They Can Be Used

The money can be used for any reason (other than daily living expenses) as long as it benefits the minor child.

Tax Savings

• Generally, the first $950¹ of income earned in all custodial accounts combined is entirely tax-free.
• Depending on the child's age, additional income may be taxed at the child's or custodian's tax rate.
• Each adult may make a gift of up to $13,000² per child each year before incurring any gift tax. For example, parents can give a total gift of $26,000 to each minor child ($13,000 per parent) without paying any gift taxes.

Convenience

You can open a custodial account for any child at any time. The child doesn't have to be a relative. The only requirements are that the child is a minor, has a Social Security number, and has only one custodian per account.

Flexibility

You may invest as much or as little in a custodial account as you want, and add to the account as often as you like. However, contributions in excess of the $12,000² annual gift exclusion will require a gift return and reduce the lifetime gift allowed.

Affordability

There is no charge to open a custodial account. There are two affordable options for custodial accounts in mutual funds:

• Open an account with a lump sum investment of as little as $1,000.
• Set up an automatic investment plan (AIP)³ for as little as $50 per month.

Contact Thrivent Financial representative for more detailed information about custodial accounts and how they can fit into your education funding plan.

Thrivent Financial for Lutherans, and its respective associates and employees cannot provide legal, tax or accounting advice or services. Work with your team of professionals, including your Thrivent Financial representative, your attorney and tax professional to determine and implement the appropriate option.

¹ For 2010. This amount is adjusted annually for inflation.

² This amount is indexed for inflation and may be increased by increments of $1,000.

³ This type of continuous investment plan does not assure a profit or protect against loss in declining markets.

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