Ohio UTMA Accounts: Rules, Kiddie Tax, and Financial Aid

An Ohio UTMA account is a custodial account created under Ohio Revised Code Chapter 5814 that lets any adult irrevocably transfer money or property to a minor, with a named custodian managing the assets until the child reaches the age set in the transfer, which can be as young as 18 and defaults to 21. The account is simpler and cheaper than a formal trust, but the transfer cannot be undone, and the tax, financial aid, and benefits consequences catch families off guard more often than the setup itself does.

What You Can Put in the Account

Ohio’s UTMA accepts a broad range of property: cash, securities such as stocks, bonds, and mutual funds, life and endowment insurance policies, annuity contracts, benefit plans, real estate, and both tangible and intangible personal property.¹ Collectibles and artwork qualify as tangible personal property.

Real estate has an extra requirement. Title must be recorded in the custodian’s name followed by language identifying the custodianship, such as “as custodian for [child’s name] under the Ohio Transfers to Minors Act.”² The custodian can manage, lease, or sell property if doing so serves the child’s interests, and any proceeds stay in the custodial framework. Securities must be registered the same way, and income the assets produce, whether dividends, interest, or rent, must be reinvested or spent for the child’s benefit.

There is no minimum or maximum transfer amount under Ohio law. Federal gift tax rules apply to larger gifts: for 2026, an individual can give up to $19,000 per recipient per year, and a married couple giving jointly can transfer up to $38,000 per child, without filing a gift tax return.³ Larger transfers require IRS Form 709, though no tax is owed until you exceed the lifetime exemption.

Opening the Account

Any person who is at least 18 years old can make a UTMA transfer to a minor in Ohio; the transferor does not have to be a parent or relative. Estates, trusts, and guardianships can also make transfers under Ohio Revised Code 5814.02.⁴

Banks, credit unions, and brokerage firms all offer custodial accounts. A brokerage account gives access to stocks, bonds, and mutual funds; a bank account is limited to deposits and certificates of deposit. The custodian needs the minor’s Social Security number, because the account is legally owned by the child and reported under the child’s taxpayer identification number. The account title must follow the statutory format: the custodian’s name, followed by “as custodian for [child’s name] under the Ohio Transfers to Minors Act.”⁴ No attorney or trustee is required, which keeps setup costs low.

Before funding an account, understand this: every UTMA transfer is irrevocable. Once you move money or property in, it belongs to the child. You cannot take it back, redirect it to a different child, or reclaim it if your finances change.⁵ Families who fund generously and later regret it when the child turns 21 have no legal remedy.

The Custodian’s Job

The custodian has broad authority but operates under a fiduciary standard. Ohio law requires them to invest and reinvest the custodial property “as would a prudent person of discretion and intelligence dealing with the property of another.”² Reckless speculation or self-dealing can expose the custodian to personal liability.

Spending decisions are largely up to the custodian’s judgment. The statute allows the custodian to pay out as much of the property as they consider advisable for the child’s use and benefit, without court approval and without regard to whether the child has other income or assets. Common uses include education costs, medical bills, and extracurriculars. But the statute is clear that UTMA spending does not replace a parent’s legal duty of support. Money spent from the account is in addition to, not a substitute for, what a parent already owes.

If the custodian is also the child’s parent, this matters. Using UTMA funds for basic necessities you are already obligated to provide, like food and housing, can raise questions about whether the funds truly benefited the child or simply subsidized your budget. Tying expenditures to costs that go beyond ordinary support is safer. Keep thorough records of every transaction; the child has the right to a full accounting when they take over.

Naming a Successor

Any adult, or a trust company, can serve as a successor custodian.⁶ A custodian who wants to resign does so through a written instrument of resignation that names the successor. This is straightforward paperwork that a surprising number of families skip. If the custodian dies without naming a successor, appointing one may require going to court. Name a backup at the outset, in writing.

A custodian’s death does not change ownership. The assets still belong to the child, and the UTMA funds are not part of the deceased custodian’s estate.

When the Child Takes Control

The custodian must deliver the property to the child when the child turns 21. The transferor can specify an earlier age, as young as 18, in the written instrument that created the account.² If the child dies before reaching the termination age, the assets go to the child’s estate.

Ohio also permits delayed delivery beyond 21. For lifetime gifts, the transferor can name a later date, but the child can override that by requesting the property in writing within 60 days of turning 21, unless the transferor’s instrument explicitly bars early delivery. For property transferred through a will or trust, delivery can be delayed as late as age 25.⁷ This option is worth considering if you are uneasy about a young adult receiving a large sum at once.

When the termination date arrives, the custodian works with the financial institution to retitle the account in the beneficiary’s name alone. If the custodian fails to hand over the assets, the beneficiary can pursue legal action, including a claim for breach of fiduciary duty.

Taxes on the Account

Because the child owns the assets, all income the account generates is reported under the child’s Social Security number. For small accounts, that can be an advantage; for larger ones, the IRS kiddie tax erases the benefit.

Kiddie Tax for 2026

The kiddie tax applies to a child’s unearned income (dividends, interest, capital gains) when the child meets any of these conditions:

Under 18 at year-end
Age 18 at year-end, if earned income did not cover more than half of the child’s own support
Age 19 through 23 at year-end, if the child was a full-time student and earned income did not cover more than half of their own support

For 2026, the first $1,350 of unearned income is tax-free, the next $1,350 is taxed at the child’s rate, and any unearned income above $2,700 is taxed at the parent’s marginal rate.⁸⁹ The parent’s rate can be significantly higher, so a well-funded UTMA may not produce the savings families expect. If the account generates taxable income above IRS filing thresholds, the custodian is responsible for filing a return on the child’s behalf.

Ohio Tax and Cost Basis

Ohio does not impose a gift tax, so the transfer itself does not create state tax liability. Investment income earned inside the account is subject to Ohio income tax, and an account that requires a federal return likely requires an Ohio return as well.

When the child takes control and sells appreciated assets, capital gains tax applies to the difference between the sale price and the original cost basis. The basis carries over from the date the transferor acquired the asset, not the date of the UTMA transfer. A stock that has appreciated over 20 years can generate a large taxable gain when the child eventually sells it. Spreading sales across tax years can help manage that.

Effect on College Financial Aid

This is where UTMA accounts cause the most regret. For federal financial aid, a UTMA is treated as the student’s asset, not the parent’s. The FAFSA formula assesses student assets at 20% of their value when calculating the Student Aid Index, compared to a maximum of roughly 12% for parent-owned assets.¹⁰ Every $10,000 in a UTMA reduces aid eligibility by about $2,000 per year, while the same $10,000 held in a parent’s name reduces it by roughly $1,200 or less.

A custodial 529 plan, by contrast, is treated as a parent asset on the FAFSA even though the child is the beneficiary. Families who are saving specifically for college and expect to apply for need-based aid should weigh whether a UTMA or a 529 better fits. Converting an existing UTMA to a custodial 529 is possible; the funds stay the child’s property and the 529 must list the same child as beneficiary, but the asset moves to the more favorable parent-asset category on the FAFSA.

Effect on Government Benefits

If a child receives Supplemental Security Income or other means-tested benefits, a UTMA can create serious problems. SSI limits countable resources to $2,000 for an individual.¹¹ Because the child legally owns UTMA assets, even a modest balance can push them past the resource limit and end their eligibility.

The irrevocability rule bites hardest here. If a child develops a disability after the account is funded, the family cannot reclaim the assets. Options at that point are limited and may involve spending the account down on qualifying expenses or seeking a court order to transfer funds into a special needs trust. Families who anticipate a child may need government benefits should generally avoid a UTMA and look at an ABLE account or a properly structured special needs trust that does not count against resource limits.

1
Ohio Legislative Service Commission. Ohio Revised Code 5814.01 – Transfers to Minors Act Definitions
2
Ohio Legislative Service Commission. Ohio Revised Code Section 5814.04 – Custodian Powers and Duties
3
Internal Revenue Service. Frequently Asked Questions on Gift Taxes
4
Ohio Legislative Service Commission. Ohio Revised Code Section 5814.02 – Subject of Gift or Transfer
5
Ohio Legislative Service Commission. Ohio Revised Code Section 5814.03 – Effect of Gift or Transfer
6
Ohio Legislative Service Commission. Ohio Revised Code Section 5814.07 – Successor Custodian
7
Ohio Legislative Service Commission. Ohio Revised Code Section 5814.09 – Delayed Time for Delivery of Custodial Property
8
Internal Revenue Service. Revenue Procedure 2025-32 – 2026 Adjusted Items
9
Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income (Kiddie Tax)
10
Federal Student Aid. Student Aid Index (SAI) and Pell Grant Eligibility
11
Social Security Administration. Understanding Supplemental Security Income SSI Resources