A more thorough explanation:

The Uniform Transfers to Minors Act (UTMA) is a law that allows people to give property to minors without setting up a formal trust. This law was created to expand on the Uniform Gifts to Minors Act, which only allowed for certain types of property to be transferred to minors.

Under UTMA, all kinds of property, such as bonds, real estate, and art, can be gifted to a minor. The donor or a custodian manages the property for the minor’s benefit until the minor reaches a certain age. Once the child reaches a specified age set by the state, the child will have full control over the property.

For example, if a grandparent wants to give their grandchild a piece of property, they can do so under UTMA. The grandparent or a custodian will manage the property until the grandchild reaches a certain age, at which point they will have full control over it.

Gifts to the minor are exempted up to $15,000 a year from Federal taxes, but the minor will be required to pay taxes beyond this amount. Also, UTMA transfer allows the gift to be taxed based on the minor’s tax rate.

However, a downside of the UTMA is that it can reduce or make a minor ineligible for financial aid since the property is owned by the minor.