How to Transfer UTMA Mutual Funds into a Roth IRA


A Uniform Transfers to Minors Act is a custodial account where parents, grandparents or other benefactors gift money to a minor child. This money can be put in various investments, including mutual funds with the taxes on the assets attributed to the minor's Social Security number. The earnings in an UTMA are taxable annually. Custodians for these accounts might want to consider moving assets into a Roth IRA for qualified minors to grow the money tax-deferred.

Things You'll Need

  • UTMA mutual fund statement
  • Calculate how much income the minor child has made. In order to open a Roth IRA, the child must have earned income, whether by mowing lawns, hosting lemonade stands or working other part-time jobs. The maximum annual Roth contribution is $5,000, or 100 percent of earned income.

  • Open a Roth IRA for the child at an IRA custodian that meets your investment needs. To continue getting mutual fund growth, you will need a brokerage account. You can use the same brokerage firm that already maintains the UTMA mutual funds.

  • Liquidate the amount of the mutual funds you will contribute into a Roth. If there is any mutual fund that is currently trading at a loss from when it was purchased, you may want to liquidate this fund to offset any capital gains tax resulting from the UTMA account.

  • Cash the check and deposit the amount from the liquidation into the Roth IRA.

Tips & Warnings

  • The Roth IRA is not able to have a custodian maintain the account, which means that minor children can access the money without parental consent. This should be considered when moving UTMA assets into a Roth IRA.


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