A UGMA account and a 529 account are both popular options for saving and investing for a child's future. However, a UGMA account offers greater flexibility and control over the funds.
A 529 account is generally designed for educational expenses and, in certain circumstances, can be used to jumpstart retirement saving. In contrast, a UGMA account allows funds to be used for anything that directly benefits the minor. When they reach the “age of majority” (18-25, depending on your state), UGMA funds can be used for a wider range of purposes, such as buying a car or starting a business, for example.
Additionally, UGMA accounts have no contribution limits, providing the opportunity to save larger amounts (be sure to check Federal and State gifting limits before contributing). While both accounts have their advantages, a UGMA account can be a versatile tool for parents seeking financial flexibility for their child's future.
Note that a UGMA account could potentially impact a student’s eligibility for financial aid, including federal aid through FAFSA, as the UGMA is considered the child’s asset. Additionally, 529 accounts may come with certain tax deductions or tax credits that vary by state.