UGMA accounts

Let's look at a practice question that will look similar to something you'll probably see on your Series 7 exam:

To establish an account under the Uniform Gifts to Minors Act, the custodian must be a:
A. trustee
B. a registered investment adviser
C. an immediate family member of the beneficiary
D. a person who has reached the state's age of majority

EXPLANATION: the custodian simply needs to be an adult (not a minor). He/she does not need to be related to the beneficiary and does not need to be a professional investor. If you open an UGMA account for your niece, you can manage the investments yourself for the benefit of the minor child. And, the beneficiary does not need to be a relative; perhaps the neighbor boy you hire to cut your grass would enjoy a surprise upon his 18th or, perhaps, 21st birthday . . .?
ANSWER: D

UGMA Accounts and Gift Taxes

For Tax Year 2009 the maximum gift that a donor can make to a non-related minor child in an UGMA account is
A. $11,000
B. $12,000
C. $13,000
D. None of these choices

EXPLANATION: don't jump to conclusions! Sometimes test questions try to mislead you. You're supposed to start thinking about the annual gift tax exclusion amount, which was $12,000 for 2008 and is $13,000 for 2009. That only has to do with gift taxes. If you give someone more than $13,000 this year, you pay gift taxes on the excess above $13,000, which has absolutely nothing to do with this question. There is no such thing as a "maximum gift" for an UGMA account.

ANSWER: D