I had opened an UTMA account for my first kid a few years ago. It has $6k in it. I have not opened one for 2nd kid but I am wondering if I should. I might move overseas in a few years.

So is it possible to close the UTMA account? I don't want to invest in any 529 or any such plan since I am not sure if I will live in the US. I just wanted to open an account in their names so that it would grow with time and fund either their college or anything else they want to use if for.

Yes. We closed both of ours.

Do you plan for your kids to go to college in the US?

What do you plan to do with the funds upon closing it? Everything you have put into the UTMA was an irrevocable gift to the minor, so you can't pull it out and use it for something else; if you close it and transfer it somewhere else, it should remain in a UTMA/UGMA type registration in the kid's name.

My reason for closing is I was told that this counts towards any financial aid my kid might be eligible for. So why put them at a disadvantage? My kids may or may not come to the US for higher education, though I think it is very likely. I feel a UTMA is restrictive. I don't plan on using the money myself, but plan on paying for my kids education, so I will be investing it.

My kids and I still live in the US with no immediate plans of moving anywhere, but I am trying to play ahead.

I emailed my brokerage and I got this as a reply.
What is a reasonable "reason" to give?


================================================
Dear kumar98,

We will need a letter of instruction for the reason for the withdrawal of funds, and then you can close the account. Please let us know if you need further assistance. We really appreciate your business.

Sincerely,

Apex Client Services, TD Ameritrade
Division of TD Ameritrade, Inc.

[This message has been edited by kumar98 (edited 7/28/2011 10:14a).]

Your b/d doesn't have the obligation to ensure you are using the funds for the benefit of the child, or maintining the account in his or her name, but the obligation is still there. If you don't put the funds back into another custodial account, they should be used "for the use and benefit of the minor." However, the funds need to be used for something that is in addition to the normal obligation of a parent to support a child (food, clothing, housing, etc); normal expenses you should pay anyway don't count.

You are correct in that funds in the UTMA will weigh heavily on the child's application for financial aid (about 20%, if I recall correctly), but that alone is not a valid reason to take back an irrevocable gift you gave your child.

I'm not a tax/legal advisor, so you should probably consult with someone qualified about the legality and taxability of pulling the funds out.