UGMA Account Limits: What High-Income Parents in California and Washington Should Know

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

There is no contribution limit on a UGMA or UTMA account. Anyone can put in any amount. The number people call the “UGMA limit” is really the federal gift tax annual exclusion, which is $19,000 per donor per child for 2026 ($38,000 from a married couple when each spouse gives $19,000; electing to split one spouse’s gift instead requires filing Form 709). Give more than that and you file a gift tax return (Form 709) and use a little of your $15,000,000 lifetime exclusion; for almost every family, no tax is due.

The limits that matter more for a high-income family are the other ones: the money becomes your child’s property the day you deposit it, investment income above a small amount is taxed at your rate, and your child takes full control at 18, 21 or as late as 25, depending on the state and how the account was set up.

UGMA or UTMA: which one applies in California and Washington

UGMA (Uniform Gifts to Minors Act) is the older law. Both California and Washington have replaced it with UTMA (Uniform Transfers to Minors Act): California in its Probate Code and Washington in chapter 11.114 RCW. If you open a custodial account at a brokerage today, the form may say “UGMA/UTMA”, but in these two states the account is governed by UTMA. The practical difference is small. UTMA allows a wider range of assets and, in both states, lets you choose a later handover age within set limits.

The five real limits on a custodial account

Sources: gift and kiddie tax figures from IRS Rev. Proc. 2025-32 and the Form 8615 instructions; California ages from Probate Code §3920.5; Washington ages from RCW 11.114.200.

Why the kiddie tax removes most of the tax benefit at your income

Custodial accounts were once a way to shift investment income to a child in a low bracket. For a family earning $750,000 or more, the kiddie tax closes most of that gap. Unearned income over $2,700 is taxed at the parents’ rate for children under 18, and in some cases up to age 23 while they are full-time students. For a married couple with taxable income over $768,700 in 2026, that rate is 37% on interest and non-qualified dividends and 20% on long-term gains and qualified dividends.

State tax works against you in California too. California has no lower rate for capital gains, so interest, dividends and gains are all taxed as ordinary income (FTB). In Washington there is no tax on wages or interest, and a child’s custodial gains are very unlikely to come near the state capital gains tax standard deduction ($278,000 for 2025, the latest published figure). Note that Washington has enacted a 9.9% income tax on AGI over $1,000,000 starting in 2028, which matters for parents above that level; detailed DOR guidance is still pending.

Worked example: a $950,000 household in the Bay Area

Assumptions (illustrative): a married couple in San Mateo, one a physician and one at a biotech company, with $950,000 of W-2 income and RSUs, filing jointly and in the 37% federal bracket for 2026. Their daughter is 7. Over three years, the parents and both sets of grandparents have moved $150,000 into a UTMA account, with every gift at or under that year’s annual exclusion per donor ($19,000 for 2026), made without electing gift splitting, so no gift tax return was needed. The account earns about 3% a year, or $4,500, all taxed as ordinary income to keep the math simple.

1. Inside the UTMA (federal, 2026): first $1,350 tax-free; next $1,350 at the child’s 10% rate, $135; the remaining $1,800 at the parents’ 37% rate, $666. Total about $801.
2. Same $150,000 in the parents’ own account: $4,500 at 37% is $1,665, plus the 3.8% Net Investment Income Tax the parents already owe at this income, $171. Total about $1,836.
3. Difference: roughly $1,035 a year federally, before California tax.

That is a real saving, but a small one next to what the family gives up. If the account grows at an assumed 6% a year, it is worth about $285,000 when she turns 18. Under California’s default rule, that is the day she can withdraw all of it, for any reason, without asking anyone.

The same families often get more out of a 529. For 2026, each donor can elect to front-load five years of annual exclusions, up to $95,000 per child ($190,000 for a couple), by filing Form 709 (Form 709 instructions). Growth is tax-free for qualified education costs, the parent stays the owner, and the beneficiary can be changed. California gives no state deduction for 529 contributions, so the benefit is the tax-free growth, not a deduction.

How a custodial account affects college aid

Because the child legally owns a UTMA account, it counts as the student’s asset on the FAFSA, not the parent’s (FSA Handbook). Student assets weigh far more heavily in the aid formula than parent assets. At $750,000 to $3 million of income, need-based federal aid is rarely in play, so for most of our families this is a minor point. It matters more if a parent expects a sharp drop in income before college, for example a sabbatical or leaving a job.

When a UTMA still makes sense for this family

• Funding a custodial Roth IRA. A child with real earned income can contribute the lesser of that income or $7,500 for 2026. A UTMA can hold money for the child that is separate from that contribution.
• Non-education goals. A first car, a gap year or a business at 21 are not 529 expenses.
• Teaching with a real account. A modest balance the child can see and discuss is a useful tool from about age 8.
• Grandparent gifts. Grandparents who want to give simply can use a UTMA, though a 529 or a trust gives the family more control.

For larger sums, a trust for minors lets you set the age, the conditions and a trustee’s discretion, instead of a fixed handover date. That is an estate planning decision, and it is worth making before the custodial balance becomes large.

Common mistakes

• Calling $19,000 a contribution cap. It is a gift tax exclusion; gifts above it are allowed and just need a Form 709.
• Opening the account without writing the later age into the transfer. In California the delay to 21 has to be stated in the transfer itself (“as custodian for … until age 21”).
• Using custodial money for ordinary family expenses. It belongs to the child.
• Letting a parent who is also the donor serve as custodian without checking the estate tax effect with your attorney.
• Forgetting that a child whose investment income passes the filing threshold generally needs a tax return. For 2026, parents may instead elect to report the child’s income on their own return (Form 8814), but only when it is all interest and dividends and the child’s gross income is over $1,350 and under $13,500.

What to write down for your kids

A UTMA account hands a young adult a large balance on a fixed date, with no instructions attached. Write a one-page note that explains why the account exists, who contributed, what you hoped it would be used for, and how you made the decision. Review it with your child in the years before the handover. As Kevin puts it, “Your kids will inherit your money. Will they inherit your judgment?”

Frequently asked questions

Is there a maximum amount I can put in a UGMA account in 2026?

No. There is no legal maximum. Gifts over $19,000 per donor per child in 2026 require a gift tax return (Form 709) and use part of the donor’s $15,000,000 lifetime exclusion. Tax is owed only after that lifetime amount is used up, which few families reach through lifetime gifts.

Can I take money back out of my child’s UTMA?

Not for yourself. The transfer is irrevocable and the money belongs to the child. As custodian you can spend it for your child’s benefit, such as camp, tutoring or a computer, but not for your own bills or for basic support you already owe. For the tax side of withdrawals, see our guide to UTMA withdrawal tax rules.

At what age does my child control a UTMA in California or Washington?

In California, 18 by default, and up to 21 if the lifetime gift says so in writing. Transfers by will or trust can delay to 25. In Washington, gifts end at 21, and the person making the transfer can extend it to 25 when naming the custodian. Check the account paperwork to see which age was selected.

Next step

List every account held for your children, who owns it, and the age at which each one transfers. If the custodial balances are larger than you want an 18-year-old to control, talk with your tax adviser and estate attorney about 529s or a trust going forward. Related reading: how a taxable brokerage account is taxed, our tax management and estate planning services, and Age Five Wealth Education.

This is general education. The right move depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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