Submitted By: Paul
Answered: April 1, 2014 8:30 am

Is there any penalty for using UTMA funds for sports-related travel expenses?

Uniform Transfers to Minors Act (UTMA) accounts are owned by a minor, even though a parent or other adult acts as custodian. Once the minor reaches the age of majority (18 in most states), the funds belong to him/her. There are no tax penalties for withdrawals for any purpose—before or after the age of majority. However, custodians are subject to legal restrictions on the use of the funds. And financial institutions may impose penalties for early withdrawals from CDs or fees in other situations.

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Tax Glossary

Health reimbursement arrangement (HRA)

Employer established account that provides tax-free reimbursements to employees for deductibles and other expenses that could be taken as itemized deductions.

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