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Fund group has gift ideas
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November 20, 2000: 3:43 p.m. ET
MFEA hopes to help people learn about investing for their kids
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NEW YORK (CNNfn) - A non-profit organization dedicated to mutual-fund education wants to give you some great gift ideas for kids this holiday season.
The Mutual Fund Education Alliance said you may save tax dollars by maintaining assets in a child's name through a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account.
UGMA and UTMA accounts are set up by states to allow money given to minors while parents maintain control over the accounts until the child comes of age. The legal age in most states is between 18 and 21.
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 UGMA
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South Carolina
Vermont
Virgin Islands
Guam
Canal Zone
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When a child is under the age of 14, the first $700 of his or her unearned income is tax free, according to Mutual Fund Education Alliance (MFEA) statistics. Unearned income over $1,400 received by a child under 14 is generally taxed at the parents' top marginal rate, but reverts to the child's rate after he or she turns 14.
For children 14 or over in the lowest income tax bracket, the MFEA said any gain on the sale of appreciated assets that have been held for at least 12 months will be taxed at a 10 percent rate -- half of the parents' 20 percent rate.
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UTMA
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All states (plus the District of Columbia) not listed under UGMA.
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UGMAs and UTMAs are similar, except for the fact that only bank deposits, securities, mutual funds and insurance policies can be held in a UGMA account. UTMAs on the other hand gives you the freedom to give your child virtually any kind of asset.
If you are considering giving your child or grandchild investments as gifts, the MFEA said these accounts are easy to set up and administer, but the not-for-profit trade association said there are some drawbacks.
Once the minor reaches the age of majority, the former minor receives complete control of the assets, and holdings assets under your child's name may also decrease the chance of receiving college financial aid.
To learn more about investing for children, you can log on to MFEA's Web site at www.mfea.com. 
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