What is a UTMA Account?
“The term Uniform Transfers to Minors Act (UTMA) refers to a law that allows a minor to receive gifts without the aid of a guardian or trustee. Gifts can include money, patents, royalties, real estate, and fine art. A UTMA account allows the gift giver or an appointed custodian to manage the minor’s account until the latter is of age. It also shields the minor from tax consequences on the gifts, up to a specified value.” – SOURCE: Investopedia
UTMA for Winquist Grandchildren
In May of 2015 Cindie and I established UTMA accounts for each of our six grandchildren after getting permission from their parents to do this. My goal was to accomplish three things. The first pertains to wisdom and modeling giving. Proverbs 13:22 says, “A good man leaves an inheritance to his children’s children, but the sinner’s wealth is laid up for the righteous.” The second was to give them a resource in adulthood that would be better than the gifts that often get broken or sold at a garage or yard sale. Finally, I hoped to be able to give them some foundational training in the skill of investing with wisdom.
Some of the Details
Over the last seven plus years Cindie and I have given a total of $24,119.28 to our children’s children. The total current balance is $44,130.07. Therefore, the value of the $24K has grown $20K. This was easy income because it required very little effort on my part. The five-year return has been about 10%, which is far better than any bank savings account or CD might pay. It is certainly far better than any bond investment can ever be.
Investment Buys and Sells 2023 Q1
Because the investments pay dividends, and I have added some money to their accounts, I also buy investments for the grandchildren. It should be noted that I also sold all of their shares of FENY in January at $25 per share. FENY is currently trading at 23.02 and I felt like it was time to take the profits from the Fidelity® MSCI Energy Index ETF and put them to work elsewhere. The total cash gained from this transaction was about $3,444.
The positions I bought for them were additions to investments they already own. These were DGRO, GAIN, MPW, and VYM. You should notice that two of them are dividend-growth ETFs: DGRO and VYM. GAIN is a Business Development Company (BDC) and MPW is a hospital REIT. GAIN and MPW, therefore, are higher risk investments. The total buys of these four was $5,095.
Rationale for the Buys
Notice first of all, that there is diversification. Secondly, see that 66.6% of the invested dollars are in the two ETFs – DGRO and VYM, but that the majority of the dollars went into VYM. What you cannot see about the VYM investments is that all of the buys were in March, and the average cost per share was $103.47. VYM is currently trading at $10.92.
Because I have a long-term perspective, I am willing to be far more aggressive with some of the investment dollars. GAIN is an aggressive investment. An even higher-risk investment is MPW. Medical Properties Trust, Inc. has seen some bad news in recent months, and this has driven the price of the shares down significantly. The shares are currently trading at about $8 per share. I purchased shares of MPW in February and March with an average cost of $11.09. In the short-term, therefore, this investment has been a loss. I may regret putting these dollars into MPW, but I think there is a huge potential reward that comes with patient long-term thinking.
Wrapping It Up
I feel it is always necessary to share a word of caution. Don’t follow this path and these percentages for your own retirement easy income strategy. For many of my readers investing in DGRO and VYM will make more sense than loading up on GAIN and MPW. However, there is greater potential reward when there are greater risks.
All scripture passages are from the English Standard Version except as otherwise noted.