I would like to open a MF account for my child and am unsure of which to open: an ugma or a straight custodial account. Can someone help me understand the difference?

I believe they are the same thing. UGMA (Uniform Gifts to Minors Act), in some states UTMA (Uniform Transfers to Minors Act), is law that governs custodial accounts. Sometimes custodial accounts are referred to as UGMA or UTMA accounts. If the mutual fund company your looking at offers two different choices, one called "UGMA" and one called "Custodial," try asking them what the difference is.

Fool.com -- an all around good, no-nonsense financial site for new investors -- has a good article on UGMA vs Custodial accounts here:

http://www.fool.com/school/taxes/taxes14.htm

Vanguard makes a distinction between Custodial and ugma. Their cs suggested ugma but everything I have read makes me believe that an ugma is not the way to go. #1 they are irrevocable, #2, at 18, said child would get control of the money. I'm not too comfortable with either condition.

I'm surprised that V. didn't have better customer service on this issue. The first person had no idea of the difference and had to transfer me, and the second person wasn't convincing in their grasp of the difference. I don't want to make a mistake based on a poor understanding of my options.

I think I have discovered other possibilities: keep the money in my name and have child as beneficiary. I could then transfer ownership when I felt it was appropriate (which likely will not be 18) Or I could be a joint owner with child. I'm not sure of the details on that.

At this point, the only benefit I see to the ugma or custodial/guardian acct is that money is taxed at the child's rate. But I think I'm willing to trade off paying taxes at my rate with the peace of mind that my child won't spend it all on a car or vacation when they turn 18.

I think the Vanguard customer service rep may have given you bad information. They offer custodial accounts, but such accounts will be designated either UGMA or UTMA depending on which state you reside in.

If you do not want to eventually give up control of the money and plan for your child to use it for college, you may want to look at a 529 college savings plan (Vanguard has several decent ones and some state allow a tax deduction on contributions). Otherwise don't give the child anything until you're okay with whatever they do with it once they are of age. UTMA is not just a type of account, it is law that covers any asset when you transfer rights of ownership to a minor.

Although certainly not authoritative, wikipedia has a fairly clear description of the differences between UTMA & UGMA-- http://en.wikipedia.org/wiki/UGMA