Setting aside money for children: Life Fund

[Anonymous]

Interested in the best way to start setting aside some money for my kids to help start their lives once they graduate college. We have an ok hhi, but we aren't talking trust funds here. UGMA? UTMA?

I'd like to try to put away about 50k for each to either help with grad school, or maybe a down payment on a house.

Not looking for investment advice, but more vehicle related. Mattress stuffed with cash?

[Anonymous]

Ibonds?

[Anonymous]

We opened an UTMA account with fidelity for our child. Self directed investments, file separate taxes for her since she’s been fortunate enough to have taxable gains.

[Anonymous]

Anonymous wrote:We opened an UTMA account with fidelity for our child. Self directed investments, file separate taxes for her since she’s been fortunate enough to have taxable gains.

Curious on the UTMA choice? Why that over UGMA? Flexibility? Or that's what the brokerage offered?

[Anonymous]

That’s what brokerage offered

[Anonymous]

I’ve left most of it in our names (aside from some ibonds) but I have a taxable account that is mostly earmarked for them. Figure we can give $30k a year without even filing a gift tax form and more if we want to.

Also during college if you end up being able to cash flow some of college expenses and not needing the entire 529 you can withdraw up to the full amount of expenses and give them that then.

[Anonymous]

PS didn’t really expect to get help for college but one reason to leave it in our names was just in case we did apply for finaid

[Anonymous]

Stays in our name and we plan to gift money in an annual basis. Better to gift than have they pay estate taxes.

[Anonymous]

The UTMA/UGMAs have to get turned over to your kid when they hit age 18 or 21, and you don’t have the ability to take back any of the funds you contributed. Doing the annual gifting as others have mentioned gives you more flexibility

[Anonymous]

Anonymous wrote:The UTMA/UGMAs have to get turned over to your kid when they hit age 18 or 21, and you don’t have the ability to take back any of the funds you contributed. Doing the annual gifting as others have mentioned gives you more flexibility

The UGMA/UTMA route can be disastrous if you have a kid who immature or has drug problems. Hedge your bets with saving in your own name.

Pay attention to the annual gift tax limitations so you can avoid annoying gift tax filing issues

[Anonymous]

Anonymous wrote:The UTMA/UGMAs have to get turned over to your kid when they hit age 18 or 21, and you don’t have the ability to take back any of the funds you contributed. Doing the annual gifting as others have mentioned gives you more flexibility

What happens if the kids are unaware of these accounts and you don't give them the userid/password for those accounts?

[Anonymous]

Not sure why you need a separate vehicle. Just keep investing in your retirement and brokerage and give them money if you want.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The UTMA/UGMAs have to get turned over to your kid when they hit age 18 or 21, and you don’t have the ability to take back any of the funds you contributed. Doing the annual gifting as others have mentioned gives you more flexibility

What happens if the kids are unaware of these accounts and you don't give them the userid/password for those accounts?

It's fraud. The money is owned by them when they turn 18 and if you are keeping their own money from them, it is stealing from them. If they found out about it, they could sue you.

[Anonymous]

Anonymous wrote:Not sure why you need a separate vehicle. Just keep investing in your retirement and brokerage and give them money if you want.

Also, are you planning to be full pay for college? If so, this won't matter. If you are, money held in their name is used to calculate financial aid. While they figure you can afford about 6% of your assets and 0% of retirement assets, they figure your child can spend 25% of their assets.

[Anonymous]

Rather than just provide the down payment, one thing that we did recently was buy the house that one of our kids lives in and rent it out to her and her husband at full market rent. That way we can legitimately treat it as a business deal and write off expenses of ownership against the rental income. The plan is to split the profits, if any, when they are ready to move on by selling the house.