Anonymous
Post 06/09/2022 19:50     Subject: Setting aside money for children: Life Fund
Just have a lawyer draw up an simple trust for you. You are the trustee and the kid is the beneficiary. Periodically give money to the trust. Disburse trust assets as appropriate to the kid's maturity. That way there is no fraud and no risk that an 18-year-old idiot gets a huge windfall.
Anonymous
Post 06/09/2022 17:17     Subject: Re:Setting aside money for children: Life Fund
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
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.


What if the money remains in their account untouched or is spent for their college expense?

Would it be the same, say, with iBonds? We have invested 10K in each of our kids' names (only because of the annual limits) and plan to continue to do this as long as the rates are good. Kids are unaware of this and our plan was to 'surprise' them when they turn 25 or at some future point when they are mature adults assuming we don't need to tap these funds to pay for private college.


NP. It is still fraud even with iBonds. Because of UTMA accounts, we've had to file taxes for our kids for years, and they have had to sign the returns. When our kids recently turned 21 in MD, our brokerage firm was very pro-active in having the kids take sole ownership of the account, they do their best to make sure the law is followed. Finally, once a child graduates from college and is independent they are responsible for the taxes on the ibonds or any other type of investment, at that point it really becomes difficult and very ill-advised to hide an account. I wouldn't use UTMA's again, for one thing, there wasn't any tax advantage to using them b/c of the kiddie tax, and we had to race to spend much of the money down before age 21 on college.


I don't think this is the case with ibonds. You can put them in your "gift box" in your kid's name, keep them for years and then deliver them at any point. The only issue is that you are using up their maximum contribution for the year you purchased them so you would need to have enough communication with them about that. Since you don't pay taxes on ibonds until they are cashed it's not an issue. But I'm not 100% sure about that.


I'm the pp that asked about the iBonds. That's my thinking as well. If I invest 10K each year (as long as it makes sense to do so), starting with when the kids are minors and continue this through college years (say 6 years), I don't think I need to even tell them about it until after they reach an age that I think is appropriate for them to know. In between, if I need the money for college, I could use these bonds, can't I? Will that be considered fraud?

Of course, if the kid is going down a path I don't approve of (e.g. drugs, college drop out, etc.), I'll stop adding money in their name and just keep it in mine.
Anonymous
Post 06/09/2022 15:51     Subject: Re:Setting aside money for children: Life Fund
Anonymous wrote:
Anonymous wrote:
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.


What if the money remains in their account untouched or is spent for their college expense?

Would it be the same, say, with iBonds? We have invested 10K in each of our kids' names (only because of the annual limits) and plan to continue to do this as long as the rates are good. Kids are unaware of this and our plan was to 'surprise' them when they turn 25 or at some future point when they are mature adults assuming we don't need to tap these funds to pay for private college.


If it's their money and it is making dividends or more money, then they have to claim it to the IRS.
Anonymous
Post 06/09/2022 15:04     Subject: Setting aside money for children: Life Fund
Op -- your name and their name as the beneficiary (POD, (payable on death beneficiary). Do this for each child. It's not a joint account, it's your account. The POD designation will remind you this bucket of money is earmarked for them/to give to them.
Anonymous
Post 06/09/2022 14:56     Subject: Re:Setting aside money for children: Life Fund
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
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.


What if the money remains in their account untouched or is spent for their college expense?

Would it be the same, say, with iBonds? We have invested 10K in each of our kids' names (only because of the annual limits) and plan to continue to do this as long as the rates are good. Kids are unaware of this and our plan was to 'surprise' them when they turn 25 or at some future point when they are mature adults assuming we don't need to tap these funds to pay for private college.


NP. It is still fraud even with iBonds. Because of UTMA accounts, we've had to file taxes for our kids for years, and they have had to sign the returns. When our kids recently turned 21 in MD, our brokerage firm was very pro-active in having the kids take sole ownership of the account, they do their best to make sure the law is followed. Finally, once a child graduates from college and is independent they are responsible for the taxes on the ibonds or any other type of investment, at that point it really becomes difficult and very ill-advised to hide an account. I wouldn't use UTMA's again, for one thing, there wasn't any tax advantage to using them b/c of the kiddie tax, and we had to race to spend much of the money down before age 21 on college.


I don't think this is the case with ibonds. You can put them in your "gift box" in your kid's name, keep them for years and then deliver them at any point. The only issue is that you are using up their maximum contribution for the year you purchased them so you would need to have enough communication with them about that. Since you don't pay taxes on ibonds until they are cashed it's not an issue. But I'm not 100% sure about that.
Anonymous
Post 06/08/2022 12:21     Subject: Setting aside money for children: Life Fund
What is the NW and income of folks on here who plan to gift their kids money (beyond say a fully funded 529 plan) when they are young adults?
Anonymous
Post 06/08/2022 11:55     Subject: Re:Setting aside money for children: Life Fund
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?


My DH, who is 42, only just received an UGMA account from his parents, no consequences.
Anonymous
Post 06/08/2022 10:23     Subject: Re:Setting aside money for children: Life Fund
Anonymous wrote:
Anonymous wrote:
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.


What if the money remains in their account untouched or is spent for their college expense?

Would it be the same, say, with iBonds? We have invested 10K in each of our kids' names (only because of the annual limits) and plan to continue to do this as long as the rates are good. Kids are unaware of this and our plan was to 'surprise' them when they turn 25 or at some future point when they are mature adults assuming we don't need to tap these funds to pay for private college.


NP. It is still fraud even with iBonds. Because of UTMA accounts, we've had to file taxes for our kids for years, and they have had to sign the returns. When our kids recently turned 21 in MD, our brokerage firm was very pro-active in having the kids take sole ownership of the account, they do their best to make sure the law is followed. Finally, once a child graduates from college and is independent they are responsible for the taxes on the ibonds or any other type of investment, at that point it really becomes difficult and very ill-advised to hide an account. I wouldn't use UTMA's again, for one thing, there wasn't any tax advantage to using them b/c of the kiddie tax, and we had to race to spend much of the money down before age 21 on college.
Anonymous
Post 06/08/2022 09:55     Subject: Re:Setting aside money for children: Life Fund
OP here. Thanks for all the helpful thoughts. I completely understand the concerns about the UGMA/UTMA issues for an irresponsible child. My hope at this point is that won't be the case, but it is something to keep an eye on.

Has anyone thought about the tax implications for cap gains if funds are held at the parent level? I assume there are tax strategies out there to help with these issues, but maybe they only come in to play when we are talking BIG dollars.

Anyone have experience with a minors trust?
Anonymous
Post 06/08/2022 09:36     Subject: Re:Setting aside money for children: Life Fund
Anonymous wrote:
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.


What if the money remains in their account untouched or is spent for their college expense?

Would it be the same, say, with iBonds? We have invested 10K in each of our kids' names (only because of the annual limits) and plan to continue to do this as long as the rates are good. Kids are unaware of this and our plan was to 'surprise' them when they turn 25 or at some future point when they are mature adults assuming we don't need to tap these funds to pay for private college.
Anonymous
Post 06/08/2022 09:28     Subject: Re:Setting aside money for children: Life Fund
Anonymous wrote:
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



Google “UTMA regret”

You can protect against this by 1) not overfunding it and 2) spending it before the age of majority. There are quite a few expenses that qualify.

In our example, we plan to get a balance of around $30,000 for each kid. This will pay for summer camps, braces, a car for HS, etc. Anything larger than this has the potential to trigger the “kiddie tax”, negating all the benefits of a UTMA.

Like many, most of the funds earmarked for our children will be in our name. We want control in case of a scenario highlighted in the above quote.

Anonymous
Post 06/08/2022 07:58     Subject: Setting aside money for children: Life Fund
We have co-owned accounts with vanguard. kids (they are over 21 now) as primary owner and i am the secondary owner. taxes are filed under their name (lower tax rate) but i still fund it when i can. obviously, it's their money technically speaking.