We have two kids. Right now, we only have a 529 set up for their college fund. There is no UGMA or UTMA set up for them yet. I was talking with a friend at a parth this weekend. He mentioned he "transferred" stock shares at low cost basis to his children, and something about for kids, the first 35K of gain is taxed at low rate (or did he say no tax at all). Anyway, it was a casual conversation after a couple of glasses of wine. I didn't drill down on the details on how he achieved this or if it would be applicable to me.
Can any financial/investment smart members on this board educate me on this? Thx!!!
invest for your Children
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Re: invest for your Children
Google kiddie tax to understand the limitations. The obvious appeal is them paying taxes at a lower rate than you.
Re: invest for your Children
up to a point (and it is not $35k).
Re: invest for your Children
You might like to read up on the pros and cons of UTMA accounts. Good article from
Fairmark tax site.
http://fairmark.com/custacct/regret1.htm
Fairmark tax site.
http://fairmark.com/custacct/regret1.htm
Last edited by Toons on Mon Feb 04, 2013 12:54 pm, edited 1 time in total.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: invest for your Children
All of the above suggestions are good ones. UTMA Regret series articles referenced above are a good start.
Like anything involving taxes, the right answer is going to be "it depends". If you have an accountant, talk to him/her first about pros and cons of opening UTMA/UGMA account for your kids. However, many accountants are not experts in the area, and may not be able to guide you the right way both short AND long term. You will need to do a lot of research on your own.
If I were in your shoes, I would not open an account until I FULLY understood the consequences of doing so, both positive and negative, as they apply to YOUR specific situation.
Since you have a college fund established already, you will want to read "Paying for College Without Going Broke, 2013 Edition (College Admissions Guides)" by The Princeton Review, available in any bookstore, or at your local library (previous editions).
If you are serious about your money, the research will take you some time. The reward, however, will be a better educated YOU when it comes to financial planning, taxes, and investments going forward.
Like anything involving taxes, the right answer is going to be "it depends". If you have an accountant, talk to him/her first about pros and cons of opening UTMA/UGMA account for your kids. However, many accountants are not experts in the area, and may not be able to guide you the right way both short AND long term. You will need to do a lot of research on your own.
If I were in your shoes, I would not open an account until I FULLY understood the consequences of doing so, both positive and negative, as they apply to YOUR specific situation.
Since you have a college fund established already, you will want to read "Paying for College Without Going Broke, 2013 Edition (College Admissions Guides)" by The Princeton Review, available in any bookstore, or at your local library (previous editions).
If you are serious about your money, the research will take you some time. The reward, however, will be a better educated YOU when it comes to financial planning, taxes, and investments going forward.
Re: invest for your Children
I never bothered with UTMAs. Yes, you could save some on taxes I suppose. But the day you make the deposit, the money is no longer yours. And the day the kid becomes 18, it is his or hers.
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Re: invest for your Children
I have a UTMA account for my child - it's just one more vehicle option available for child specific savings/investments. I never look a gift horse in the mouth - $1000 tax-free each year is pretty good and the next $1K after that taxed at 10% is another gift. The expectation is the funds will be used for higher education.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: invest for your Children
My goal in life is never to give anything to any of my children.Calm Man wrote:I never bothered with UTMAs. Yes, you could save some on taxes I suppose. But the day you make the deposit, the money is no longer yours. And the day the kid becomes 18, it is his or hers.
Re: invest for your Children
If you put it into a UTMA when your child is 6, the money is not yours (quoting you). When the child turns 18, the money is hers (quoting you). Who owns if for the intervening 12 years? I assume that is important, as that mystery third person will be the one paying income taxes on it. Is that third party some form of escrow company designated to hold the money that was once yours but is not yet your child's?Calm Man wrote:I never bothered with UTMAs. Yes, you could save some on taxes I suppose. But the day you make the deposit, the money is no longer yours. And the day the kid becomes 18, it is his or hers.