529 AND UTMA

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spacecadet610
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529 AND UTMA

Post by spacecadet610 » Mon Jan 15, 2018 2:20 pm

I had planned on maxing out the 529 account every year for my kid until i started reading about UTMA accounts.

For UTMA, the first $2100 in income for 2018 is tax free. Maybe I can gift stock to the UTMA account and harvest gains to pay for non-essential child expenses. Seems more flexible than a 529 account which i can only use for school.

I am not worried about financial aid for child as I know he won't qualiy. I get no state tax deduction for 529 account (i live in WA state). And not particularly worried about him having access to UTMA account at 18.

What am i missing? everyone seems to recommend a 529 account.

ZWorkLess
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Re: 529 AND UTMA

Post by ZWorkLess » Mon Jan 15, 2018 2:54 pm

I did use UGTM accounts when my kids were tiny. In the 90s/00s, I transferred their UGTM accounts some stock that had a 2c basis (had been gifted from my dad to me, and so it carried his 2c/share basis) and was selling for about $100/share with numerous splits -- so essentially a 0 basis (and was something I wanted to diversify out of, as it came to represent a HUGE part of my net worth when it went nuts in the 90s). Each year, I sold the max tax-free in their accounts (seems like it was maybe 600/yr, but that was a long time ago), and I then put it in their Educational IRAs. It was a handy way to transfer some money to the kids and get rid of some very low cost basis money. If it still works that way, then, I personally thought it was a good idea. If this is legal/kosher and you can do it now, that's an idea to consider (using a 549 instead of EdIRA).

Although I did use the UGTM accounts, I got the money out of the UGTM accounts pretty quickly, as I didn't want a lot of money sitting in accounts that the kids would legally be able to access at age 18. (My mom was a family attorney and taught me that people with early access to big pots of family money often make messes of their lives, and since Mom was generally right about everything so far as I can tell, I just go with that, lol.) So, my kids accounts never had many thousands in over the years, and around the time they each hit 18, I zeroed them out, closed them down, and bought them their going-away-to-college computer with whatever was left in the UGTM account that I hadn't gotten around to selling/transferring earlier on. (I think something about our tax picture changed at some point, making it harder for me to do my magic money shuffle that I'd been doing, so a couple thousand sat in each UGTM account until I zero'ed them each out.)

So, anyway, that's why I wouldn't use UGTM accounts for major kid/college money. (IME, if your kids are under 17, you probably haven't seen their most irresponsible moments yet. Surprisingly enough, the smartest young kids often grow up into very smart by sometimes reckless teens/young adults. My kids are awesome, but I'm really glad they don't have access to large amounts of money yet. I do hope they'll be ready by their late 20s, but that is as yet to be determined.)

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Re: 529 AND UTMA

Post by Rupert » Mon Jan 15, 2018 2:58 pm

There are many downsides to UTMA accounts. (1) The money placed in an UTMA is treated as a completed gift to the beneficiary. Custodians have no control over how the funds are used. (2) The beneficiary gains full access to UTMA funds at a specified age, usually 18-21, whether or not he/she is mature enough to handle it. (3) You can't transfer UTMA funds from one beneficiary to another.

In contrast, with a 529, you retain ownership over money, and you can change the beneficiary or transfer money to another child's 529 if, for example, your first child's 529 account is overfunded.

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Re: 529 AND UTMA

Post by harvestbook » Mon Jan 15, 2018 3:09 pm

We did 529s up to about half the expected cost, then started UTMA fund with the express purpose of bribery--any money received through scholarships, the child will get that money at 21 instead of having it spent on college. But I have been selling some off to match the child's earnings in a Roth account until then, figuring that's a better way to push the payoff out into the future while also hopefully sparking an interest in lifetime saving. I expect to cash flow some, too, but all in all, we felt going too far on a 529 wouldn't really help us until two generations from now, and we're not there financially yet.
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itstoomuch
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Re: 529 AND UTMA

Post by itstoomuch » Mon Jan 15, 2018 3:34 pm

We did UGMA 1985-2000, then switched to 529. Oregon with state tax credit.
We will be moving to WA in 2018. We will need to do 529 for 2017 and 2018 for future grand children. Later we will do UGMAs when we get SS number(s).
IRRC, 529 have a accumulation limit. In a low growth (???) environment, a 529 ,may not be enough for full pay families who want to mostly to fully fund college.
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Re: 529 AND UTMA

Post by indexfundfan » Mon Jan 15, 2018 3:40 pm

spacecadet610 wrote:
Mon Jan 15, 2018 2:20 pm
For UTMA, the first $2100 in income for 2018 is tax free. Maybe I can gift stock to the UTMA account and harvest gains to pay for non-essential child expenses. Seems more flexible than a 529 account which i can only use for school.
With the new tax laws, the $2100 number could be higher. It is still unclear now until we get more guidance. Search for the thread on kiddie tax.
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Re: 529 AND UTMA

Post by Spirit Rider » Mon Jan 15, 2018 4:38 pm

indexfundfan wrote:
Mon Jan 15, 2018 3:40 pm
spacecadet610 wrote:
Mon Jan 15, 2018 2:20 pm
For UTMA, the first $2100 in income for 2018 is tax free. Maybe I can gift stock to the UTMA account and harvest gains to pay for non-essential child expenses. Seems more flexible than a 529 account which i can only use for school.
With the new tax laws, the $2100 number could be higher. It is still unclear now until we get more guidance. Search for the thread on kiddie tax.
First, it is not that the first $2100 is tax free. Rather the first $1,050 ($350 if earned income > $1,050) is tax free and the next $1,050 is taxed at the dependents tax rate.

If the amount > $1,050 ($350) is from qualified dividends and/or LTCG, then it is tax free, but any amount of income subject to ordinary tax rates will be subject to a 10% tax.

The new tax reform extends the 10%/0% bracket an additional $2,550.

spacecadet610
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Re: 529 AND UTMA

Post by spacecadet610 » Mon Jan 15, 2018 5:15 pm

thanks for the replies everyome.

My child is 6 months old.

I maxed out the 529 for 2017 but from what people are saying it makes sense for me to do the UTMA accounts going forward. I can gift low cost basis shares to the UTMA then harvest yearly for tax free gains to pay for non-essential child expenses.

Then maybe when he is close to college i can zero out the UTMA to not worry about how he will use that money when he gets control.

Am i correct in this assumption? Max i can contribute COMBINED to both UTMA and 529 is subject to maximum gift. So 2018 i can contribute up to $15000? I can maybe do $7500 UTMA and $7500 529 for this year?

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Re: 529 AND UTMA

Post by indexfundfan » Mon Jan 15, 2018 5:51 pm

Spirit Rider wrote:
Mon Jan 15, 2018 4:38 pm
indexfundfan wrote:
Mon Jan 15, 2018 3:40 pm
spacecadet610 wrote:
Mon Jan 15, 2018 2:20 pm
For UTMA, the first $2100 in income for 2018 is tax free. Maybe I can gift stock to the UTMA account and harvest gains to pay for non-essential child expenses. Seems more flexible than a 529 account which i can only use for school.
With the new tax laws, the $2100 number could be higher. It is still unclear now until we get more guidance. Search for the thread on kiddie tax.
First, it is not that the first $2100 is tax free. Rather the first $1,050 ($350 if earned income > $1,050) is tax free and the next $1,050 is taxed at the dependents tax rate.

If the amount > $1,050 ($350) is from qualified dividends and/or LTCG, then it is tax free, but any amount of income subject to ordinary tax rates will be subject to a 10% tax.

The new tax reform extends the 10%/0% bracket an additional $2,550.
Is there a consensus whether the $2,550 is taxable (assuming every dollar is LTCG unearned income)? If it is not taxable, this will provide $2,100 + $2,550 = $4,650 of tax-free LTCG unearned income.
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itstoomuch
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Re: 529 AND UTMA

Post by itstoomuch » Mon Jan 15, 2018 6:09 pm

If using a UGMA, you think that child is undeserving, you can move the funds into a UGMA-529 in their names with you as custodian.
If the child owner now tries to claim the funds, then (s)he is responsible for tax ramifications. Also when you, the custodian move appreciated UGMA to 529, the UGMA pays the taxes.
The custodian should hopefully recognize trouble well before actual turnover of UGMA account and take appropriate action.
In a final gambit, the child wants the UGMA funds, You, the custodian hire a lawyer to prevent the turnover of the UGMA. UGMA pays for the legal fees.
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ZWorkLess
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Re: 529 AND UTMA

Post by ZWorkLess » Mon Jan 15, 2018 8:44 pm

Another consideration . . .

This sounds like it is your first child.

Are you absolutely 100% sure s/he will be your only child? (Until your first kid is at least two years old and unless surgery has been performed and you and your wife are both at least 40, I would not be so sure!! SO many people change their minds on purpose or on accident!)

If you're not 100% sure, then I'd steer clear of putting large amounts on money in a type of account that you can't redirect to another child . . .

What happens if 4-10 or more years from now, you've got 100k++ in this kid's UGTM account, and then you have another child. Or twins. Or triplets. And one of you parents needs to stay home to care for them . . . so income goes down, expenses go up . . . Now, say, one of those kids has special needs, so you're looking at $$$$$ in lifetime expenses . . .

For me, I wouldn't want to be locked in to divvying up my wealth evenly, let alone unevenly to the benefit of one well child, until all my kids were in adulthood (or very close to it). The families I know who are raising a special needs child (or two!), have *completely* different financial situations than the rest of us with relatively well kids. I know if one of my three were special needs, I'd be utterly unlikely to be able to help with "extras" and maybe even struggle to put them through local university . . . as we'd have to direct all our "extra" and retirement funds towards caring for a high needs child for life.

549s and similar accounts that allow you to redirect funds from one child to another avoid this risk . . .

In my estate planning, I even consider this "unequal help for kids with unequal needs" issue up until my kids are all 30 . . . and they're all healthy, bright, and the youngest is 15 . . . It's just the sort of thing I worry about when I am doing catastrophe planning . . . What if one adult kid is hit by a bus and permanently disabled soon after we die? If that happened, I'd just as soon the vast majority of our wealth be directed to supporting that child +/- their dependents rather than have the three split it, with two quite wealthy by my standards (say 500k - 1,000,000 each which would be a massive windfall to a 20-something with a good career with little to no debts) and one barely able to survive . . . (even a million wouldn't go very far for a life time disability in their 20s . . .). I am a worrier about these sorts of things . . . So, I'd *definitely* worry too much about that so early in the game to commit large funds to each particular child.

So, anyway, if I were you, I'd talk to an actual estate planner and/or some sort of really savvy fee-only financial planner before I got more than 10k or so (say, a year's worth of your own "blow money") locked into any one child's name for keeps.

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Re: 529 AND UTMA

Post by indexfundfan » Mon Jan 15, 2018 9:40 pm

I think OP will be fine since his intention is to wash the capital gains in his stocks through the UTMA and withdraw the money for on-going non-essential child expenses.

In this way, the value / growth of the UTMA will be limited. It would also be easy to close the account by the time the child reaches majority.
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spacecadet610
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Re: 529 AND UTMA

Post by spacecadet610 » Tue Jan 16, 2018 1:05 am

Yes this is my first child. I may or may not have another.

From all this discussion, it seems i can capture all the positives but none of the negatives by contributing low cost basis stocks (maybe $10-20k worth?) first couple years of his life to UTMA then rest of time will contribute to a 529.

This way every year I can harvest the UTMA tax free up to the limit to use for his non-essential expenses. I plan to deplete this ideally when he turns 18 or whatever the age is. I won't have to worry about him having control of this money.

What do people estimate an amount for non-essential expenses for 18 years? Is $20k or 30k enough? I want him to be diversified and to encourage lessons in whatever he is interested in.

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Re: 529 AND UTMA

Post by itstoomuch » Tue Jan 16, 2018 1:31 am

Parents can not anticipate everything in the future, for their children. They squirm too much. :mrgreen: :annoyed :oops:
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: 529 AND UTMA

Post by woof755 » Tue Jan 16, 2018 2:37 am

spacecadet610 wrote:
Tue Jan 16, 2018 1:05 am

This way every year I can harvest the UTMA tax free up to the limit to use for his non-essential expenses. I plan to deplete this ideally when he turns 18 or whatever the age is. I won't have to worry about him having control of this money.

What do people estimate an amount for non-essential expenses for 18 years? Is $20k or 30k enough? I want him to be diversified and to encourage lessons in whatever he is interested in.
I haven't put this much thought into how to potentially utilizing UTMA money for Roth so thx for bringing this up. But, I'm not sure how Ifeel about cashing out UTMA money to pay for a child's expenses. It's supposed to be his/her money. Is $2100 per year tax free worth opening an account you intend to drain? Maybe it is.

My 13 yr old is a talented tennis player. We spend thousands per year on shoes, racquets, strings, uniforms, tournament fees, private lessons, after school tennis, and because we are in Hawaii, inter-island travel for tournaments. Depending upon what sport or artistic endeavor your child is into (pianos and violins are expensive too, as are lessons!), I could see you spending $5k a year or more. Hard to plan for everything!
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spacecadet610
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Re: 529 AND UTMA

Post by spacecadet610 » Tue Jan 16, 2018 3:31 am

woof755 wrote:
Tue Jan 16, 2018 2:37 am
spacecadet610 wrote:
Tue Jan 16, 2018 1:05 am

This way every year I can harvest the UTMA tax free up to the limit to use for his non-essential expenses. I plan to deplete this ideally when he turns 18 or whatever the age is. I won't have to worry about him having control of this money.

What do people estimate an amount for non-essential expenses for 18 years? Is $20k or 30k enough? I want him to be diversified and to encourage lessons in whatever he is interested in.
I haven't put this much thought into how to potentially utilizing UTMA money for Roth so thx for bringing this up. But, I'm not sure how Ifeel about cashing out UTMA money to pay for a child's expenses. It's supposed to be his/her money. Is $2100 per year tax free worth opening an account you intend to drain? Maybe it is.

My 13 yr old is a talented tennis player. We spend thousands per year on shoes, racquets, strings, uniforms, tournament fees, private lessons, after school tennis, and because we are in Hawaii, inter-island travel for tournaments. Depending upon what sport or artistic endeavor your child is into (pianos and violins are expensive too, as are lessons!), I could see you spending $5k a year or more. Hard to plan for everything!
Nice! I grew up as a talented tennis player also and forgot how expensive that can be to develop a talent. I'll probably raise my expected expenses in that case. I hope to provide whatever same opportunity for my child.

I have no qualms depleting UTMA money tax free to pay for my child's expenses. His money is being used to develop his potential. If the government allows me to do this tax free, why not take advantage of it?

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Re: 529 AND UTMA

Post by Wagnerjb » Tue Jan 16, 2018 9:58 am

spacecadet610 wrote:
Tue Jan 16, 2018 1:05 am
Yes this is my first child. I may or may not have another.

From all this discussion, it seems i can capture all the positives but none of the negatives by contributing low cost basis stocks (maybe $10-20k worth?) first couple years of his life to UTMA then rest of time will contribute to a 529.

This way every year I can harvest the UTMA tax free up to the limit to use for his non-essential expenses. I plan to deplete this ideally when he turns 18 or whatever the age is. I won't have to worry about him having control of this money.

What do people estimate an amount for non-essential expenses for 18 years? Is $20k or 30k enough? I want him to be diversified and to encourage lessons in whatever he is interested in.
I funded a UTMA for my two children, and I did exactly as you indicate - as Custodian I chose to spend the UTMA for non-essential items for my children before they went off to college. (My income just about guaranteed that my children weren't eligible for scholarships). Each of their UTMA accounts had roughly $30k and were each spent down within 4 or 5 years.

For my son, about half of the total expenses were summer camp, tennis lessons, trips with school theater group (one to Europe), his high school ring, two computers, etc. The other half were spent on a car, including insurance, repairs, and deductibles for an accident and a comprehensive claim.

For my daughter, there were gymnastics lessons, soccer camp, flights to see friends, braces, a new bed for her room, and high school band expenses. I had depleted her UTMA by the time I bought her a car.

Best wishes.
Andy

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Re: 529 AND UTMA

Post by Spirit Rider » Tue Jan 16, 2018 11:37 am

I realize it is water under the bridge, but the purpose of this forum is to inform others as well.

Not to quibble, but the valid UTMA distribution determination is not essential vs non-essential, but rather parental support obligation or not. While braces may be somewhat optional, but they are not just cosmetic. I would maintain that they are a parental support obligation. Same thing with a bed. Even if this was a non-essential upgrade. Once you chose to do it, it was a parental support obligation.

These were expenditures for the health and welfare of the minor, the others were not. Although my two girls would consider many of them (iPhone/iPad, summer camp, extracurricular activities, etc... ) a matter of life or death.

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Re: 529 AND UTMA

Post by Wagnerjb » Tue Jan 16, 2018 1:57 pm

Spirit Rider wrote:
Tue Jan 16, 2018 11:37 am
I realize it is water under the bridge, but the purpose of this forum is to inform others as well.

Not to quibble, but the valid UTMA distribution determination is not essential vs non-essential, but rather parental support obligation or not. While braces may be somewhat optional, but they are not just cosmetic. I would maintain that they are a parental support obligation. Same thing with a bed. Even if this was a non-essential upgrade. Once you chose to do it, it was a parental support obligation.
Your view is rather conservative in my opinion. You can find multiple examples of articles where the author indicates that braces are an acceptable use of UTMA funds and not considered parental support. Sure, in a exceedingly rare case braces are medically necessary....but we aren't talking about those rare cases, just the common braces worn by upper middle-class kids. And I am not sure that upgrading my daughter's single bed to a nice queen sized bed would be parental support.

Each individual needs to make their own assessment and I grant that there can be differences of opinion here.

Best wishes.
Andy

spacecadet610
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Re: 529 AND UTMA

Post by spacecadet610 » Tue Jan 16, 2018 2:42 pm

From my reading this non parental support definition defined by the IRS is quite vague and the wording of it leaves it quite open to interpretation.

I think as long as there is some rational thoughts in your head for the expense that would match up with the IRS wording, it can be justified in case of IRS audit.

On a separate note, I just opened up a Vanguard UTMA account online. I would like to gift shares preserving cost basis to the UTMA account but not quite sure how. I called Vanguard and the rep told me to do the "Exchange (sell to buy) Vanguard Funds" option to move the shares from my vanguard brokerage account to the UTMA account. However, my concern would be that this is a taxable event for me and i would lose the cost basis. Shouldn't i do some kind of ACAT transfer instead? anyone have experience with this?
Last edited by spacecadet610 on Tue Jan 16, 2018 3:08 pm, edited 4 times in total.

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Re: 529 AND UTMA

Post by indexfundfan » Tue Jan 16, 2018 2:50 pm

spacecadet610 wrote:
Tue Jan 16, 2018 2:42 pm
From my reading this parental support definition defined by the IRS is quite vague and the wording of it leaves it quite open to interpretation.

I think as long as there is some rational thoughts in your head for the expense that would match up with the IRS wording, it can be justified in case of IRS audit.

On a separete note, I just opened up a Vanguard UTMA account online. I would like to gift shifts preserving cost basis to the UTMA account but not quite sure. I called Vanguard and the rep told me to do the "Exchange (sell to buy) Vanguard Funds" option to move the shares from my vanguard brokerage account to the UTMA account. However, my concern would be that this is a taxable event for me and i would lose the cost basis. Shouldn't i do some kind of ACAT trasfer instead? anyone have experience with this?
At Merrill Edge, it is considered to be an internal transfer. You don't do it through the buy-and-sell menu.
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Re: 529 AND UTMA

Post by Wagnerjb » Tue Jan 16, 2018 3:00 pm

spacecadet610 wrote:
Tue Jan 16, 2018 2:42 pm
On a separete note, I just opened up a Vanguard UTMA account online. I would like to gift shifts preserving cost basis to the UTMA account but not quite sure. I called Vanguard and the rep told me to do the "Exchange (sell to buy) Vanguard Funds" option to move the shares from my vanguard brokerage account to the UTMA account. However, my concern would be that this is a taxable event for me and i would lose the cost basis. Shouldn't i do some kind of ACAT trasfer instead? anyone have experience with this?
You are wise to be very careful with this transaction. Like you, I suspect the transfer might (inadvertently) be a taxable transaction that resets the basis.

Our children no longer have UTMA accounts, but I regularly gift them appreciated shares between my account (joint with wife) and their brokerage account. We use the form called "Change of Ownership between Vanguard Nonretirement Accounts". That form is a transfer in kind, which is what you are likely looking for. The form requires a signature (and a voice verification by me and my wife), so you may not be able to consummate your transaction online.

I would call Vanguard and be very clear what you are intending.

Best wishes.
Andy

spacecadet610
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Re: 529 AND UTMA

Post by spacecadet610 » Tue Jan 16, 2018 3:07 pm

Wagnerjb wrote:
Tue Jan 16, 2018 3:00 pm
spacecadet610 wrote:
Tue Jan 16, 2018 2:42 pm
On a separete note, I just opened up a Vanguard UTMA account online. I would like to gift shifts preserving cost basis to the UTMA account but not quite sure. I called Vanguard and the rep told me to do the "Exchange (sell to buy) Vanguard Funds" option to move the shares from my vanguard brokerage account to the UTMA account. However, my concern would be that this is a taxable event for me and i would lose the cost basis. Shouldn't i do some kind of ACAT trasfer instead? anyone have experience with this?
You are wise to be very careful with this transaction. Like you, I suspect the transfer might (inadvertently) be a taxable transaction that resets the basis.

Our children no longer have UTMA accounts, but I regularly gift them appreciated shares between my account (joint with wife) and their brokerage account. We use the form called "Change of Ownership between Vanguard Nonretirement Accounts". That form is a transfer in kind, which is what you are likely looking for. The form requires a signature (and a voice verification by me and my wife), so you may not be able to consummate your transaction online.

I would call Vanguard and be very clear what you are intending.

Best wishes.
Thanks. I called Vanguard back to be clear about what I was trying to do.

The rep make it clear that as long as I do the "Exchange (sell to buy) vanguard funds" option between 2 non-retirement accounts and that I exchange to the exact same fund, it will NOT be a taxable event for me. I could choose to do the paperwork if i'm not comfortable but he said it would be the same thing. He understands why i hesitate because of the wording of it but he absolutely sure.

I may just do a small amount to test it out before doing the full amount.

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Re: 529 AND UTMA

Post by mega317 » Tue Jan 16, 2018 3:14 pm

I called Vanguard to gift shares like this. The rep seemed knowledgeable and helpful, took me through the process for a minute or two until he reported that it could not be done.

"Why not?"

Because I had recently tax gain harvested the account into a fund I don't know. I was trying to transfer less than 3k of VTSMX. Oops. Helpful phone rep, though.

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Re: 529 AND UTMA

Post by spacecadet610 » Tue Jan 16, 2018 3:54 pm

Ok i just did a test run of $3000 VMMSX from my Vanguard account to the UTMA account. I have 40% LT gains on this fund and have been wanted to sell it because of the high expense ratio. Putting it into the UTMA would be perfect to use for my son. I just hope the cost basis gets preserved.

For those that have done the UTMA, logistically how do you fund the child expenses? Do you just spend throughout the year for your child, then at end of year add it up and withdraw approprate amount from UTMA? Or withdraw at beginning of year up to maximum that would be tax free then spend throughout the year. Obviously i would keep records of the eligible expenses. It just seems very cumbersome to make a withdrawal every time to match each expense as they occur.

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Re: 529 AND UTMA

Post by itstoomuch » Tue Jan 16, 2018 4:13 pm

spacecadet610 wrote:
Tue Jan 16, 2018 3:54 pm
Ok i just did a test run of $3000 VMMSX from my Vanguard account to the UTMA account. I have 40% LT gains on this fund and have been wanted to sell it because of the high expense ratio. Putting it into the UTMA would be perfect to use for my son. I just hope the cost basis gets preserved.

For those that have done the UTMA, logistically how do you fund the child expenses? Do you just spend throughout the year for your child, then at end of year add it up and withdraw approprate amount from UTMA? Or withdraw at beginning of year up to maximum that would be tax free then spend throughout the year. Obviously i would keep records of the eligible expenses. It just seems very cumbersome to make a withdrawal every time to match each expense as they occur.
New basis when you do UGMA because child is now the owner.
We withdrew for just the major stuff and dependent on our personal household finances and how the UGMA was doing. The biggest cost item for the UGMA was the payment of student loans. My biggest mistake was not doing LTCG so when the account was liquidated, the Only had a stock that was 6x the basis. I can't remember if he had a taxable amount at the time.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

Wagnerjb
Posts: 7202
Joined: Mon Feb 19, 2007 8:44 pm
Location: Houston, Texas

Re: 529 AND UTMA

Post by Wagnerjb » Tue Jan 16, 2018 4:53 pm

spacecadet610 wrote:
Tue Jan 16, 2018 3:54 pm
For those that have done the UTMA, logistically how do you fund the child expenses? Do you just spend throughout the year for your child, then at end of year add it up and withdraw approprate amount from UTMA? Or withdraw at beginning of year up to maximum that would be tax free then spend throughout the year. Obviously i would keep records of the eligible expenses. It just seems very cumbersome to make a withdrawal every time to match each expense as they occur.
I spent money on my personal credit card (for my children) and kept an Excel spreadsheet of the individual items, the date and the amount. I also tried to keep a receipt where possible. Then, periodically I would reimburse myself from the UTMA. Personally, I did not take money from the UTMA in advance but I suspect the law is vague here....just like it is around withdrawing money from the UTMA well after the item is purchased for the child. Keep good records and use good judgment.

Best wishes.
Andy

itstoomuch
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Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: 529 AND UTMA

Post by itstoomuch » Tue Jan 16, 2018 5:17 pm

We used a UGMA bank account with checking, savings, and CC plus a brokerage account. Everything going in and coming out went through this UGMA account. When the savings account got too small I transferred from brokerage to bank savings. When the savings got too big, I did the reverse and acquired more shares.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

spacecadet610
Posts: 32
Joined: Sun Aug 26, 2012 1:41 pm

Re: 529 AND UTMA

Post by spacecadet610 » Tue Jan 16, 2018 5:38 pm

itstoomuch wrote:
Tue Jan 16, 2018 4:13 pm
spacecadet610 wrote:
Tue Jan 16, 2018 3:54 pm
Ok i just did a test run of $3000 VMMSX from my Vanguard account to the UTMA account. I have 40% LT gains on this fund and have been wanted to sell it because of the high expense ratio. Putting it into the UTMA would be perfect to use for my son. I just hope the cost basis gets preserved.

For those that have done the UTMA, logistically how do you fund the child expenses? Do you just spend throughout the year for your child, then at end of year add it up and withdraw approprate amount from UTMA? Or withdraw at beginning of year up to maximum that would be tax free then spend throughout the year. Obviously i would keep records of the eligible expenses. It just seems very cumbersome to make a withdrawal every time to match each expense as they occur.
New basis when you do UGMA because child is now the owner.
My understanding is that my cost basis is preserved because the shares are gifted to the child. Is this not right?

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: 529 AND UTMA

Post by itstoomuch » Tue Jan 16, 2018 6:21 pm

Child would want a higher value. But may not make much difference with small amounts in the ugma.
A lot has to do with your future expectations on what you want to do and when
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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