UTMA accounts

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international001
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Re: UTMA accounts

Post by international001 » Wed Oct 23, 2019 5:39 pm

Spirit Rider wrote:
Tue Oct 22, 2019 12:20 am
With no earned income*, there is a $1,100 unearned income standard deduction. The first $1,100 of ordinary income and/or capital gains is tax free. The next $1,100 is subject the dependent's tax rates. The ordinary income tax rate is 10% and the capital gains tax rate is 0%. Unearned income > $2,200 is subject to trust tax brackets.
Thanks for your detailed responses. I keep hearing about that dependent 's tax rates. Do these rates (0% 10%) have any meaning outside UTMA?

Also few things that was not mentioned:

- Let's assume no earned income. You get $4850 at 0% tax for LTCG/QDIV. LEt's say you have $1100 of NQDIV and the rest $3750 on QDIV. You still pay 0% (i.e, the NQDIV are acounted before). That's probably important if you want to hold some international stocks, REITs, etc.

-Once the kid gets the ownership, he has to pay taxes with his own tax brackets, and he inherits the cost basis, right? Is there some more to it? I was confused by so many thread around this idea.

- You could consider you brokerage + UTMA as 'family money'. Consider that you may pay part of tuition from brokerage, or that your sons will get a gift after they graduate. Then the strategy should be to consider taxable + UTMA as a whole AA, and to fill up the bracket space. For instance, invest in UTMA only on year 0 with assets that genertaet that $4850 on QDIV, and hold the dividends on cash on the UTMA, and reduce the cash exposure on your taxable. Has this possibility been explored? You can save 15% of $4850 every year

caklim00
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Re: UTMA accounts

Post by caklim00 » Wed Oct 23, 2019 5:44 pm

So, my father in law just cashed out UTMA accounts for our 3 children and gave us the checks. UTMA written on them to our children's names. Does it matter what state you create a new UTMA/529 account in? I have all of our 529s with Utah but live in a different state. I live in the state where the UTMAs were created. I gave Utah a call and they said I could open 3 new UTMA accounts with Utah and have the checks endorsed for deposit into those accounts. Does this sound right? Wish my father in law would have just done a 529 instead.

Spirit Rider
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Re: UTMA accounts

Post by Spirit Rider » Wed Oct 23, 2019 8:39 pm

international001 wrote:
Wed Oct 23, 2019 5:39 pm
Thanks for your detailed responses. I keep hearing about that dependent 's tax rates. Do these rates (0% 10%) have any meaning outside UTMA?
Any unearned income of a "Kiddie" is subject to these rules. This can be UTMA bank, brokerage, inherited IRA accounts or any other custodial accounts such a held by a property guardian, etc...
Let's assume no earned income. You get $4850 at 0% tax for LTCG/QDIV. LEt's say you have $1100 of NQDIV and the rest $3750 on QDIV. You still pay 0% (i.e, the NQDIV are acounted before). That's probably important if you want to hold some international stocks, REITs, etc.
Correct.
Once the kid gets the ownership, he has to pay taxes with his own tax brackets, and he inherits the cost basis, right? Is there some more to it? I was confused by so many thread around this idea.
The application of the Kiddie Tax is based on dependent status and age. If they are dependent college students, they are subject to Kiddie Tax rules until age 23 even after receiving control of the account.
You could consider you brokerage + UTMA as 'family money'. Consider that you may pay part of tuition from brokerage, or that your sons will get a gift after they graduate. Then the strategy should be to consider taxable + UTMA as a whole AA, and to fill up the bracket space. For instance, invest in UTMA only on year 0 with assets that genertaet that $4850 on QDIV, and hold the dividends on cash on the UTMA, and reduce the cash exposure on your taxable. Has this possibility been explored? You can save 15% of $4850 every year.
As long as you understand.

Contributions to UTMA accounts are completed gifts to the account owner. It is irrevocably their money and no longer your money. Any withdrawal must be to the benefit of the account owner. You can never take back any money or use it for your benefit.

There is no requirement that all disbursements are direct from the UTMA to the expense. You are ok as long as any use of brokerage and UTMA funds are reasonably contemporaneous. There is no requirement that they occur in the same year, but think weeks and months not years.

RetiredAL
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Re: UTMA accounts

Post by RetiredAL » Wed Oct 23, 2019 11:46 pm

caklim00 wrote:
Wed Oct 23, 2019 5:44 pm
So, my father in law just cashed out UTMA accounts for our 3 children and gave us the checks. UTMA written on them to our children's names. Does it matter what state you create a new UTMA/529 account in? I have all of our 529s with Utah but live in a different state. I live in the state where the UTMAs were created. I gave Utah a call and they said I could open 3 new UTMA accounts with Utah and have the checks endorsed for deposit into those accounts. Does this sound right? Wish my father in law would have just done a 529 instead.
First, I'm not a lawyer, so these are just my opinions/experiences.

UTMA's are usually done under the rules for state the minor resides, but could be the the state that the custodian resides. A common difference between states is the age custodianship ends. Some states are 18, others can be 21 or later, depending on various factors. Utah allows age 21. Someone with more knowledge than me will need to tell you if you can use a random state or not. For UTMA's, there is no "State Fund" that manages the money seen with some state 529's. The UTMA custodian does the management, thus it's common to have the account at a brokerage such as Vanguard, Fidelity, Schwab, or a bank.

Many years ago, my parents closed the original UGMA accounts for 2 of my 3 kids, so they could be moved to Schwab with me as the custodian. The process was about the same you are seeing, checks which I sent to Schwab. State was California and age 21 was used. The daughter was within a year of college, so her's was left in the original GNMA fund at USAA. She got control at age 18 and used that money mostly for her college.

My eldest son asked for and took control of his at age 20. My other son did not file his paperwork to take control for a couple of years after my custodial lapsed. Although it was un-managed for those years, it was mostly invested in Schwab's SP500 fund and did well left to itself.

Today, I am the custodian for my two grand-kids UTMA's. Their UTMA's were created under Montana rules since that is where they reside.

Since your kids accounts were cashed out, you may have taxes due this year. Going forward, do understand the value to tax gain harvesting for your kid's UTMA's to minimize future tax liabilities.

MikeG62
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Re: UTMA accounts

Post by MikeG62 » Thu Oct 24, 2019 8:17 am

Da5id wrote:
Mon Oct 16, 2017 10:24 am

...UMTAs unless absolutely massive can be spent down for child's benefit. Expensive sleep away camps, school trips to foreign countries, etc. And of course they can be used for college, and financial aid is in fact granted with the understanding that the UMTA will largely be spent for college. Or you can leave it all for the kid at 18/21 (whatever your state allows).
^This.

In addition, just because they turn 18 does not mean you run down to the bank on their birthday and turn the account over to them. Of course, they could force you to do that, but in our experience our kids did not even ask about the accounts. We turned them over to them when they graduated college. They both still have the funds from those accounts.
Real Knowledge Comes Only From Experience

caklim00
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Re: UTMA accounts

Post by caklim00 » Thu Oct 24, 2019 8:46 am

RetiredAL wrote:
Wed Oct 23, 2019 11:46 pm
caklim00 wrote:
Wed Oct 23, 2019 5:44 pm
So, my father in law just cashed out UTMA accounts for our 3 children and gave us the checks. UTMA written on them to our children's names. Does it matter what state you create a new UTMA/529 account in? I have all of our 529s with Utah but live in a different state. I live in the state where the UTMAs were created. I gave Utah a call and they said I could open 3 new UTMA accounts with Utah and have the checks endorsed for deposit into those accounts. Does this sound right? Wish my father in law would have just done a 529 instead.
First, I'm not a lawyer, so these are just my opinions/experiences.

UTMA's are usually done under the rules for state the minor resides, but could be the the state that the custodian resides. A common difference between states is the age custodianship ends. Some states are 18, others can be 21 or later, depending on various factors. Utah allows age 21. Someone with more knowledge than me will need to tell you if you can use a random state or not. For UTMA's, there is no "State Fund" that manages the money seen with some state 529's. The UTMA custodian does the management, thus it's common to have the account at a brokerage such as Vanguard, Fidelity, Schwab, or a bank.

Many years ago, my parents closed the original UGMA accounts for 2 of my 3 kids, so they could be moved to Schwab with me as the custodian. The process was about the same you are seeing, checks which I sent to Schwab. State was California and age 21 was used. The daughter was within a year of college, so her's was left in the original GNMA fund at USAA. She got control at age 18 and used that money mostly for her college.

My eldest son asked for and took control of his at age 20. My other son did not file his paperwork to take control for a couple of years after my custodial lapsed. Although it was un-managed for those years, it was mostly invested in Schwab's SP500 fund and did well left to itself.

Today, I am the custodian for my two grand-kids UTMA's. Their UTMA's were created under Montana rules since that is where they reside.

Since your kids accounts were cashed out, you may have taxes due this year. Going forward, do understand the value to tax gain harvesting for your kid's UTMA's to minimize future tax liabilities.
Thanks for the input. I didn't even think about just opening an account with Schwab to get free ETF trades. Perhaps I will move forward with this since it would be a lot cheaper than Utah (DFA/Vanguard + admin fees).

When you say tax gain harvesting can you please elaborate.

Does this mean selling funds with gains before the gains become too large and will eventually require paying taxes?

dbr
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Re: UTMA accounts

Post by dbr » Thu Oct 24, 2019 11:19 am

In any case be sure adult beneficiaries of UTMA accounts are properly reporting and paying taxes, especially if they now have significant taxable income. It is not fun for them to have to go back and correct for unreported income from accounts they did not realize were taxable to them. This would come about when parents who have been handling the taxes don't make sure the kids are getting the tax documents they need and understand they need to report the income.

inbox788
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Re: UTMA accounts

Post by inbox788 » Thu Oct 24, 2019 12:33 pm

dm200 wrote:
Tue Oct 22, 2019 8:34 am
Where, in my opinion, UTMA or UGMA are ok would be for smaller amounts - that would not have these disadvantages.
Agree. I'm about to start and dip my toes in and realize about $5000 LTCG. I plan to pay any taxes due from the UTMA account.
international001 wrote:
Wed Oct 23, 2019 5:39 pm
- Let's assume no earned income. You get $4850 at 0% tax for LTCG/QDIV. LEt's say you have $1100 of NQDIV and the rest $3750 on QDIV. You still pay 0% (i.e, the NQDIV are acounted before). That's probably important if you want to hold some international stocks, REITs, etc.
The calculations and the thresholds are detailed and confusing, but I think that going over a little isn't a big deal. You might pay 10% on dividends or 15% on LTCG above the 0% brackets, but that's most like higher than the parents rates anyway. There may may also be some state tax involved, but again likely equal to or better than parents rate.

I don't see the need for more than one fund like Total US Market (or just Total World Market). I would even use just Total International since I view AA holistically. I might give in to the TLH potential and add a second fund, but with the main goal of TGH, there's limited opportunity. I don't see the role of REITs or other complication in the timeframe involved.

I've been thinking about what happens the year the child turns 18, whether it makes any difference if anything is done before or after the birthday, but because of the Kiddie Tax, it seems the transition age becomes 24 vs 25 or when child is no longer a dependent.
unclescrooge wrote:
Tue Oct 22, 2019 9:25 am
SGM wrote:
Mon Oct 16, 2017 10:07 am
I have been trying to get my children to take over their UTMA accounts. I have warned them that if they do not change the account registration, the accounts will revert back into my estate at death. They seem to be too busy working. I cannot transfer the accounts without their signatures either medallion or just signature guaranteed. I think I will get a Vanguard financial advisor to speak to them and maybe start managing their accounts.
My coworker went though the same issue with E-Trade. He was 26 and they still had his ugma account. A simple phone call and they converted it to a regular account.
Sounds like an extension on the Millennials not moving out of parents house stereotype.
dm200 wrote:
Thu Oct 24, 2019 11:09 am
Well, if the applicable state rules state that this needs to be done at age 18, then you should do it - right away!!!
I wouldn't stress. Looked around and called a couple of brokerages and they deal with it somewhat. One said 30 days, while another 90 days. They notify the owner, probably as per regulation. It's possible you both lose access to the account until it's in compliance, so be sure the assets invested are on autopilot like the example above invested in SP500 index. (taxes are still yours and your child's problems)

Sales6280
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Re: UTMA accounts

Post by Sales6280 » Thu Oct 24, 2019 12:38 pm

When you tax loss harvest a UTMA invested in a Vanguard Index fund do you just exchange for another fund? The fund I am in does not allow you to buy within 30 days of selling the same fund.

Spirit Rider
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Re: UTMA accounts

Post by Spirit Rider » Thu Oct 24, 2019 1:27 pm

Sales6280 wrote:
Thu Oct 24, 2019 12:38 pm
When you tax loss harvest a UTMA invested in a Vanguard Index fund do you just exchange for another fund? The fund I am in does not allow you to buy within 30 days of selling the same fund.
Probably the best fund to hold in a UTMA is Total Stock Market. Just exchange it to 80:20 (S&P 500:Extended Market) and back again when you can. Alternatively, you can use ETFs, but then you have spreads to worry about.

RetiredAL
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Re: UTMA accounts

Post by RetiredAL » Thu Oct 24, 2019 1:46 pm

Sales6280 wrote:
Thu Oct 24, 2019 12:38 pm
When you tax loss harvest a UTMA invested in a Vanguard Index fund do you just exchange for another fund? The fund I am in does not allow you to buy within 30 days of selling the same fund.
Sales Dude...

Most of the dialog about harvesting in UTMA Accounts is around GAIN harvesting to avoid ( or minimize ) taxes. But yes, you can LOSS harvest too.

I use Schwab ETF's for the UTMA's, so I tax gain harvest to the same ETF with a sell then buy. If I had a "loss" I was harvesting, it would need to be to a different ETF, like selling Schwab SP500, and buying Schwab 1000 to avoid wash sales rules. I also do not auto re-invest dividends, so as to not create a wash issue or a straggling buy into something I I've sold.

You can use Vanguard's SP500 and Total Market funds to accomplish the same thing and get around their 30 day fund rules. In the big picture IMO, there is not a lot of return difference between those funds, but if you are so set to want to go that way, buy sell fund1, buy fund2, hold for 32 days, then sell fund2 and buy fund1.

For ETF's, I sell on day1 late then buy on day2 early to not get caught up in settlement date issues, important with IRA's and Roth's where adding settlement funds can't be done. For Funds, anytime day1 and day2 works as the close is when the transaction occurs. At least that is how Schwab and Fidelity funds work, but I have no Vanguard experience at all, and their settlement / avail-to-buy rules could be different. As I remember, both Schwab and Fidelity show the proceeds of a ETF/Stock sale as available as soon as the trade occurs, even though I choose to wait one day between.

international001
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Re: UTMA accounts

Post by international001 » Thu Oct 24, 2019 4:21 pm

RetiredAL wrote:
Thu Oct 24, 2019 1:46 pm
Sales6280 wrote:
Thu Oct 24, 2019 12:38 pm
When you tax loss harvest a UTMA invested in a Vanguard Index fund do you just exchange for another fund? The fund I am in does not allow you to buy within 30 days of selling the same fund.
Sales Dude...

Most of the dialog about harvesting in UTMA Accounts is around GAIN harvesting to avoid ( or minimize ) taxes. But yes, you can LOSS harvest too.

I use Schwab ETF's for the UTMA's, so I tax gain harvest to the same ETF with a sell then buy. If I had a "loss" I was harvesting, it would need to be to a different ETF, like selling Schwab SP500, and buying Schwab 1000 to avoid wash sales rules. I also do not auto re-invest dividends, so as to not create a wash issue or a straggling buy into something I I've sold.

You can use Vanguard's SP500 and Total Market funds to accomplish the same thing and get around their 30 day fund rules. In the big picture IMO, there is not a lot of return difference between those funds, but if you are so set to want to go that way, buy sell fund1, buy fund2, hold for 32 days, then sell fund2 and buy fund1.

For ETF's, I sell on day1 late then buy on day2 early to not get caught up in settlement date issues, important with IRA's and Roth's where adding settlement funds can't be done. For Funds, anytime day1 and day2 works as the close is when the transaction occurs. At least that is how Schwab and Fidelity funds work, but I have no Vanguard experience at all, and their settlement / avail-to-buy rules could be different. As I remember, both Schwab and Fidelity show the proceeds of a ETF/Stock sale as available as soon as the trade occurs, even though I choose to wait one day between.
You do tax loss harvesting to delay taxes. I am not sure it's a good strategy for UTMA accounts. If your are paying 0% on LCGT, why to do it? (you are increasing the cost basis and in the future it may become taxable). IF you are paying a high tax in the UTMA, perhaps you added too much money to it, but it seems a good strategy. When kid gets the money, he'll just have to pay likely 0% or 15%

If you have net loss for the year, you cannot claim it as a deduction in your taxes, right? So it would be lost

Also, for wash sale rules you have to treat *all* the UTMAs for that kid in isolation? Or toguether with your brokerage account and *all* the UTMAs for all your kids? If the former, you can do some smart rebalancing and avoid wash sale rules (if you consider AA as a whole)

I thought wash sales rules are determined by settlement days that you see on your transactions? Are they not? I usually take a few more days just in case, though.

international001
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Re: UTMA accounts

Post by international001 » Thu Oct 24, 2019 4:23 pm

RetiredAL wrote:
Wed Oct 23, 2019 11:46 pm

UTMA's are usually done under the rules for state the minor resides, but could be the the state that the custodian resides. A common difference between states is the age custodianship ends. Some states are 18, others can be 21 or later, depending on various factors. Utah allows age 21. Someone with more knowledge than me will need to tell you if you can use a random state or not. For UTMA's, there is no "State Fund" that manages the money seen with some state 529's. The UTMA custodian does the management, thus it's common to have the account at a brokerage such as Vanguard, Fidelity, Schwab, or a bank.
I find it weird that UTMA has to follow state rules
What if one state mandates to transact UTMA at 18, but you don't, and when kid is 19 you move to a state when the transaction age is 21?

What if you or kids are resident outside US?

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Re: UTMA accounts

Post by LadyGeek » Thu Oct 24, 2019 7:21 pm

I removed a contentious post and reply regarding the minimum age to withdraw from the UTMA. The interchange may be due to a misunderstanding of intent.
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nolesrule
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Re: UTMA accounts

Post by nolesrule » Thu Oct 24, 2019 7:50 pm

international001 wrote:
Thu Oct 24, 2019 4:23 pm
RetiredAL wrote:
Wed Oct 23, 2019 11:46 pm

UTMA's are usually done under the rules for state the minor resides, but could be the the state that the custodian resides. A common difference between states is the age custodianship ends. Some states are 18, others can be 21 or later, depending on various factors. Utah allows age 21. Someone with more knowledge than me will need to tell you if you can use a random state or not. For UTMA's, there is no "State Fund" that manages the money seen with some state 529's. The UTMA custodian does the management, thus it's common to have the account at a brokerage such as Vanguard, Fidelity, Schwab, or a bank.
I find it weird that UTMA has to follow state rules
What if one state mandates to transact UTMA at 18, but you don't, and when kid is 19 you move to a state when the transaction age is 21?

What if you or kids are resident outside US?
Someone correct me if I'm wrong, but I believe it's based on the state laws for the state in which the account was established. I've lived in 3 states now, and my kids have UTMA accounts established in all 3. Some of them actually have the state name in the account title.

RetiredAL
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Re: UTMA accounts

Post by RetiredAL » Thu Oct 24, 2019 8:25 pm

international001 wrote:
Thu Oct 24, 2019 4:23 pm
RetiredAL wrote:
Wed Oct 23, 2019 11:46 pm

UTMA's are usually done under the rules for state the minor resides, but could be the the state that the custodian resides. A common difference between states is the age custodianship ends. Some states are 18, others can be 21 or later, depending on various factors. Utah allows age 21. Someone with more knowledge than me will need to tell you if you can use a random state or not. For UTMA's, there is no "State Fund" that manages the money seen with some state 529's. The UTMA custodian does the management, thus it's common to have the account at a brokerage such as Vanguard, Fidelity, Schwab, or a bank.
I find it weird that UTMA has to follow state rules YES
What if one state mandates to transact UTMA at 18, but you don't, and when kid is 19 you move to a state when the transaction age is 21?

What if you or kids are resident outside US? No Idea, but I suspect that could run afoul of US Residency rules that brokerage houses have.
Like many formal trusts or trust like items such as a UTMA, they are state law derived. Not every state has enacted UTMA's.

I can only speak of Schwab's UTMA Account creation for CA or MT. When you create the account, Schwab asks "what State" and if state selected allows extended age to 21, it then asks until "age 21?". The account is then titled as "John Doe until age 21".

Spirit Rider
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Re: UTMA accounts

Post by Spirit Rider » Thu Oct 24, 2019 8:54 pm

international001 wrote:
Thu Oct 24, 2019 4:23 pm
I find it weird that UTMA has to follow state rules What if one state mandates to transact UTMA at 18, but you don't, and when kid is 19 you move to a state when the transaction age is 21? What if you or kids are resident outside US?
UTMA accounts are 100% creations of state law, that are subject to both state and federal income taxes.

As stated, the applicable state is either the state of the custodian's residence or the state of the UTMA account owner's residence at the time of the UTMA account creation. It does not matter whether the custodian or account owner as applicable move another state or even country. The UTMA account remains subject the original state's UTMA statutes including age of termination. This is even true if you open another UTMA when the custodian or UTMA account owner are residents of another state and transfer the assets. The original state's statutes follow the money..

There is no UTMA police, because this is a civil matter and not a criminal matter unless a custodian is found in contempt of court. The only person who has standing is the UTMA account owner. The earlier comments are generally correct. After the applicable age of termination, the UTMA account owner should be notified within a reasonable time period. If they are in agreement, there is no urgency in releasing control. However, if they request you release control and you don't, you are in material breach of your custodial duty.

m1collector
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Re: UTMA accounts

Post by m1collector » Thu Oct 24, 2019 9:28 pm

If we already started a UTMA, can we transfer the money to a Roth IRA when the child has earned income? Or transfer the money to an irrevocable trust? Probably the latter is not possible, I would bet?

NewMoneyMustBeSmart
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Re: UTMA accounts

Post by NewMoneyMustBeSmart » Thu Oct 24, 2019 10:22 pm

bampf wrote:
Mon Oct 16, 2017 8:45 am
Some years ago I populated some UTMA accounts for my kids. At the time it seemed like the right thing to do. However, as they get older I worry about whether they are mature enough to manage that money once they turn 18. In retrospect I think having the accounts turn over at 21 or upon graduation from university. Two questions:

1. Have another people done this and whats your experience with turning over significant sums to 18 years olds?
2. Suggestions about how to resolve this if I do decide to yank it back.

Thanks!
Bampf
I think I can't 'yank it back' - I lost that right when I put it in the UTMA.

Here's what I would do.

I am the custodian of my kid's UTMA accounts which I set up and funded. In my state they will receive the proceeds at age 21.

I would use my fiduciary duty for the kids to put the money into a place for them that is beneficial, e.g. pre-pay tuition, buy them a practical car, etc. This way I would be acting honorably and legally for their best interest, and removing the money from a place they would benefit.

Perhaps you could contribute the money to a 529 you control.

It may be that you could put the money from the UTMA into an irrevocable trust for them that you control - worth talking to an attorney.

inbox788
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Re: UTMA accounts

Post by inbox788 » Thu Oct 24, 2019 10:40 pm

NewMoneyMustBeSmart wrote:
Thu Oct 24, 2019 10:22 pm
bampf wrote:
Mon Oct 16, 2017 8:45 am
Some years ago I populated some UTMA accounts for my kids. At the time it seemed like the right thing to do. However, as they get older I worry about whether they are mature enough to manage that money once they turn 18. In retrospect I think having the accounts turn over at 21 or upon graduation from university. Two questions:

1. Have another people done this and whats your experience with turning over significant sums to 18 years olds?
2. Suggestions about how to resolve this if I do decide to yank it back.

Thanks!
Bampf
I think I can't 'yank it back' - I lost that right when I put it in the UTMA.

Here's what I would do.

I am the custodian of my kid's UTMA accounts which I set up and funded. In my state they will receive the proceeds at age 21.

I would use my fiduciary duty for the kids to put the money into a place for them that is beneficial, e.g. pre-pay tuition, buy them a practical car, etc. This way I would be acting honorably and legally for their best interest, and removing the money from a place they would benefit.

Perhaps you could contribute the money to a 529 you control.

It may be that you could put the money from the UTMA into an irrevocable trust for them that you control - worth talking to an attorney.
FYI,
I didn't see OP update anything since 2017, but there's a lot of useful UTMA discussion, so worth continuing. viewtopic.php?f=2&t=229903#p4772780

OP did post here recently if you're interested in how it was or is resolving.
viewtopic.php?f=1&t=291736&p=4776568#p4776568

As far as adding additional restrictions after UTMA is funded, I don't think it can be done in a vacuum. If you're really concerned, you might have the kid sign an agreement to what you're doing, but I'm not sure it's binding if he's underage. Came across some discussions on illiquid investments, which like trusts, change the agreement after the fact. I didn't pay much attention, but my takeaway is that if kid wanted to sue you, you'd have to replace the funds from outside funds at market value (vs. liquidation value of illiquid funds).

I don't plan to put that much in UTMA, and if kid isn't responsible with it, he ain't getting no more.

BTW, a question for those that have filed a dependent child tax return, if the only income is unearned income from UTMA interest, dividends and capital gains, does it enter the parents return in any way? Took me 5 minutes at myfreetaxes.com to do the child return, and I'm thinking I don't need to involve my accountant on the matter (and I'm even considering going out on my own taxes as well). When the child falls out of the kiddie tax requirements, I wouldn't even know or care about the adult child's tax returns. Hope I'm not missing an obvious or important connection.

dbr
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Re: UTMA accounts

Post by dbr » Fri Oct 25, 2019 7:23 am

inbox788 wrote:
Thu Oct 24, 2019 10:40 pm
I wouldn't even know or care about the adult child's tax returns. Hope I'm not missing an obvious or important connection.
The one connection is to be sure the adult child's address is on the account so they get the tax documents rather than you getting them and throwing them away leaving the adult child with income they are not reporting. Now most people would have enough sense not to make a mistake like that but one can read stories here and there of exactly that happening. Sometimes people don't even know they own a UTMA because the custodian for some reason never told them.

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Re: UTMA accounts

Post by international001 » Fri Oct 25, 2019 6:36 pm

dbr wrote:
Fri Oct 25, 2019 7:23 am
inbox788 wrote:
Thu Oct 24, 2019 10:40 pm
I wouldn't even know or care about the adult child's tax returns. Hope I'm not missing an obvious or important connection.
The one connection is to be sure the adult child's address is on the account so they get the tax documents rather than you getting them and throwing them away leaving the adult child with income they are not reporting. Now most people would have enough sense not to make a mistake like that but one can read stories here and there of exactly that happening. Sometimes people don't even know they own a UTMA because the custodian for some reason never told them.
But while the child is a minor, what do you do? You have to file a tax return on his behalf? Even if it's a small account and he doesn't get to pay any taxes ?

And if he owes any taxes, can you pay them? Does it count as a give ($14 a year w/o need of further reporting) ?

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Re: UTMA accounts

Post by international001 » Fri Oct 25, 2019 6:37 pm

Spirit Rider wrote:
Thu Oct 24, 2019 8:54 pm
the applicable state is either the state of the custodian's residence or the state of the UTMA account owner's residence at the time of the UTMA account creation.
the custodian's or the owner's? You can't have it both ways

Does it mean that if you are resident outside the US, you cannot open a UTMA?

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Re: UTMA accounts

Post by inbox788 » Fri Oct 25, 2019 8:40 pm

international001 wrote:
Fri Oct 25, 2019 6:37 pm
Spirit Rider wrote:
Thu Oct 24, 2019 8:54 pm
the applicable state is either the state of the custodian's residence or the state of the UTMA account owner's residence at the time of the UTMA account creation.
the custodian's or the owner's? You can't have it both ways

Does it mean that if you are resident outside the US, you cannot open a UTMA?
TLDR answer is yes you can!

I went looking for UTMA regulation information -- https://en.wikipedia.org/wiki/Uniform_T ... Minors_Act
I wondered what "Uniform" refers to. http://uniformlaws.org/home
Better Laws
Since 1892, the ULC has provided states with non-partisan, carefully conceived uniform laws. Our work simplifies life for people who live, work, or travel in multiple states and improves local economies by facilitating interstate commerce. Each uniform act is drafted in an open and deliberative process that draws on the expertise of state-appointed commissioners, legal advisors and observers.
Apparently not so uniform, since different states interpreted or changed the ages as they pleased. [I hope they didn't change other things too -- https://www.nolo.com/technical-support- ... s-act.html ]
What is a Uniform Act?
A uniform act is one that seeks to establish the same law on a subject among the various jurisdictions. An act is designated as a “Uniform” Act if there is substantial reason to anticipate enactment in a large number of jurisdictions, and uniformity of the provisions of the act among the various jurisdictions is a principal objective.
http://uniformlaws.org/acts/overview/uniformacts

https://www.uniformlaws.org/committees/ ... 6e499ca67c

INAL, but here's some legal language. If a state hasn't changed it, it seems it can be established under any one of the transferor, minor or custodian (and even the property if so involved!). So I don't know how you can have it both ways (18 and 21?), but this laypersons interpretation is that you can have it either (or any of the jurisdictions) state you want when you open the account, and that doesn't change when you or the minor move.
SECTION 2. SCOPE AND JURISDICTION.
(a) This [Act] applies to a transfer that refers to this [Act] in the designation under
Section 9(a) by which the transfer is made if at the time of the transfer, the transferor, the minor, or
the custodian is a resident of this State or the custodial property is located in this State
. The
custodianship so created remains subject to this [Act] despite a subsequent change in residence of
a transferor, the minor, or the custodian, or the removal of custodial property from this State.
(b) A person designated as custodian under this [Act] is subject to personal
jurisdiction in this State with respect to any matter relating to the custodianship.
(c) A transfer that purports to be made and which is valid under the Uniform
Transfers to Minors Act, the Uniform Gifts to Minors Act, or a substantially similar act, of another
state is governed by the law of the designated state and may be executed and is enforceable in this
State if at the time of the transfer, the transferor, the minor, or the custodian is a resident of the
designated state or the custodial property is located in the designated state.

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Re: UTMA accounts

Post by Spirit Rider » Fri Oct 25, 2019 8:47 pm

international001 wrote:
Fri Oct 25, 2019 6:37 pm
Spirit Rider wrote:
Thu Oct 24, 2019 8:54 pm
the applicable state is either the state of the custodian's residence or the state of the UTMA account owner's residence at the time of the UTMA account creation.
the custodian's or the owner's? You can't have it both ways
@inbox788 provided the answer and statute.
Does it mean that if you are resident outside the US, you cannot open a UTMA?
A U.S. citizen who is resident abroad can still maintain a U.S. domicile state.

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Re: UTMA accounts

Post by RetiredAL » Sat Oct 26, 2019 12:20 am

international001 wrote:
Fri Oct 25, 2019 6:36 pm
dbr wrote:
Fri Oct 25, 2019 7:23 am
inbox788 wrote:
Thu Oct 24, 2019 10:40 pm
I wouldn't even know or care about the adult child's tax returns. Hope I'm not missing an obvious or important connection.
The one connection is to be sure the adult child's address is on the account so they get the tax documents rather than you getting them and throwing them away leaving the adult child with income they are not reporting. Now most people would have enough sense not to make a mistake like that but one can read stories here and there of exactly that happening. Sometimes people don't even know they own a UTMA because the custodian for some reason never told them.
But while the child is a minor, what do you do? You have to file a tax return on his behalf? Even if it's a small account and he doesn't get to pay any taxes ?

And if he owes any taxes, can you pay them? Does it count as a give ($14 a year w/o need of further reporting) ?
If the minor's income is above the filing threshold, a tax return for the minor needs to be filed.

In the past, I've completed the IRS tax forms by hand for my Grandson using the fill-able forms, delivered them to my daughter who signs them as "her name for his name, minor child". She is aware that if for some reason it's large enough for state tax filing, she has to do the state forms. In their state, taxes can be done by filling out an on-line form using certain data cells from the IRS form.

To date, no taxes have been due, but if so, I understand that taxing authorities don't care who writes the payment check from whatever payment account as long as they get their money.

No gains were harvested last year due to the dip in Nov - Dec. I'm getting ready to harvest this year and as of today we will definitely have to file for my Grandson, and iffy for my Granddaughter.

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Re: UTMA accounts

Post by dbr » Sat Oct 26, 2019 7:53 am

Also, Kiddie Tax provisions apply: https://www.irs.gov/taxtopics/tc553

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Re: UTMA accounts

Post by LadyGeek » Sat Oct 26, 2019 7:58 am

^^^ The wiki has some background info: Kiddie tax
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: UTMA accounts

Post by MP173 » Sat Oct 26, 2019 10:44 am

I set up UTMA for both of my sons shortly after their births for college funding. I added a small amount regularly and increased that amount every 6 months or so.

There was enough by age 18 to pay for college.

I discussed the program with both with the understanding that the funds were to be used for college. I also told them at age 18 the money was legally theirs and if they wanted it and to throw a big party/lifestyle that was their decision....BUT, if they did they would have to go thru me to access the funds and it would be a very ugly fight.

They understood the rules and both graduated and had appx $10k to start adult life.

Both seem to be savers/investors (ages 33 and 25 now). It worked out, but the 529 would have been a better route.

Ed

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Re: UTMA accounts

Post by international001 » Sat Oct 26, 2019 10:57 am

dbr wrote:
Sat Oct 26, 2019 7:53 am
Also, Kiddie Tax provisions apply: https://www.irs.gov/taxtopics/tc553
Hmm.. so I'm reading 'Parents' Election to Report Child's Interest and Dividends'

If the child doesn't have to pay taxes under the kiddie tax, no need to file a return on behalf of the kid.
If he had to pay taxes, then you can include the earnings under your own tax return, which could mean potentially less (since estate rates thresholds are compressed).

Am I reading this right?

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Re: UTMA accounts

Post by international001 » Sat Oct 26, 2019 11:03 am

RetiredAL wrote:
Sat Oct 26, 2019 12:20 am


If the minor's income is above the filing threshold, a tax return for the minor needs to be filed.

In the past, I've completed the IRS tax forms by hand for my Grandson using the fill-able forms, delivered them to my daughter who signs them as "her name for his name, minor child". She is aware that if for some reason it's large enough for state tax filing, she has to do the state forms. In their state, taxes can be done by filling out an on-line form using certain data cells from the IRS form.

To date, no taxes have been due, but if so, I understand that taxing authorities don't care who writes the payment check from whatever payment account as long as they get their money.

No gains were harvested last year due to the dip in Nov - Dec. I'm getting ready to harvest this year and as of today we will definitely have to file for my Grandson, and iffy for my Granddaughter.
I wast talking about a tax higher than $15k, then you would have to file form 709

All I read about kiddie tax is about federal taxes. How are the taxes for a given state paid? It depends on the state? Is there at threshold?

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Re: UTMA accounts

Post by dbr » Sat Oct 26, 2019 11:03 am

I don't know because I don't understand your reference to estate rates. Otherwise it sound right.

Some people would take the approach of filing a tax return for the child whether or not it is required so there is a record of the account and of the income.

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Re: UTMA accounts

Post by RetiredAL » Sat Oct 26, 2019 2:07 pm

international001 wrote:
Sat Oct 26, 2019 10:57 am
dbr wrote:
Sat Oct 26, 2019 7:53 am
Also, Kiddie Tax provisions apply: https://www.irs.gov/taxtopics/tc553
Hmm.. so I'm reading 'Parents' Election to Report Child's Interest and Dividends'

If the child doesn't have to pay taxes under the kiddie tax, no need to file a return on behalf of the kid.
If he had to pay taxes, then you can include the earnings under your own tax return, which could mean potentially less (since estate trust rates thresholds are compressed).
edited by RetiredAL to remove confusion
Am I reading this right?
OK, up to something like $10k - $12k, you can include a minor's income on your tax return. But whey would you want to do so when the first $4760 of unearned income for the minor is essentially Tax Free? The next $10K on unearned income is at the 10% rate.

I changed your word Estate to Trust. Yes, they both use the same tax rates. A UTMA is a standardized "trust" that is created by you the custodian filling out an account form for the UTMA because a minor can't own an account. However, "Kiddie Tax" rules requiring the use of "Trust Tax Rates are much broader than just UTMA income. If you have a 17 yearold working and earning $50K a year, the tax rate he would have to use for his tax return is the Trust Tax Rate. Why? That's the law.

Now adding earned income to a minor's income stream can force the minor into higher tax rates sooner than if filed under their parent. OK, the application of taxes is not always fair. For most minor's, these newer rates ( Trust ) are advantageous. These rules were developed keep the very rich from avoiding the taxman's bite by transferring $ to their minor children. Having and maintaining a $50M family trust creates a heft tax bill. I'd like to be in that predicament.

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Re: UTMA accounts

Post by inbox788 » Sat Oct 26, 2019 3:16 pm

RetiredAL wrote:
Thu Oct 24, 2019 8:25 pm
Like many formal trusts or trust like items such as a UTMA, they are state law derived. Not every state has enacted UTMA's.
FYI, I still had some windows open, and as I was closing them, came across some 2013 mentions that Vermont and South Carolina were the only states that hadn't. On another site, a map showed only South Carolina and a note/comment about 2019 bill. Seems Vermont enacted in 2015 and South Carolina in progress, so finally a little more uniformity. The age thing is still variable, and one site pointed out to Florida's peculiarities, though potentially desirable (more control and complexity).

https://www.scstatehouse.gov/sess123_20 ... ls/696.htm

Now if only the tax authorities can come together and make things simpler for us.

Kiddie Tax Non-Conformity
CALIFORNIA: California still follows the pre-TCJA regime.
https://www.taxcpe.com/blogs/news/kiddi ... conformity

Form FTB 3803 vs 3800. Pick your poison.

BTW, if the UTMA account has realized capital gains, the child is require to fill out federal and state returns, correct?

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Re: UTMA accounts

Post by RetiredAL » Sat Oct 26, 2019 3:42 pm

inbox788 wrote:
Sat Oct 26, 2019 3:16 pm

Now if only the tax authorities can come together and make things simpler for us.
Legislators: Simplicity: Common sense: IMO, three absolutely mutually exclusive data sets. I wonder how many truckloads it would take to have paper copies of all Federal and all the State/Local Tax codes? Anybody ever see that figure?

Years ago, I heard that the maintenance documentation for a Military Fighter ( F-16 I believe ) would require 18 semi sized trucks to hold one set.

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Re: UTMA accounts

Post by Spirit Rider » Sat Oct 26, 2019 4:27 pm

There are incomplete and/or incorrect statements in this post.
RetiredAL wrote:
Sat Oct 26, 2019 2:07 pm
OK, up to something like $10k - $12k, you can include a minor's income on your tax return.
You can only elect to report a dependent's income on your tax return if their AGI < $11,000 (2019) and they have no capital gains (distributions are ok). Also, there are several other requirements. See Topic No. 553 Tax on a Child's Investment and Other Unearned Income (Kiddie Tax)
But whey would you want to do so when the first $4760 of unearned income for the minor is essentially Tax Free?
For 2019 the amount is $4850 and it is only tax free if the amount of unearned income subject to ordinary income taxes is <= the standard deduction applied again unearned income. This is $1100 with no unearned income, $350 if earned income is >=$750 and < $11,850 and $0 if earned income is >= $12,200
The next $10K on unearned income is at the 10% rate.
Not remotely true
  • Unearned ordinary income <= ($4800 - the above standard deduction) is subject to a 10% tax rate. The rate on the next $6700 is 24%, the next $3450 is 35% and rate after is 37%
  • Unearned capital gains and qualified dividends up to total unearned income <= $4850 is subject to a 0% tax rate. The rate on the next $10,300 is 15% and the rate after is 20%, with the NIIT kicking in @$12,750.
A UTMA is a standardized "trust" that is created by you the custodian filling out an account form for the UTMA because a minor can't own an account.
Not true, a UTMA is not a trust of any kind, it is simply a custodial account. The use of trust tax brackets for Kiddie Taxes was purely based on tax changes in the TCJA of 2018.
However, "Kiddie Tax" rules requiring the use of "Trust Tax Rates are much broader than just UTMA income. If you have a 17 year old working and earning $50K a year, the tax rate he would have to use for his tax return is the Trust Tax Rate. Why? That's the law.
This is NOT the law and is not true. Earned income of dependents like all other tax payers is and has always been subject to the same standard/itemized deductions and tax brackets. Earned income affects the amount of the standard deduction that can be applied against unearned income as pointed out above and unearned income is included in the taxpayers AGI.

Only a dependent's unearned income is subject to the Kiddie Tax rules and the trust tax brackets.
Now adding earned income to a minor's income stream can force the minor into higher tax rates sooner than if filed under their parent. OK, the application of taxes is not always fair. For most minor's, these newer rates ( Trust ) are advantageous. These rules were developed keep the very rich from avoiding the taxman's bite by transferring $ to their minor children. Having and maintaining a $50M family trust creates a heft tax bill. I'd like to be in that predicament.
Again this is not true. The change in the Kiddie Tax rules to using trust tax brackets is beneficial in majority of cases rather than at the parent's marginal brackets. It now pretty much levels the playing field between UTMA accounts and Trust accounts. With the UTMA account actually having additional tax-free/lower tax space. Trusts assets in tax efficient investments and judicious use of tax efficient distributions of earnings to beneficiaries can allow the trust to have quite manageable to no tax bills.
Last edited by Spirit Rider on Sun Oct 27, 2019 12:57 pm, edited 1 time in total.

inbox788
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Re: UTMA accounts

Post by inbox788 » Sat Oct 26, 2019 4:49 pm

Spirit Rider wrote:
Sat Oct 26, 2019 4:27 pm
There are incomplete and/or incorrect statements in this post.
Thank you for all your contributions, detailed explanations, and all the corrections.

Personally, for me there are so many moving parts, that I'm just going to make a best guess and let the tax software or accountant figure it out. I'm estimating that the first $5k gains will be close to 0% and the next $5k around 15%, and I will have achieved about 80% of any benefit for me. No need optimize it to the dollar unless there's a hard threshold cliff. It's more like a dozen little and big steps.
RetiredAL wrote:
Sat Oct 26, 2019 3:42 pm
inbox788 wrote:
Sat Oct 26, 2019 3:16 pm

Now if only the tax authorities can come together and make things simpler for us.
Legislators: Simplicity: Common sense: IMO, three absolutely mutually exclusive data sets. I wonder how many truckloads it would take to have paper copies of all Federal and all the State/Local Tax codes? Anybody ever see that figure?

Years ago, I heard that the maintenance documentation for a Military Fighter ( F-16 I believe ) would require 18 semi sized trucks to hold one set.
LOL. You probably have to measure in centuries the time it would take you to read it all. You could probably disassemble a couple of F-16s and nicely pack them into the same 18 semi-trailers. But I tend to be a DIY guy with taxes and maintenance, so I'd just buy the Hayes manual from Amazon and wing it.

General Dynamics F-16 Fighting Falcon Manual: 1978 onwards (all marks) (Haynes Owners' Workshop Manuals) Hardcover
https://www.amazon.com/General-Dynamics ... 0857333984

Wonder how much a depreciated 1978 model goes for these days...looks like these things hold their value well. Someone is asking $8.5M for a 1980. Wikipedia reports their unit cost $14.6-18.8M in 1998.

https://www.foxnews.com/us/f-16-fighter ... le-florida

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Re: UTMA accounts

Post by RetiredAL » Sat Oct 26, 2019 5:15 pm

Spirit Rider

Thank you for the clarifications and corrections.

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Re: UTMA accounts

Post by illumination » Sat Oct 26, 2019 5:42 pm

aristotelian wrote:
Mon Oct 16, 2017 9:26 am
I am custodian of inheritances that my kids received from a wealthy uncle who died early. They are not in UTMA accounts, but similarly they will inherit full control when they turn 18. This will likely by about $2M each by that time. We are absolutely terrified. Just hope they turn out to be good kids. I just had a big talk with my 10 year old who spent all his yard sale money on comic books and then realized he did not have enough to get a drawing tablet he has wanted for the last year.

If it were me, I would definitely do 529 or trust with a higher age limit and/or conditions.
This would be terrifying.

Can't you set up a trust for them and deposit this UTMA money into it? As the current custodian of those accounts, aren't you given this discretion to make decisions like that as long as the kids are the beneficiary? Might be worth seeing an estate attorney, this is one of the most important parenting decisions you'll probably make.

My big fear wold be they "retire" right out of high school. And then find themselves out of money later in life with no job skills.

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Re: UTMA accounts

Post by RetiredAL » Sat Oct 26, 2019 6:26 pm

Spirit Rider,

Are you a wiki maintainer for this topic?

It seems to me that
Spirit Rider wrote:
Sat Oct 26, 2019 4:27 pm
"Only a dependent's unearned income is subject to the Kiddie Tax rules and the trust tax brackets."
is a key knowledge piece that should be prominent in the wiki.

This Earned vs Unearned differentiation never stood out to me via the examples, likely because to date I've only had to deal with unearned for the currently held grand-kids UTMA's. Those so far have been below the taxable point, so I never touched that wall. I'm sure I would figured it out when I got there, but fore-knowledge is always desirable.

The last for my kids UGMA's expired 15 years ago and I did no gain harvesting back then. He had been living independent 2 years before that. It's likely there were CapGain sales as money was being withdrawn for some of the specialized training he wanted, such as EMT Certification and Rope Rescue training, on his road to becoming a Wildland Fireman, but can't recall the taxing details.

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Re: UTMA accounts

Post by aristotelian » Sat Oct 26, 2019 7:56 pm

illumination wrote:
Sat Oct 26, 2019 5:42 pm
aristotelian wrote:
Mon Oct 16, 2017 9:26 am
I am custodian of inheritances that my kids received from a wealthy uncle who died early. They are not in UTMA accounts, but similarly they will inherit full control when they turn 18. This will likely by about $2M each by that time. We are absolutely terrified. Just hope they turn out to be good kids. I just had a big talk with my 10 year old who spent all his yard sale money on comic books and then realized he did not have enough to get a drawing tablet he has wanted for the last year.

If it were me, I would definitely do 529 or trust with a higher age limit and/or conditions.
This would be terrifying.

Can't you set up a trust for them and deposit this UTMA money into it? As the current custodian of those accounts, aren't you given this discretion to make decisions like that as long as the kids are the beneficiary? Might be worth seeing an estate attorney, this is one of the most important parenting decisions you'll probably make.

My big fear wold be they "retire" right out of high school. And then find themselves out of money later in life with no job skills.
As I said, this is not UTMA money and as far as I know there is no other option. Because the money was over a certain threshold, I needed to be appointed Guardian of Estate by the probate court. I have to report every expense to them. This was all done with the assistance of an estate attorney and at no point has anyone suggested there is any alternative.

Also, what you are describing would defeat the purpose of UTMA, which is to ensure that money belonging to the kid is theirs as soon as they are of age. So, even if this was UTMA money I don't think what you are suggesting could be done. Would welcome input from lawyers to confirm.

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Re: UTMA accounts

Post by Spirit Rider » Sat Oct 26, 2019 9:05 pm

What @aristotelian is describing sounds like a property guardianship. This is required when minor's directly inherit assets. The property guardian is usually under the supervision of a court (probate usually).

Unlike a UTMA, the property guardianship automatically ends when they become adults. The only possible option would be the appointment of a conservatorship. However, this is only done if the now adult is deemed to be unable to conduct their own affairs.

It would take extreme circumstances for this to be done for a young adult. Blowing the money is not one of them. There would be no way to put this money in a trust.

international001
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Re: UTMA accounts

Post by international001 » Sun Oct 27, 2019 10:56 am

Spirit Rider wrote:
Sat Oct 26, 2019 4:27 pm

For 2019 the amount is $4850 and it is only tax free if the amount of unearned income subject to ordinary income taxes is <= the standard deduction applied again unearned income. This is $1100 with no unearned income, $350 if earned income is >=$750 and < $11,850 and $0 if earned income is >= $12,200
You meant 'This is $1100 with no *arned* income' . Right?

Too many little complications, but I think if you can manage UTMA to be under control (like max of $100k on TSM), it's a good deal

Spirit Rider
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Re: UTMA accounts

Post by Spirit Rider » Sun Oct 27, 2019 12:59 pm

international001 wrote:
Sun Oct 27, 2019 10:56 am
Spirit Rider wrote:
Sat Oct 26, 2019 4:27 pm
For 2019 the amount is $4850 and it is only tax free if the amount of unearned income subject to ordinary income taxes is <= the standard deduction applied again unearned income. This is $1100 with no unearned income, $350 if earned income is >=$750 and < $11,850 and $0 if earned income is >= $12,200
You meant 'This is $1100 with no *arned* income' . Right?

Too many little complications, but I think if you can manage UTMA to be under control (like max of $100k on TSM), it's a good deal
Yes, my mistake. Good catch. I also corrected it as above in the referenced post.

the way
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Re: UTMA accounts

Post by the way » Mon Oct 28, 2019 2:04 pm

Spirit Rider wrote:
Mon Oct 21, 2019 8:54 pm
However, as I already pointed out, you can tax gain harvest (sell and re-buy appreciated securities) to realize up to $4,850 (2019) in tax-free increase in basis every year. Then whenever the UTMA is released to the UTMA account owner there is little to no unrealized capital gains.

In fact, I consider any UTMA custodian who does not tax gain harvest up to the tax-free limit every year. Is in material violation of their fiduciary duty to subject the UTMA account owner to unnecessary unrealized capital gains.
btw, they are trying repeal the kiddie tax change. It might be wise to wait until the end of the year to see what happens. If you TGH your LTCG right now to the limit and the repeal goes thru, you'll cost your kid some taxes.
ref. https://www.google.com/search?q=kiddie+tax+repeal+2019

inbox788
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Re: UTMA accounts

Post by inbox788 » Mon Oct 28, 2019 6:46 pm

the way wrote:
Mon Oct 28, 2019 2:04 pm
Spirit Rider wrote:
Mon Oct 21, 2019 8:54 pm
However, as I already pointed out, you can tax gain harvest (sell and re-buy appreciated securities) to realize up to $4,850 (2019) in tax-free increase in basis every year. Then whenever the UTMA is released to the UTMA account owner there is little to no unrealized capital gains.

In fact, I consider any UTMA custodian who does not tax gain harvest up to the tax-free limit every year. Is in material violation of their fiduciary duty to subject the UTMA account owner to unnecessary unrealized capital gains.
btw, they are trying repeal the kiddie tax change. It might be wise to wait until the end of the year to see what happens. If you TGH your LTCG right now to the limit and the repeal goes thru, you'll cost your kid some taxes.
ref. https://www.google.com/search?q=kiddie+tax+repeal+2019
Thanks for the heads up. That puts a wrench in the planning. How this for a contingency plan:

Realize $2200 in LTCG now (adjusted 2017 zero tax level/child schedules), and on Dec. 30, 2019, pending outcome, realize another $2650?

There's no telling if the appreciated stock or market will dip in December again like last year. But if it does, you might be be able to TLH, and realize a bit more gains by buying low into a total market fund.

Can or has congress or the IRS made changes to tax law after the tax year has finished? How far into tax season/new year?

I recall there was a lot of hoopla over property tax payments in 2017 and prepaid 2018 taxes that created confusion and chaos at some local assessor offices.

https://www.slocounty.ca.gov/Department ... e-new.aspx
https://www.currentfederaltaxdevelopmen ... erty-taxes

Spirit Rider
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Re: UTMA accounts

Post by Spirit Rider » Mon Oct 28, 2019 8:50 pm

It is against forum policy to discuss pending legislation.

Not the least of which is, something passing the house means nothing. It also has to be passed by the Senate and then signed into law by the president.

Not to mention, the effective date is 1/1/2020 anyway.

international001
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Re: UTMA accounts

Post by international001 » Tue Oct 29, 2019 2:37 pm

Is it really to forbidden to discuss possibilities in future legislation? I see it discussed all the time, and I thought it was fine as long as you don't take sides on politics.

Anyway, it's good to know for me because I can defer opening a UTMA account

Just for my understanding, before the 2007 kiddie tax reform (that may or not may be back after 2020), what is the advantage of an UTMA (vs just holding your money on your own taxable account)?

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LadyGeek
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Re: UTMA accounts

Post by LadyGeek » Tue Oct 29, 2019 3:43 pm

international001 wrote:
Tue Oct 29, 2019 2:37 pm
Is it really to forbidden to discuss possibilities in future legislation? I see it discussed all the time, and I thought it was fine as long as you don't take sides on politics.
Yes, discussions of future (proposed) legislation are not permitted. For a detailed explanation, see: Political comments and proposed tax plan remain off-topic
LadyGeek wrote:
Sun Nov 20, 2016 12:01 pm
...The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law....
If there are any questions, feel free to PM me.
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international001
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Re: UTMA accounts

Post by international001 » Tue Oct 29, 2019 8:20 pm

Thanks for the info. So I'll just re-post my question:

before the 2007 kiddie tax reform what was the advantage of an UTMA (vs just holding your money on your own taxable account)?

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