estate trust for kids for a brokerage account

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Mjar
Posts: 133
Joined: Wed May 23, 2018 5:18 pm

estate trust for kids for a brokerage account

Post by Mjar » Thu Jul 12, 2018 4:58 pm

I am completely new to estate/trust planning. I am well on my way for retirement and saving for my kids college in 9 years. I want to start putting 5k each for both of my daughters into a brokerage account and grow it till I decide to let them know about it ontop of what I am already doing with my retirement and college savings.

The basis of this people have the hindsight of saying if I invested earlier I would have X more. Knowing what i know now I would have started the moment I earned my first dollar back in high school. So my kids are 9 and 6 so I want to start a brokerage account that I would manage till my hearts content till I feel they are ready to have the money else it will go towards my retirement if I need it or they suitable for it.

So annually I would put in 5k each and invest it
At some age they turn, 18, 30, 40 or when I am on my deathbed I want them to know about it
This would give them nearly 30 to 40 years of compound interest working in their favor on top of whatever savings/investing they do on their own.

I want them to have something in their back pocket that they don't know is there when the time comes as I don't expect them to have the same passion or drive to manage money the stock market as I feel they are more like my wife when it comes to number crunching but you never know. I will teach them as they grow up and show them how to manage money but just in case they don't. Basically I am starting a retirement account for them but without all the restrictions of a Roth IRA/IRA

Should I put it in a trust or and estate, is there a difference to protect it from probate/creditors of anykind? if so what kind? Again I am completely new on this...any advice given here will NOT be a substitute for a discussion with a lawyer, I just want to be armed with some basis when I speak to the lawyer as to what I want.

If I left out anything let me know i can fill in more assumptions and background. Thank you in advance for any knowledge!

afan
Posts: 3885
Joined: Sun Jul 25, 2010 4:01 pm

Re: estate trust for kids for a brokerage account

Post by afan » Thu Jul 12, 2018 5:22 pm

Well, tough to satisfy all those desires.
I gather this money is separate than your savings for college. Is that correct? If it is college savings, then a 529 would be a great idea.
If you want to own the money yourself, then you don't need to do anything special. Save, invest the money and spend it how you like, including giving it to your kids at some point.

If you want your kids to get the money only when you die, then your estate plan would take care of that.
If you want your kids to get it while you are alive then you can give it to them at any time. However, there is an annual cap on how much you can give without filing a gift tax return (no tax due, just have to file the return). This is $15,000. You can give larger amounts but you would have to file a return. That means that if you keep the money as it accumulates and give it to your kids later, then you would run into gift tax return issues.

I would point out that $5,000 a year is not likely to accumulate to some amount that would rob kids of their ambition. This is not enough to turn them into the dreaded trust fund babies.

If you were putting in more and willing to completely give up the money, it might make sense to put in into trust on behalf of the kids. This would mean it would no longer be your money and you could not use it on yourself. So this would be only if you were sure you would never need it. This would make more sense if you planned to do it ever year for the rest of your life and give, at least, the annual exclusion amount. Eventually this would accumulate to a significant sum.
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Mjar
Posts: 133
Joined: Wed May 23, 2018 5:18 pm

Re: estate trust for kids for a brokerage account

Post by Mjar » Fri Jul 13, 2018 4:22 pm

afan wrote:
Thu Jul 12, 2018 5:22 pm
Well, tough to satisfy all those desires.
I gather this money is separate than your savings for college. Is that correct? If it is college savings, then a 529 would be a great idea.
If you want to own the money yourself, then you don't need to do anything special. Save, invest the money and spend it how you like, including giving it to your kids at some point.

If you want your kids to get the money only when you die, then your estate plan would take care of that.
If you want your kids to get it while you are alive then you can give it to them at any time. However, there is an annual cap on how much you can give without filing a gift tax return (no tax due, just have to file the return). This is $15,000. You can give larger amounts but you would have to file a return. That means that if you keep the money as it accumulates and give it to your kids later, then you would run into gift tax return issues.

I would point out that $5,000 a year is not likely to accumulate to some amount that would rob kids of their ambition. This is not enough to turn them into the dreaded trust fund babies.

If you were putting in more and willing to completely give up the money, it might make sense to put in into trust on behalf of the kids. This would mean it would no longer be your money and you could not use it on yourself. So this would be only if you were sure you would never need it. This would make more sense if you planned to do it ever year for the rest of your life and give, at least, the annual exclusion amount. Eventually this would accumulate to a significant sum.
Thanks Afan. This would be ontop of college savings. What about a joint brokerage account that they don't know about? Is that possible with kids like I have done with my wife in our joint brokerage account that she has access to? This way I would know about and manage it till I tell them about and then in theory hand it over to them when I feel suit.

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