Question for you guys.

I have a thought to start an account and invest a little for each of my kids and gift it to them either for a wedding or first home purchase.

I realize UTMA isn't really going to work as they legally take control at 18 and that's not what I intend for them

To accomplish my goals (gift to them later in life, prob late 20's) is it advisable to just open an account in my name and then gift it to them later?

I guess it will have limitations for gift tax. but I'm not anticipating it being something so large we couldn't work around that. I doubt it will be more than what my wife and I could give them. Even if it was more than that we could give it at the end of the year and re-do it in January.

Any thoughts on this? I guess if I do it in my name will brokerage accounts let me have multiple? I have all my accounts at vanguard. I guess I could open up an account at fidelity or something similar. In this scenario I guess the easiest thing would be to just have one account and mentally have it split between my two kids?

The Grinder (99) said:

---

Question for you guys.

I have a thought to start an account and invest a little for each of my kids and gift it to them either for a wedding or first home purchase.

I realize UTMA isn't really going to work as they legally take control at 18 and that's not what I intend for them

To accomplish my goals (gift to them later in life, prob late 20's) is it advisable to just open an account in my name and then gift it to them later?

I guess it will have limitations for gift tax. but I'm not anticipating it being something so large we couldn't work around that. I doubt it will be more than what my wife and I could give them. Even if it was more than that we could give it at the end of the year and re-do it in January.

Any thoughts on this? I guess if I do it in my name will brokerage accounts let me have multiple? I have all my accounts at vanguard. I guess I could open up an account at fidelity or something similar. In this scenario I guess the easiest thing would be to just have one account and mentally have it split between my two kids?

---

If the accounts were opened as custodial accounts, then the income earned is reportable by the child and not the parent. If you mentally "earmark" a certain amount within your own account then the income will be reportable by you. Probably not a huge factor though. If you go the one account but earmark amounts to gift to them later, then the money of course is yours and is subject to your creditors. Again, might not be a concern to you.

A brokerage will let you have multiple accounts. I had a client that had a ton of outside income from royalties and they had his and her basic brokerage account, one they used to accumulate their royalty income, one to "escrow" for property taxes (they had about 5,000 acres), and one to "escrow" for estimated income tax.

And yes, the gift tax issue can be worked around.

I personally used custodial accounts for our three kids (and now our four grandkids) mainly so I could easily track the progress of how well I was setting aside what I hoped to set aside.

I created a UTMA for my child along with a 529. Most savings goes in 529, but I do throw a small amount in UTMA.

In Texas, the age the account transfers to the kid is when they reach 21, so not quite as early as you mentioned (18).

Oh, that's good to know (21 not 18)