Dude, you answer all the questions that I had between 529 vs UGMA. For my 5 months daughter, I don't know what gonna happens with the education system from now to 18 years due to all the online resources and this is why I'm moving away from 529... My work is to make that little girl responsible enough, but the trick of transfer later to 529 and the 60 days window that you're talking about gave me a lot of hope.. It will just about to convince her to not do anything with the money and wait until 25.. Let's see how it will work I'll go back to this video 20 years later to see if that works :) thank you!
Thank you for the information. My kids (ages 2 and 5) both have savings accounts for their gift money and an auto-withdrawal from my checking each month to fund the account until age 18. Doing the math, they’ll have less than $25k in the account at age 18. With such minuscule gains in the savings account I’m considering splitting a portion of the funds into a UTMA. Their 529 plans are already being funded by grandparents.
Sounds like a good plan. It's also a good idea to get them to understand savings too. We have UTMA and 529s, but also a clear piggy bank they can see the money building up. We make it a big deal to save what they have but also to split it up between savings and spending. The kids get really excited about filling it up. Too often kids get money and they're asked what they are going to spend it on. Thanks for watching. hope this helps.
Travis Sickle so about that. The five year old saved his money and split some off to spend. Went to target, chose a toy, got to the checkout only to find out only electronic payments were being accepted. 🤷🏼♂️ hahaha
@@DogFacePuffa ha, of course. At least he's learning to split and save! I can remember when my Dad showed me my own bank account deposit book when I was little. Had a big impact on me. And I'm talking pennies! but it set the stage for saving.
Thank you for the detailed video. Helped cleared up a lot of questions. My other questions are can the whole UTMA or UGMA account be transfer over to Roth IRA or just how much they make? Since one of your replies was only if they have taxable income. Another question is what happens to the UTMA or UGMA account if something were to happen to the child?
Great Video! Can you roll these types of funds into a Roth Ira account without having to get rid of the Mutual Funds or ETf's in the UTMA/UGMA accounts. If so what then happens to the money that is taxable earnings for the UTMA/UGMA?
Depends - once the minor takes custody of the account (reach age of maturity), they then can setup and transfer the funds to a Roth IRA - as long as they have the income to support the contributions to Roth IRA - if they make $5k they can’t contribute $6k to the Roth IRA.
Thanks for the video. I have created a trust for my grandchild as a beneficiary, and I am the trustee. I also have a UTMA account. Since the grandchild is approaching the age of majority, can I transfer all or part of the funds in the UTMA?
The UTMA is just like any investment or bank account but in the child's name. There are no funding restrictions. But, you should be mindful of gift taxes.
@@young-dahlsong6797 I don't know your entire situation but in general, transferring stock maintains the cost basis. So when your grandchild sells the stock, they will have cap gains from the price point you purchased it. So this means that highly appreciated stock is usually not the best to gift. It doesn't mean you made a mistake either, but that's generally the way to do it. It may also be irrelevant depending on the amount of the stock and their cap gains because they may not have any taxes either. Obviously, this stuff gets complicated fast.
Mom set up an UGMA for her grandchild about forty five years ago. The grandchild is now 50 years old and mom is still getting checks from her UGMA as custodian and they are deposited into her standard checking account. Since this UGMA can not be modified and the grandchild is too old to benefit from the account how are these current proceeds to be handled?
Just Trying to learn something I believe they are saying this due to the fact that non-responsible parents can take the money out whenever they want and not tell their children and this in the long run defeats the purpose of having the savings account because the child is losing money that is rightly theres. However, the child can sue the parent if they choose if they think the parent spent money on things unrelated to them. For instance a fancy car for the parent instead of the child’s education. Hope that makes sense that’s what I understood from doing my own research.
Justine Jones Also, you get taxed (not your parents) on those accounts when you turn 18 or 21, depending on the state. If your parents don’t tell you about the accounts and don’t change the address information to your address, you may never know about these accounts, but you are still on the hook for a nasty tax bill down the road once the IRS finds out that you haven’t been paying taxes on these accounts. Also, a lot of UTMA and UGMA accounts gouge you with fees and their investments absolutely suck.
That’s why I’m setting up a simple brokerage account for my daughter that is in our name. That way, we can simply pull the money when she needs it for a down payment on a house and we will pay all the taxes on it. We also can pick any stocks, ETFs, or investments we think are best without paying all the commissions and fees. She also has a 529 and an ESA. These investment vehicles are much less nightmarish.
Silver Eyed Stacker I agree with you about the taxes and fees on the UTMA/UGMA accounts, but the main reason I was looking into it for certain parents/children is the fact some children may not want to go to college and the money in the 529 and ESAs are more beneficial if the child does go to college/trade school/ vocational studies. Wonder if they want to be an entrepreneur instead and decide against school then kinda in the same boat again with being penalized just not as heavily depending upon the state/plan you chose to have your ESA/529. I haven’t looked into other brokerage accounts yet so maybe that’s also a good idea. Thank you for replying back with your info. I am looking into this for my nephew trying to see what makes the most sense and I love hearing the good and bad before investing for him want to make sure it’s the best scenario all around regardless there would be fees and taxes just trying to make it make the most sense.
To protect a UTMA account from being completely turned over to the child at age 18 (or 21) could it be transferred to a joint account where BOTH the child AND a parent must agree on any withdrawal?
So I currently have a brokerage account in my name. Do not have the option to just withdraw the money for the child or transfer to a Roth for your adult child once they begin receiving income instead of paying taxes on a utma or ugma on top of taxes for a brokerage account that you may hold yourself.
I live in Washington DC, but I was looking at opening a Wyoming UTMA through TDAmeritrade. As I investigated I received the warning of: The age of termination for Wyoming is 21. According to Wyoming law, however, if your circumstances require it, you can choose a different age. The rules and tax consequences vary by state. **Electing to extend the age may cause you to lose your annual exclusion from federal gift tax.** Consult an attorney or tax advisor before making this selection. This warning wasn't Wyoming specific - DC and other states (like Florida) had the same notice. Does that mean the 15k exclusion doesn't apply if I pick 25? I'd be (way... way ... WAY) under the lifetime gift threshold, but I'll still have to report every time I contribute? Or is it more serious?
My state's age of majority is 21, so QUESTION: At 21, when it becomes his money, is he *REQUIRED* to liquidate and sell all shares and remove it as cash? This causes a taxable event! Or can he leave it and continue to let it grow? Thank you!
My question is, if these accounts are open to being challenged in court. Lets say the mother wants premature access to the funds. Is this the right type of account? Or should I stick to a discretionary trust? I need to rest knowing that my kids will receive these funds that I leave for them.
It’s the child’s money and must be used for their interest. After they turn 18 it’s a regular account in their name. The reason it’s a UTMA is purely because they are under 18.
My kid is going college next year 2021 , if he use ugma money to pay for a college , does he or we have to pay text on gain?? He is going to be 17 1/2 when he goes to the college. Is there any limit that we can follow to per year to avoid taxes ? We are in California.
Yes, there is a way to avoid it. Depending on the amount of cap gains you may want to look into it before year end since there are limits to pay zero. You could spread it out.
Can i pay for college courses directly from a UTMA? Would this action be considered as taxable income or would it not be taxed or penalized because it is used directly for college? My goal it not to use FAFSA or any type of loans for an estimated 50k of college.
Once the child has reached the age of 18/21, the money is theirs. They can use it to go to college, buy a house, or do whatever they so choose. A UTMA/UGMA is not a college tuition check.
In 2021 provided that the unearned income (Dividends, Capital Gains, Interest) in total from all sources for the child is not over $1,100 then it is tax free. Otherwise any amount over that threshold can currently be taxed at the child's rate. The parent used to be able to include it as income under their filing. I don't know if that still applies and tax laws always change.
![KSI - Dirty [Official Visualiser]](http://i.ytimg.com/vi/VoDh1h1dPUE/mqdefault.jpg)
5 ads in a 15 minute video.....definitely a business man!
We try. Thanks for watching it through!
What ads? Oh Premium
I got premium and with RUclips music it’s a business expense 😂
@@nvts007 good for you
@@1dyrfullymade educational purposes right? Great point!!
Great info. We went with UTMAs for our kids a few years ago mainly because of the flexibility.
At father daughter. What platform do you use and recommend? Thank you
Dude, you answer all the questions that I had between 529 vs UGMA. For my 5 months daughter, I don't know what gonna happens with the education system from now to 18 years due to all the online resources and this is why I'm moving away from 529... My work is to make that little girl responsible enough, but the trick of transfer later to 529 and the 60 days window that you're talking about gave me a lot of hope.. It will just about to convince her to not do anything with the money and wait until 25.. Let's see how it will work I'll go back to this video 20 years later to see if that works :) thank you!
I have 4 kids and talk about money and how it works all the time. That’s how my parents helped me understand good saving habits.
@@TravisSickle that makes a total difference I didn't have this opportunity with my parents but is time to break the cycle thanks
Thank you for the information. My kids (ages 2 and 5) both have savings accounts for their gift money and an auto-withdrawal from my checking each month to fund the account until age 18. Doing the math, they’ll have less than $25k in the account at age 18. With such minuscule gains in the savings account I’m considering splitting a portion of the funds into a UTMA. Their 529 plans are already being funded by grandparents.
Sounds like a good plan. It's also a good idea to get them to understand savings too. We have UTMA and 529s, but also a clear piggy bank they can see the money building up. We make it a big deal to save what they have but also to split it up between savings and spending. The kids get really excited about filling it up. Too often kids get money and they're asked what they are going to spend it on. Thanks for watching. hope this helps.
Travis Sickle so about that. The five year old saved his money and split some off to spend. Went to target, chose a toy, got to the checkout only to find out only electronic payments were being accepted. 🤷🏼♂️ hahaha
@@DogFacePuffa ha, of course. At least he's learning to split and save! I can remember when my Dad showed me my own bank account deposit book when I was little. Had a big impact on me. And I'm talking pennies! but it set the stage for saving.
@@DogFacePuffa I feel his pain and I'm over 55!
That's really smart to take it out 2-3 years before college. We already have a 529 but trying to make sure that my kids are set in other ways
Checkout this one then…Payroll tax deduction and why you should hire your kids
ruclips.net/video/3q9qRk6p0Yo/видео.html
Thanks for the detailed video
This is so helpful! Thank you so much!
Thank you!
Thank you for the detailed video. Helped cleared up a lot of questions. My other questions are can the whole UTMA or UGMA account be transfer over to Roth IRA or just how much they make? Since one of your replies was only if they have taxable income. Another question is what happens to the UTMA or UGMA account if something were to happen to the child?
I convinced my dad to open this account for me.
Awesome, it’s a benefit for him too. If you have gains it can be put on a tax return for you. Which also means little or possibly no tax.
@@TravisSickle yeah I put my money in his brokerage previously until I started researching about taxes.
Good work!
Great Video! Can you roll these types of funds into a Roth Ira account without having to get rid of the Mutual Funds or ETf's in the UTMA/UGMA accounts.
If so what then happens to the money that is taxable earnings for the UTMA/UGMA?
Depends - once the minor takes custody of the account (reach age of maturity), they then can setup and transfer the funds to a Roth IRA - as long as they have the income to support the contributions to Roth IRA - if they make $5k they can’t contribute $6k to the Roth IRA.
Ty
Best explanation I’ve found
Thank you for the video. What platform do you recommend? Thank you again
Thank you for this video. Very helpful.
great information!!!
$3,000 plus 37% over $12.500. That's insane!!!
Thanks for the video. I have created a trust for my grandchild as a beneficiary, and I am the trustee. I also have a UTMA account. Since the grandchild is approaching the age of majority, can I transfer all or part of the funds in the UTMA?
Depends on the trust. Likely yes.
The UTMA is just like any investment or bank account but in the child's name. There are no funding restrictions. But, you should be mindful of gift taxes.
@@TravisSickle Thank you. If I transferred the stocks and etfs, will there be any capital gains tax to be concerned?
@@young-dahlsong6797 I don't know your entire situation but in general, transferring stock maintains the cost basis. So when your grandchild sells the stock, they will have cap gains from the price point you purchased it. So this means that highly appreciated stock is usually not the best to gift. It doesn't mean you made a mistake either, but that's generally the way to do it. It may also be irrelevant depending on the amount of the stock and their cap gains because they may not have any taxes either.
Obviously, this stuff gets complicated fast.
On fidelity website is says apply for custodial account or roth ira for kids, is there a different of the two???
If your on dss like food stamp does that play a problem down the road?
I'm in Arizona. My grandchildren is currently living in New Mexico. Which state laws are used?
where the account is opened.
Mom set up an UGMA for her grandchild about forty five years ago. The grandchild is now 50 years old and mom is still getting checks from her UGMA as custodian and they are deposited into her standard checking account. Since this UGMA can not be modified and the grandchild is too old to benefit from the account how are these current proceeds to be handled?
July 11, 2023
Wait. What??? I have to file taxes for my kid?
July 23, 2023
Utma and ugma accounts are absolute nightmares when you don’t have a responsible parent.
Can you explain?
Just Trying to learn something I believe they are saying this due to the fact that non-responsible parents can take the money out whenever they want and not tell their children and this in the long run defeats the purpose of having the savings account because the child is losing money that is rightly theres. However, the child can sue the parent if they choose if they think the parent spent money on things unrelated to them. For instance a fancy car for the parent instead of the child’s education. Hope that makes sense that’s what I understood from doing my own research.
Justine Jones Also, you get taxed (not your parents) on those accounts when you turn 18 or 21, depending on the state. If your parents don’t tell you about the accounts and don’t change the address information to your address, you may never know about these accounts, but you are still on the hook for a nasty tax bill down the road once the IRS finds out that you haven’t been paying taxes on these accounts. Also, a lot of UTMA and UGMA accounts gouge you with fees and their investments absolutely suck.
That’s why I’m setting up a simple brokerage account for my daughter that is in our name. That way, we can simply pull the money when she needs it for a down payment on a house and we will pay all the taxes on it. We also can pick any stocks, ETFs, or investments we think are best without paying all the commissions and fees. She also has a 529 and an ESA. These investment vehicles are much less nightmarish.
Silver Eyed Stacker I agree with you about the taxes and fees on the UTMA/UGMA accounts, but the main reason I was looking into it for certain parents/children is the fact some children may not want to go to college and the money in the 529 and ESAs are more beneficial if the child does go to college/trade school/ vocational studies. Wonder if they want to be an entrepreneur instead and decide against school then kinda in the same boat again with being penalized just not as heavily depending upon the state/plan you chose to have your ESA/529. I haven’t looked into other brokerage accounts yet so maybe that’s also a good idea. Thank you for replying back with your info. I am looking into this for my nephew trying to see what makes the most sense and I love hearing the good and bad before investing for him want to make sure it’s the best scenario all around regardless there would be fees and taxes just trying to make it make the most sense.
Can you use the money to buy a car ? For my daughter to go to college
To protect a UTMA account from being completely turned over to the child at age 18 (or 21) could it be transferred to a joint account where BOTH the child AND a parent must agree on any withdrawal?
No, but it would be possible with a trust to setup what you’re describing.
So I currently have a brokerage account in my name. Do not have the option to just withdraw the money for the child or transfer to a Roth for your adult child once they begin receiving income instead of paying taxes on a utma or ugma on top of taxes for a brokerage account that you may hold yourself.
Nice content! What kind of funds are recommended in such accounts for kids ? Stocks, REITS, ETFs? Thanks!
Hard question to answer, I use stocks but depends on your risk tolerance.
@@TravisSickle These are for kids, so its a long term strategy. I was thinking of just ETFs, but not sure which ones would fit well in UTMA. Thanks!
I live in Washington DC, but I was looking at opening a Wyoming UTMA through TDAmeritrade. As I investigated I received the warning of:
The age of termination for Wyoming is 21. According to Wyoming law, however, if your circumstances require it, you can choose a different age. The rules and tax consequences vary by state. **Electing to extend the age may cause you to lose your annual exclusion from federal gift tax.** Consult an attorney or tax advisor before making this selection.
This warning wasn't Wyoming specific - DC and other states (like Florida) had the same notice.
Does that mean the 15k exclusion doesn't apply if I pick 25? I'd be (way... way ... WAY) under the lifetime gift threshold, but I'll still have to report every time I contribute? Or is it more serious?
My state's age of majority is 21, so QUESTION: At 21, when it becomes his money, is he *REQUIRED* to liquidate and sell all shares and remove it as cash? This causes a taxable event! Or can he leave it and continue to let it grow? Thank you!
Leave it, just change title of account.
@@TravisSickle THANK YOU!
@@TravisSickle What do you mean by “change title of account?”
I'm a minor. Can I buy bitcoin with a UTMA account under my parents name?
You should be able to with a coverdell ESA, not sure about utga.
Not likely, I don’t know any that would hold it.
Are Utma's the same as a custodial brokerage account?
they can be. It's literally just an account in the kids name.
Does having a UTMA account affect the chances of getting financial aid for the child?
needs based aid yes
My question is, if these accounts are open to being challenged in court. Lets say the mother wants premature access to the funds. Is this the right type of account? Or should I stick to a discretionary trust? I need to rest knowing that my kids will receive these funds that I leave for them.
It’s the child’s money and must be used for their interest. After they turn 18 it’s a regular account in their name. The reason it’s a UTMA is purely because they are under 18.
My kid is going college next year 2021 , if he use ugma money to pay for a college , does he or we have to pay text on gain?? He is going to be 17 1/2 when he goes to the college. Is there any limit that we can follow to per year to avoid taxes ? We are in California.
Yes, there is a way to avoid it. Depending on the amount of cap gains you may want to look into it before year end since there are limits to pay zero. You could spread it out.
@@TravisSickle what is the limit per year to pay zero?
Can i use the utma accounts for buying stock for the children?
I think so
What would need to be done inside or out of the 30 day window before said child turns 21 to access funds?
@@TravisSickle for them to receive funds as soon as possible for their college expenses and transportation
@@TravisSickle The McDonnell law firm
@@TravisSickle ok thank you. I really appreciate this information
So you still have to pay taxes even though you don't sell anything?
It goes up to the standard deduction for no tax.
Can i pay for college courses directly from a UTMA?
Would this action be considered as taxable income or would it not be taxed or penalized because it is used directly for college?
My goal it not to use FAFSA or any type of loans for an estimated 50k of college.
UTMA is not a tax advantages account like an Ira. It’s just an account in minors name.
Travis, I like lemonade. Do you like lemonade?
Who doesn’t like lemonade?
Can a minor log in to the account or is it illegal?
Are the kids can use the money in college anywhere in America or just the state you open the account in?
Once the child has reached the age of 18/21, the money is theirs. They can use it to go to college, buy a house, or do whatever they so choose. A UTMA/UGMA is not a college tuition check.
These are not tax free? I must of missed it if he mentioned it.
Not they are not tax free.
Not at all?
Re: eTrade Custodial Brokerage Account: "earnings below $1,050 are not subject to federal taxes".
In 2021 provided that the unearned income (Dividends, Capital Gains, Interest) in total from all sources for the child is not over $1,100 then it is tax free. Otherwise any amount over that threshold can currently be taxed at the child's rate. The parent used to be able to include it as income under their filing. I don't know if that still applies and tax laws always change.
1:00
What’s up?
sUGMA ballz