Parents and grandparents often want to gift money to minor children and/or grandchildren but are uncertain how to do that because a minor cannot open a bank account.
One option is to open an account for the benefit of the minor under the Uniform Transfer to Minors Act (UTMA) of the state. In some states it is called the Uniform Gift to Minors Act (UGMA). UTMA/UGMA accounts allow assets to be transferred to a minor child with an adult custodian controlling the assets for the benefit of the minor until the minor reaches the age of majority. The transfer of the assets is irrevocable and must be used for the minor's benefit. The minor owns the account but the adult custodian maintains control until the minor reaches the age of majority (age 18 in most states) or at the time specified by the specific state's law. The funds in the account can be used for any purpose that benefits the child, education or otherwise.
Account earnings, distributions and transactions are reported to the IRS under the minor's Social Security number and may also be taxable at the state and local levels. Contributions over $15,000 (in 2020) per donor per donee per year may be subject to federal gift tax.
Another option is a 529 account. More about that here.
We can help you with your overall plan of distribution during lifetime or after. Give us a call at 931-250-8585 to schedule an appointment.