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    Investments and Estate Planning for Kids

    I know talk to a lawyer. I plan to just like to do a little research beforehand.

    Im far from rich but I want to set my kids up for success and with how things are going they are going to be way behind the curve if my wife and I are not proactive. Putting money in a saving account does not work anymore.

    I have three kids Oldest is 6. They all have 529s for college set up.

    I want to set up some sort of investment accounts to help them in the future.

    1. I don't want them to know about it until they are eligible to control/withdraw it.
    2. I would prefer that age to be 25.

    Any financial planners or lawyers that could help with that?

    In addition, I need to get a will and a revocable living trust


    Thanks,

    #2
    Great thread...tagged


    Sent from my iPhone using Tapatalk

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      #3
      I'd say the simplest thing would be index fund in S&P 500, similar to your 529s.

      But, make sure you are funding your retirement accounts before doing so. Compound that interest!

      Comment


        #4
        Originally posted by bbqfan5909 View Post
        I'd say the simplest thing would be index fund in S&P 500, similar to your 529s.

        But, make sure you are funding your retirement accounts before doing so. Compound that interest!
        Pension, 401k, and 457 are set up for my wife and I.

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          #5
          Roth IRA for each kid is the best investment besides 529

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            #6
            Originally posted by warrington View Post
            Roth IRA for each kid is the best investment besides 529
            Dont they need earned income for that?

            Unfortunately, I cant hire them out yet.

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              #7
              Just open a custodial UTMA account. No real need for a lawyer.

              Comment


                #8
                If you want them to have control and access to invest and maybe spend some of the money as they choose at age 25 (or any other age after 21), you basically have two options. 1) Set up a trust for each child to hold assets between now and whatever age you want to turn it over to them; or 2) Set up a separate account in your name (your joint name with you and your wife) that are earmarked for each child, and then gift them the money whenever you're ready to turn it over to them.

                Option 1 is more complicated and would involve some legal fees in setting it up. It probably wouldn't be worth the hassle and expense unless each trust was going to hold fairly significant assets. And then you'd need to do some work with your CPA and financial advisor to minimize income taxes in each trust, as it doesn't take much income for a trust to hit the higher tax brackets.

                Option 2 would be simpler and cheaper to set up, but it could potentially get into some required tax reporting or even tax owed on the amounts eventually gifted to the kids at age 25 (or whenever you give them the money), depending on the amount you ultimately give them.

                All of the above applies to a goal of the child having access to potentially spend some/all of that money after age 21 but before age 59 1/2. Maybe you want them to have money to start a business or buy a house or whatever....

                If you want to set them up with a retirement account that they wouldn't spend until AFTER age 59 1/2, then a Roth IRA would be great. They do have to have earned income before they can contribute to a Roth though. And you wouldn't be able to maintain control of the money after the child turns 18.

                You can put money into a custodial account for a child, but once they turn 21 (UTMA) or 18 (UGMA), the adult custodian's name comes off the account, and the child controls it. Money from those accounts can be withdrawn at any age without penalty. They generate 1099s each year for the taxable income. There are some tax breaks for small income amounts earned by children, but they're not completely tax free.

                As always, the right answer to your question is talk to your financial advisor and CPA about your specific situation and goal and then maybe your attorney as well, if you think a trust is the best route to go for your situation.

                Comment


                  #9
                  We went the trust route as part of a overall family plan that included wills, power(s) of attorney, estate planning, custodial agreements, etc...

                  I highly recommend working with an attorney that specializes in this area. I learned a great deal about trusts, probate, asset protection, etc.. all as part of this process.

                  Comment


                    #10
                    Originally posted by mmoses View Post
                    Dont they need earned income for that?

                    Unfortunately, I cant hire them out yet.
                    They do need earned income, but it doesn't have to be W-2 income. Pretty easy to show $6k of earned income for a kid.

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                      #11
                      I personally don't like the idea of turning over large sums of money today for kids to access and control at future date. I rather make that decision at the time. Who knows what situation your child will be in in 20 years and if that money will become a blessing or a curse to them.

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                        #12
                        Originally posted by Throwin Darts View Post
                        I personally don't like the idea of turning over large sums of money today for kids to access and control at future date. I rather make that decision at the time. Who knows what situation your child will be in in 20 years and if that money will become a blessing or a curse to them.
                        I kinda agree. One of the reasons I don't want them to know about it and at a later date than 21.

                        It won't be millions for sure but hopefully enough for a down payment for a house or something.

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                          #13
                          I'm in the same boat with my son about to turn 2. Just have a hard time with the thought of kicking a large chunk of money to them at 18 to do whatever they want.

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                            #14
                            Originally posted by SNKETR View Post
                            I'm in the same boat with my son about to turn 2. Just have a hard time with the thought of kicking a large chunk of money to them at 18 to do whatever they want.
                            Trusts offer up a great deal of "protection" in this area. You can set an array of parameters including age, marital status, criminal background, employment status, etc.... A trustee will administer the requirements of the trust.

                            Just a word of advice, more is not always better when it comes to stipulations and requirements in trusts.

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                              #15
                              I struggled with the correct route as you are for the very same reasons. Ultimately I went with option 2 as Shane listed above. I know I will have some capital gains taxes when the time comes to hand it over, but I like the flexibility of keeping it in my name until I can see what the future holds for my children and gift it at the right time. My main concern was getting that compound interest working ASAP.

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