Investments and Estate Planning for Kids

[Walker]

Just open some funds for yourself and leave to the kids in your will. Easy peasy.

[Avid Hunter]

I would really like to get the ball rolling on something for my kids kiddos. Something small started now could be huge after 50yrs compounded. Wish someone before my day would have thought of that. Could have saved alot of time and money in my 20s paying off student loans and other college debt.

[HogHunter34]

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.

Why not just house the money under your own personal accounts so you always have control on timing & amount to hand off for said occasions…house down payment, etc…
Pretty simple to self invest without all the hassle of attorney fees

[JHT]

Any well thought out plan of your estate for the ease of your passing for your children isn't really too difficult to plan out. You can even involve your kids in the process.

Just keep this in mind. There is about a 99.9% chance of them going to war after you pass if someone feels they got wronged.

Do what you think is best for them and sign the will.

[bbqfan5909]

Then why not keep total control and gift the money you see fit?

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.

[Fordnandez]

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.

I am by no means an expert but I believe this is correct. I have been told you can "pay" your kids up to 10k which reduces your taxable income and they dont have to pay income tax on the 10k either. I got lost in the reason why but I have had multiple folks tell me this that is in the know.

[The Crippler]

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.

Yep, "hire" your kids.

Trusts can be a great vehicle, but you have to select your trustee wisely. Uncle Joe may seem trustworthy but once he's in control of your money things may change. Banks appear to be a good idea but good luck ever getting them to cede control once they have it. Everyone hates lawyers but it's a whole lot cheaper to get these things set up the right way than trying to fix it down the road.

[mmoses]

Just open some funds for yourself and leave to the kids in your will. Easy peasy.

Hopefully I am alive when this money is useful to them.

[mmoses]

Then why not keep total control and gift the money you see fit?

Why not just house the money under your own personal accounts so you always have control on timing & amount to hand off for said occasions…house down payment, etc…
Pretty simple to self invest without all the hassle of attorney fees

My understanding is that you are limited to the amount you can give them a year. I think its $15k before they have to pay taxes.

[SaintBlaise]

Very good advise on this thread. I can only add a little.
* UTMA/UTMA accounts don't automatically revert to the kids at the age of the majority for the child. You will have to do separate actions for the child to take over the account. One of my clients has two UTMA's for her sons, 40 & 42. And the company will allow the 'kids' to remove their names form the account. However, the client has been carrying the tax burden.
* Not sure if you have any extended family, but you must have POAs. Power of attorney for financial & health care.
* Get a will and decide who you want to raise your kids in the event that you and your spouse are incapacitated or worse.
* Get a 30 year term life insurance, it's cheap.
* Attorney services may be offered by your employer. Our company uses ARAG, and it costs me $15/month. With that I have access to lawyers for many different services. Some are free others are discounted. We used the service for Wills and POAs, in-person service, $0 additional cost. Otherwise, contact several lawyers and ask what they charge. You should be able to get Wills and POAs for $300-$1000. I would not pay more. Now the trust alone may cost $1000 on the low side.

[mmoses]

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.

This is great Thank you, UTMA or UGMA seems like the easiest way to do this.

[mmoses]

Very good advise on this thread. I can only add a little.
* UTMA/UTMA accounts don't automatically revert to the kids at the age of the majority for the child. You will have to do separate actions for the child to take over the account. One of my clients has two UTMA's for her sons, 40 & 42. And the company will allow the 'kids' to remove their names form the account. However, the client has been carrying the tax burden.
* Not sure if you have any extended family, but you must have POAs. Power of attorney for financial & health care.
* Get a will and decide who you want to raise your kids in the event that you and your spouse are incapacitated or worse.
* Get a 30 year term life insurance, it's cheap.
* Attorney services may be offered by your employer. Our company uses ARAG, and it costs me $15/month. With that I have access to lawyers for many different services. Some are free others are discounted. We used the service for Wills and POAs, in-person service, $0 additional cost. Otherwise, contact several lawyers and ask what they charge. You should be able to get Wills and POAs for $300-$1000. I would not pay more. Now the trust alone may cost $1000 on the low side.

Thank you!

[Grayson]

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

[helibow]

I have a very good friend who is an estate planning attorney in Ft. Worth. Shoot me an IM if you want his contact. I'm sure he will talk to you about your situation and help you determine if you need an attorney or not to accomplish what you want (before he engages in a fee based relationship)

[Keith]

I need to read this when I have time, tagged for later.