Many people know about 529 Plans, or tax-advantaged investment plans that can be used for a child’s education. Minor’s Gifting Trusts are less well known, but serve a similar purpose, allowing minors to own securities without needing an attorney to prepare Trust documents, or the court to appoint a Trustee. But there’s another option you may want to consider if you wish to make a gift to a minor: A gift under the UTMA, or Uniform Transfers to Minors Act.
A major advantage of a UTMA gift is property like real estate can given to a child, making an UTMA gift a somewhat more flexible property transfer option. As long as the UTMA is created to benefit the minor beneficiary, gifts can be made up to the annual exclusion amount or under the lifetime exclusion amount. The minor is considered the taxpayer, not the donor, and a designated custodian is in charge of the account, making decisions on behalf of the beneficiary.
One disadvantage is that the beneficiary can access all funds or property in the account once he or she reaches age 21.
If you want to make gifts on behalf of a child, what is the best option? If you wish to gift property, a UTMA may be the only option. But keep in mind tax advantages of UTMA accounts are minimal. If you plan to make cash or financial security gifts for higher education purposes, a 529 Plan or Minor’s Gifting Trust could be the best option. Make an appointment to find out the best way – both for tax reasons and to ensure funds are used the way you intend – to make gifts to minors.
- These Trusts Satisfy Advanced Estate Planning Objectives - June 15, 2021
- Three Tips to Provide Inheritance Planning Insight - June 11, 2021
- Veterans Pension Can Defray Long-Term Care Costs - June 7, 2021