Minor (underage) inheritance

georgina

DIS Veteran
Joined
Apr 21, 2003
UTMA's - how easy it is to change owner really depends on who the account is with. The main reason I keep an account with a local bank is that we occasionally need Medallion signature guarantees. Last time was when we transferred our IRAs out of one firm to another.

529 money is controlled by the account holder not the child. We easily transferred money between our 3 kids, one DD just used them up for grad school. And there is never any income tax paid on them if used for education expenses.
 

ruadisneyfan2

DIS Veteran
Joined
May 20, 2006
My parents opened UTMAs for our kids when they were babies. They were given small gifts at Christmas and birthdays but their real gift each year was more deposits to their accounts. Now that my kids are 22 and almost 19, I'm so glad they did.

We didn't tell them in advance because we didn't want them to start concocting plans for how to spend it. When ds22 first attended college at 18, my dad told him it existed and he'd get 1/4 of it each year that he was in school, assuming 4 yrs of college. In hindsight, that was a good plan because he only stayed one semester. By the time he turned 21, the balance had grown higher than it was before that 25% was pulled out for his first year of school. I sat him down and explained what an amazing gift this is, all the planning and saving took years in the making, and it was not to be spent on something foolish. He did pay off the rest of his student loan of about $2600. He also had a small car loan (we put 50% down for him) but it was only 1.99% and could earn more than that if invested.
So he put some into a Vanguard Roth IRA account and the rest into a Vanguard investment account. Both are doing very well these days. He also has a Vanguard through work and continues to save most of his paycheck to his Vanguard investment account. I was floored when he logged in to print out tax forms and saw that combined, it's equivalent to a down payment on a home.:eek: Of course, part of that is retirement money and not touchable for a home but still, a great chunk to have at 22.

Ds19 wants no parts of college and wants to attend a trade school but just needs to narrow down his choices, which is fine; I just want him to be happy. He works full time and recently bought a car and has a very small car payment 5 yr term but he wants to pay it down in 1 year. He has no idea he'll get this money when he's 21. I'm glad for that or he may have been tempted to get a more expensive car. Once he narrows down which trade he wants and which school he'll attend and it gets to be time to talk money and pay, I'll tell him about it.

If I ever have grandchildren, I plan to do this as well.
 
  • QueenIsabella

    DIS Veteran
    Joined
    Jan 17, 2016
    omg, I so want that! :cloud9:
    This is a running joke in our family. Back in college, I knew a guy whose parents sent him a weekly allowance, and he would take it and go down to the mall and buy $25 worth of Swedish Fish with it. Every. Single. Week. I was a struggling student--no allowance for me, just work-study--and I thought it was the stupidest thing I'd ever heard. So, when we have discussions of frivolous spending in this house, I always bring up Swedish Fish. Plus, it sounds ridiculous.

    P.S. It sounds like you handle inherited/gifted money like we do, and it's been working well in your family, as well. There's nothing wrong with letting kids know that they have a legacy gift from their grandparents, but as parents, you have to help guide them to put that money to a good purpose.
     

    ruadisneyfan2

    DIS Veteran
    Joined
    May 20, 2006
    This is a running joke in our family. Back in college, I knew a guy whose parents sent him a weekly allowance, and he would take it and go down to the mall and buy $25 worth of Swedish Fish with it. Every. Single. Week. I was a struggling student--no allowance for me, just work-study--and I thought it was the stupidest thing I'd ever heard. So, when we have discussions of frivolous spending in this house, I always bring up Swedish Fish. Plus, it sounds ridiculous.

    P.S. It sounds like you handle inherited/gifted money like we do, and it's been working well in your family, as well. There's nothing wrong with letting kids know that they have a legacy gift from their grandparents, but as parents, you have to help guide them to put that money to a good purpose.

    When we were kids we inherited a small amount from a great uncle and we all knew about it. The only reason I didn't tell my kids is that they both have issues with motivation and I felt it would take some wind out of their sails.

    I was like you, not much time or money for anything beyond work + studying. I worked 25 hours/week in HS and college. I grossed $100, took home $80, and $50 went to tuition. The rest went to gas and necessities. My crappy job kept me motivated to finish school to have a better job some day. Even at 15, I couldn't wait to be able to work and have my own money.:hyper: My kids, not so much.

    Part of knowing what/when to tell your children, is just knowing your children.
     

    4kids4karen

    DIS Veteran
    Joined
    Dec 25, 2006
    I did a quick google search of UTMA, is there any way to stipulate an older age? I know legally it is their money, but I liked the idea of an education stipulation if it was being used at an early age. I think we can all agree we don't make the best decisions (financial or otherwise) at 18/21 and I would hate to see my kids mess up a good opportunity their GG gave them. We also do not have ANY money put away their education. So this would light a fire under us. I think I have a lot to discuss with my husband. As well as considering the other options they gave us. I will definitely have him make us an appointment with his CPA. Thank you so much for all the perspective and advice!
    Legally, it is your money.
    Morally, it is their money.

    I always had to advise this to my military members when I was active duty and worked their life insurance forms. Minors can not inherit money. If you put a minor's name as a beneficiary, the money legally goes to the person who has custody of said minor. Custodian can spend how they see fit. I advised military members not to list a child's name unless there was also an associated trust. I never put my children's names as beneficiaries when they were minors. When my two oldest (now adults) were minors, I know their deadbeat bio-dad would have tried to get custody if he knew he could get more than a half-mil of my insurance money. And he would have had his dad care for the kids while he was out doing his shenanigans.
     

    verleniahall

    DIS Veteran
    Joined
    Aug 5, 2013
    imy parents are doing a trust or my niece and 2 nephews - they can access when they turn 21 or if they enlist in the military at 18 - now granted it will prob. only effect myniece since she is so much younger than my nephews, but that was the fairest way for them to do that
     
  • Auntof2

    Mouseketeer
    Joined
    Feb 22, 2012
    The only issue with UTMAs is when the child becomes an adult, you need a "Medallion Signature Guarantee" to change ownership, put in a change of address, or sell it. My son has some World Wrestling Stock and I have been trying to get my name, and the UTMA off of it for years (my son is now 31) and I have been trying to find someone willing to do a "Medallion Signature Guarantee" and so far, no luck. I understand why, This is basically a step above a Notarized Document in that the person verifying your ID is ALSO promising that if something goes wrong, THEY will reimburse any loss. In my case it is $86, but many firms will not even guarantee that little of a transaction.


    https://www.lynalden.com/medallion-signature-guarantee/
     

    Auntof2

    Mouseketeer
    Joined
    Feb 22, 2012
    Regarding the Medallion signature, we needed them in the last 2 years for two separate reason.

    The first one was transferring an ancient ROTH IRA into his current one to avoid having two accounts. He had a checking account with Wells Fargo, and they were willing to sign, though we ended up sitting in a managers office for quite a while getting a sales pitch on investments.

    When I needed one done for a different transfer (old 401K funds to a TIRA), Wells Fargo would not sign mine as I was not on my husband's account. (We still had both our individual checking and savings from pre-marriage but also have a joint account). My husband had me added to his account on the spot...but after we signed off on everything they said there was a 60 day waiting period so we didn't end up getting my signature. I did have a credit card with Chase, so popped into one of their locations and they handled it immediately without even verifying my account (I had pulled out the card that had their logo on it, so maybe that was enough even though I swear they couldn't have made out my name).

    It was a pain only because we both generally are at work the same hours banks are open so it was a special trip (we do all banking online), but otherwise it was easy enough. Hope this helps anyone needing this type of signature.
     

    tvguy

    Question anything the facts don't support.
    Joined
    Dec 15, 2003
    Regarding the Medallion signature, we needed them in the last 2 years for two separate reason.

    The first one was transferring an ancient ROTH IRA into his current one to avoid having two accounts. He had a checking account with Wells Fargo, and they were willing to sign, though we ended up sitting in a managers office for quite a while getting a sales pitch on investments.

    When I needed one done for a different transfer (old 401K funds to a TIRA), Wells Fargo would not sign mine as I was not on my husband's account. (We still had both our individual checking and savings from pre-marriage but also have a joint account). My husband had me added to his account on the spot...but after we signed off on everything they said there was a 60 day waiting period so we didn't end up getting my signature. I did have a credit card with Chase, so popped into one of their locations and they handled it immediately without even verifying my account (I had pulled out the card that had their logo on it, so maybe that was enough even though I swear they couldn't have made out my name).

    It was a pain only because we both generally are at work the same hours banks are open so it was a special trip (we do all banking online), but otherwise it was easy enough. Hope this helps anyone needing this type of signature.
    I need to get off the stick on this, but much easier for me to just pay the tax on the $3.20 a year in dividends that get it changed!

    You made me LOL with the "ancient ROTH IRA". Lord, ROTH IRAs have only been around 20 years. I guess the Traditional IRA I opened 44 years ago would be pre-historic!
     

    TreeFalls

    Mouseketeer
    Joined
    Jun 22, 2016
    The only issue with UTMAs is when the child becomes an adult, you need a "Medallion Signature Guarantee" to change ownership, put in a change of address, or sell it. My son has some World Wrestling Stock and I have been trying to get my name, and the UTMA off of it for years (my son is now 31) and I have been trying to find someone willing to do a "Medallion Signature Guarantee" and so far, no luck. I understand why, This is basically a step above a Notarized Document in that the person verifying your ID is ALSO promising that if something goes wrong, THEY will reimburse any loss. In my case it is $86, but many firms will not even guarantee that little of a transaction.


    https://www.lynalden.com/medallion-signature-guarantee/
    My banks have done medallion signature guarantees for me at no cost (Wells Fargo, and our local credit union). Sometimes it takes a few phone calls because there in only one person in the branch who is "allowed" to do them, but I've always managed to get one.
     
  • Auntof2

    Mouseketeer
    Joined
    Feb 22, 2012
    I need to get off the stick on this, but much easier for me to just pay the tax on the $3.20 a year in dividends that get it changed!

    You made me LOL with the "ancient ROTH IRA". Lord, ROTH IRAs have only been around 20 years. I guess the Traditional IRA I opened 44 years ago would be pre-historic!
    Oops, I just meant ancient for us! it was from when my husband had his first job around age 22-23 and had been just sitting for over 15 years without contributions, in an account that had higher fees than our primary/current retirement accounts. We got a letter that it would be considered abandoned and transferred to the state and that made us get moving!
     

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