Marriage & Taxes:

Setting Up Investment Accounts for Your Kids

Many people believe in building for the future. That's why many of us are always talking about savings. We could invest some money early and have some additional income at the end of our lives, traditional IRA and Roth IRA being a prime example. But another worry that plays at people's minds is the future of their children. There are two options available for setting up accounts for our kids that you can tell your client about.

• A Guardian Account - the owner of the account is the parent. The parent is the one who owns the money and they are the one who pays taxes on it. The advantage is that you are in complete control and you decide the fate of the money. The disadvantage is that the money is taxed at the parent's rate, which could be close to 41% for alt of people.
• A Custodial Account - the owner of the account is the child. The parent has control over the account until the child reaches the age 18. The disadvantage here is that you will lose control of the account at some point. The advantage here is that the money is taxed at the child's rate as long as he is a child, which can be as low 15%. There are two kinds of custodial accounts:
  1.Uniform Gift to Minors Act is where you can maintain control over the account until the child reaches the age of 18. During this time you can gift money, real estate, stocks, etc. to your child.
  2.Uniform Transfer to Minors Act is where you can maintain control until the child reaches the age of 25. This allows you to invest the child's money into different investment opportunities like stocks and real estate. This gives you more time to help the child stand up on his or her feet.

Do keep in mind that none of these accounts can be used to support the child for basic things like food and shelter. Those are still parents' responsibilities!