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Author: larrymf Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: ugma account investing Date: 5/22/1999 3:10 PM
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Is there anything a custodian of a ugma account could invest in or do that would prevent the recipient from wasting it and perhaps ruining his life. Could it be placed in some kind of trust or would an annuity work? Would this be legal if done by the custodian prior to the date he receives it in this state which is 21.
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Author: zgriner Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10683 of 76418
Subject: Re: ugma account investing Date: 5/23/1999 12:07 AM
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Would this be legal if done by the custodian prior to the date he receives it in this state which is 21.

I think you need to go the Tax Board and ask this question.

When money is deposited in a UGMA account, the money belongs to the minor, not the custodian. Withdrawals (and gains) are taxed at the minor's tax rate, if he's 14 or older. As far as I know, UGMA accounts are to be used for extra or extraordinary expenses for the care of the minor. That means you can't withdraw money to pay for food and clothing. You can withdraw it for camp or medical expenses. Also, this money counts towards the minor's ability to pay for college tuition.

Consequently, if you put the money in a trust, the minor can sue for the money at age of majority.

I think the IRS has a publication on this.

Zev

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Author: dharmadollars Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10686 of 76418
Subject: Re: ugma account investing Date: 5/23/1999 9:29 AM
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Two brief follow-ups to Zev's post. First, he correctly notes that the governing age is age of majority in the state in question, not age 21. Age 21 applies to UTMA accounts, not UGMA accounts.

Second, Zev states that the minor can sue for the money at age of majority. Suit is unnecessary. The former minor only needs to provide the custodian with proof of age, e.i., a birth certificate. The custodian is then obligated to transfer title to the account from its UGMA status to the name of the former minor. The only wrinkle would appear to be a situation where the assets in the account are in the form of equities, and the state's age of majority would be less than the securities industry's benchmark for legal capacity. This, however, is a minor wrinkle of infrequent manifestation.

Hope this adds to your knowledge.

Regards--dharmadollars

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Author: PJGeorge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10703 of 76418
Subject: Re: ugma account investing Date: 5/23/1999 8:09 PM
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Let's not over look the most important fact. Your kid (or whoever the minor is) has to KNOW ABOUT THE ACCOUNT to do anything. If he/she doesn't know about it, then they can't do anything about it.

My boss has TONS of money in three such accounts and plans to use it as a kinda WILL thing. They are all now in college and he has never told them about the accounts. Therefore, they cannot want what they do not know exists.

P.

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Author: RecoveringFool Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10704 of 76418
Subject: Re: ugma account investing Date: 5/23/1999 8:14 PM
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<<My boss has TONS of money in three such accounts and plans to use it as a kinda WILL thing. They are all now in college and he has never told them about the accounts. Therefore, they cannot want what they do not know exists. >>

As long as there are no annual dividends, distributions, or other taxable events, this might work but his kids will be underreporting assets and could have tax issues. I wouldn't do it.

Jacki



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Author: PJGeorge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10705 of 76418
Subject: Re: ugma account investing Date: 5/23/1999 8:20 PM
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Yes, I forgot to mention that he only chooses stocks/funds that pay NO dividends. If you do that there will be no taxes until you sell the stocks/funds. I don't think he is doing anything risky, but I'm no expert...

Also, I am not aware of any of life's event that requires you to report your net worth. I've only done for my own personal knowledge. Perhaps if you are trying to get educational assistance... But perhaps there is an exception to that too??

P.

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Author: RecoveringFool Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10706 of 76418
Subject: Re: ugma account investing Date: 5/23/1999 8:24 PM
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<<Also, I am not aware of any of life's event that requires you to report your net worth. I've only done for my own personal knowledge. Perhaps if you are trying to get educational assistance... But perhaps there is an exception to that too?? >>

There is no exception to reporting assets on Federal financial aid forms so if his children apply for aid as independent adults or later for their children, there could be issues. I honestly think this is not a good idea - set up a trust or handle it another way, IMHO

Jacki



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Author: WilliamLipp Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10707 of 76418
Subject: Re: ugma account investing Date: 5/23/1999 9:25 PM
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PJGeorge Date: 5/23/99 8:09 PM Number: 10703
My boss has TONS of money in three such accounts and plans to use it as a kinda WILL thing. They are all now in college and he has never told them about the accounts.

I wonder how he handles the tax issues. UGMAs are not tax deferred accounts, so the kids need to report dividends and capital gains every year. Perhaps he does their taxes for them, and they never read the forms.

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Author: PJGeorge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10720 of 76418
Subject: Re: ugma account investing Date: 5/24/1999 8:10 AM
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I wonder how he handles the tax issues. UGMAs are not tax deferred accounts, so the kids need to report dividends and capital gains every year. Perhaps he does their taxes for them, and they never read the forms.

He only buys stocks that do not pay dividends, thus no capital gains.

He could do the student loan forms for his kids but you're right, later in life, his kids would have to do educational assistance forms for their kids and they would not be reporting assets that existed.

I'll ask him about that.
P.

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Author: tonyw44 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10731 of 76418
Subject: Re: ugma account investing Date: 5/24/1999 10:16 AM
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"My boss has TONS of money in three such accounts and plans to use it as a kinda WILL thing. They are all now in college and he has never told them about the accounts."

Sorry, I think that's pretty bad when someone doesn't trust their kids enough to tell them about these accounts. They are, after all, responsible for the taxes on the dividends, interest, capital gains, and so on.

Deceiving a child is a pretty low thing to do.

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