Is there any way to get out of a UTMA? Our son is 5 years old now and we would rather have total control of the money.
[[Is there any way to get out of a UTMA? Our son is 5 years old now and we would rather have total control of the money.]]Legally, once it goes...it's gone.You would be violating the terms of your trusteeship if you were to now STEAL the funds (harsh words...but them's the facts) from the child. But there is certainly nothing that says that you must continue to add to the account. Simply manage the funds that are there now. In effect, you DO have control of the funds...until your son reaches the age of majority. But simply closing the account because you changed you mind is not really the correct way to solve the problem.TMF TaxesRoySPECIAL NOTE: Remember that this response is not the "last word" on your situation. It is really only a starting point. Make sure to review the "Read This First" post(http://www.fool.com/School/Taxes/TaxesDisclaimer.htm) for additional information. In addition, many of your questions may already be referenced in the Taxes Frequently Asked Questions area. In order to visit the Taxes FAQ area, go to the Fool's Money area (http://www.fool.com/money.htm) and check out "Tax FAQs" in the list box, OR you can jump directly to the Taxes FAQ area (http://www.fool.com/school/taxes/taxes.htm). Additionally, if any references were made to the IRS Web Site, you can get there by pointing your web browser to (http://www.irs.ustreas.gov).
There is something else you may want to consider besides the suggestion made of not adding anything else to the account. You cannot take the money back, as it does belong to your son, but you can spend it instead of your own funds on some specific things that are for his benefit. It is my understanding that you cannot spend the money on things that you must provide [i.e. food, shelter, clothing, medical care, etc.], but you can use it for other things that are 'extras'. For instance, I think you could use it to provide music lessons for example. I know that on one of these boards, there was someone else who was very knowledgeable on what sorts of expenses were OK and what were not. But it is another alternative you might want to consider. If it were me, it would depend on how much money was in the child's name, but I'd probably just stop contributing to the account and save in my name instead [which is what I do for my kids], and leave that money to keep growing for your son. I would try to invest it and use it to teach him some lessons on how to invest and handle money. So maybe there's a learning opportunity here as well as the chance for him to have some amount of investments as he gets older.
There are a fair number of messages discussing this early in the Family Fool and some in Paying For College. 2gifts has it all correct. You can use it for private school, music lessons, camp - anything that benefits the child that a parent is not obligated to provide. There are 2 reasons people give for not wanting the money in UTMA - thinking it will harm the possibility of financial aid and not trusting their child's judgement. (All the pros and cons seemed to have been beaten to death on the previously mentioned boards.) I agree with TMF Taxes and 2gifts - don't contribute anymore but I wouldn't endeavor to move what's already there. Changing your mind isn't a good enough reason.RF...3 kids & UGMA accounts all over the place
[[ I know that on one of these boards, there was someone else who was very knowledgeable on what sorts of expenses were OK and what were not. But it is another alternative you might want to consider. ]]KAT in Chicagoland has the best write-up on this issue on the web. You might want to go over there and check it out. You can get to KAT's site at:http://www.fairmark.comHope this helps...TMF TaxesRoy
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