I am looking to begin giving each of my two grandchildren around $5000 to $10000 a year. I want to do this so they will have plenty of money for college, buying a house or ?. I also want to do this to avoid the estate tax my heirs will end up paying if I don't start giving it away now. I understand that the tax laws regarding gifts of this nature are more complicated because they are minors. If I am also giving similar amounts to their parents, will the gifts be taxed as income for the boys? Can anybody advise me or lead me to more information regarding gifts to minors?Chuck O'Neil
There are 2 boards on TMF which may have more info for you, Inheritance Strategies and Estate Planning and the Fool. This issue has been addressed on both boards and you may find your answer by just reading through the posts. There are a lot of helpful knowledgeable people on both boards.If I am also giving similar amounts to their parents, will the gifts be taxed as income for the boys? I don't believe the gifts will be taxed as income as long as you don't give more than $10,000 total each year. They might have income tax on the earnings/dividends from the $10,000, but that depends on a lot of variables. It probably would be best to discuss with the parents whether or not they want their children to have the money in the boys'names or not. If they have money, they might decide to rollerblade around the world or something instead of using it for college. <G> There are other tax consequences there along with any eligibility for financial aid for college.Check those other boards. There is a lot of info on them that could give you some other ideas of what might be best for you and for your family.I have gotten some very good planning advice from them.Carol
I am looking to begin giving each of my two grandchildren around $5000 to $10000 a year.I understand that the tax laws regarding gifts of this nature are more complicated because they are minors. If I am also giving similar amounts to their parents, will the gifts be taxed as income for the boys? Carol gave you some good leads. You don't say how old your grandchildren are, but my experience is that gifts of that size can add up pretty quickly, so if they're young, you will most likely want to set up a trust instead of just opening a UGMA/UTMA account for them. (Uniform Gifts/Trusts to Minors Act - that's how bank accounts, brokerage accounts, etc. are set up when the owner is a minor.) So it's not really the tax laws that are more complicated, it's a matter of how you want the money to be owned. If it's under UTMA, the money is theirs at the age of majority (18 or 21). If it's in a trust, the trust specifies when they can have the money. Search on "Crummey Trust" for more info, and ask your lawyer.The gifts aren't taxed as "income" - I think you meant is there a gift tax on them. You can give up to $10,000 to each person - the boys are treated separately from their parents. So if you have one son, a daughter-in-law, and two grandsons, you can give $10,000 to each of them ($40,000 total).FYI, if the boys' money generates income - and it will unless they invest it in growth stocks with no dividend - there are special tax laws that determine whether the income is taxed at the boys' income tax rate or at their parents' income tax rate. Good luck!
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