Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
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!
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.