Message Font: Serif | Sans-Serif
No. of Recommendations: 2
It has made me begin to wonder if I shouldn't create the account in my name, knowing that it is for him in the future?

A separate account will probably make things easier for you, but I would not leave it to him via a will. I'd be more apt to just make him a beneficiary on the account so that it won't go through probate and he could get the money faster/more easily when you die.

If you plan to do this for all your nieces and nephews, separate accounts is probably the easiest so that you have an idea of how much you have set aside for each one.

This way, you also control the money and can actually decide later if you still want it to go to that child, or if you have a better need for it such as an emergency, it is available to you. If you put it in the child's name, it will be their money and you cannot take it back. It will count as their assets for financial aid calculations, where money in your name even with them as listed beneficiaries will not be counted because it does not belong to them.

I am not a fan of 529 plans at all. What happens if the child doesn't go to college or gets a full ride scholarship somewhere? I don't think they have enough flexibility, and I prefer managing the money myself.

If you do decide to give the money to the child via a UGMA/UTMA, then remember that you will be creating some work for the parents in terms of tracking and taxes.

Something else that I did not see mentioned and I would recommend is that when the child is older, please teach the child about investing. My kids had MCD stock by the time they were about 3, and they knew at that age that they owned a piece of MCD. It helps to buy stock that interests the child, and so things that are consumer stocks and are very visible tend to be good to investigate for a child. I think a financial education for the child will be a huge boon to them as they get older. I know it has worked very well with my children over the years, and I have talked about that a lot here on the various boards. Please consider this as a way to complete the gift.

As I think about it, I would suggest that you at least buy a little stock in the child's name just to teach them about finances, but you can keep the bulk of your gift in your own name for the reasons mentioned above. These are not mutually exclusive options.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
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.