Jun
11
Child – First Account Oppened
June 11, 2009 | Comments Off
We just opened the Child’s first bank account. A regular savings account will do, under Uniform Transfers to Minors Act.
“In most states, minors do not have the right to contract, and so cannot own stocks, bonds, mutual funds, annuities and life insurance policies. In particular, parents cannot simply transfer assets to their minor children, but instead must transfer the assets to a trust. The most common trust for a minor is known as a custodial account (an UGMA or UTMA account).“– FinAid
We chose the UTMA structure mainly for tax purposes. A child’s income tax bracket may be more beneficial than the tax bracket imposed to successful and hardworking people. There seems to be around $900 of income that could be shielded from taxes there. Small change, but still good in principle.
The disadvantage of an UTMA is that the money is on child’s property. The FAFSA (Financial Aid) will penalize him for having money and will reduce his financial aid in the future. If we continue being successful, his financial aid will be reduced anyways, so this may not be such a big deal.
We placed the money in a savings account both, for the small ammount of the initial investment, and because the person who gave the gift is adverse to riskier investments.
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