UGMA Issues and Problems

[Ima saver]

Re: UGMA Issues and Problems

You are being very nice about this. I am sorry that she opened the account up and did not understand what she was going. I guess you are going to have to report it to the IRS if she does not come around. What a mess, I hope you can get things straightened out!

[Thrifty Ray]

Re: UGMA Issues and Problems

UGMA acccounts were established as a means of saving for a child with tax advantages. Since the interest is earned under the minors social security number, the parent does not claim the interest during the life of the account.

The IRS will have a real problem with people who set these up ONLY to avoid paying taxes on the money. The intent (and legal aspect) is that the money is deposited for and goes to the child upon reaching legal age.

Momma is getting herself into hot water by not turning the funds over. In essence, she has avoided claiming the interest all these years, but is fully benefitting from the account (Big NONO to the IRS)

In addition, the bank could also be held responsible in any lawsuit for turning over UGMA money when the beneficiary has reached adulthood.

Understanding that momma deposited the money and is feeling that it is HERS, the laws of UGMA accounts dictate very differently. The money is indeed SONS as far as the IRS is concerned.

If you can find out what bank they are at, you might have son call them and explain whats up...most likely, they will put an administrative freeze on the money until it is settled....(ie may have to get court involved.)

Good luck to you.

[SeraphLullabye]

Re: UGMA Issues and Problems

we found the brokerage that is holding the account. TD Waterhouse has some of the nicest customer service people in the entire east coast...and as I have called most of them I feel good saying that. They told us that they can not immediately freeze nor remove her name from the account, but the quick and legal answer for him to avoid all this and NOT have to actually call the IRS on his mother is to come in adn show them his birth certificate. When he does and is indeed legal age, they will move the money into a new account at the same tax rate for him in his name since he's an adult now and then he can spend it on his education and our taxes.

I am so relived. Thanks to everyone here for adding to the information that we did not have and how to go about finding all this.

They also found us a company that can do an assett search for him and that will tell him any and all accoutns with his name on it. Our problem it would seem is solved tomorrow morning.

Thanks for all the help!

[Ima saver]

Re: UGMA Issues and Problems

Well, I am so glad that you have found someone to help you. I think we have all learned a lot about this, I never thought of all the problems it could cause. I have 2 of these accounts, one for each granddaughter. I guess I will be turning them over when they turn 21 and hope they don't just blow the money.

[Thrifty Ray]

Re: UGMA Issues and Problems

Well, I am so glad that you have found someone to help you. I think we have all learned a lot about this, I never thought of all the problems it could cause. I have 2 of these accounts, one for each granddaughter. I guess I will be turning them over when they turn 21 and hope they don't just blow the money.

Legal age differs from state to state...in some states it is 18 and others 21...(although either age is still pretty young to come into alot of money.)

[SeraphLullabye]

Re: UGMA Issues and Problems

We went in to the brokerage house today and took care of the matter. It is resolved and she will be unhappy and we are going ot have capital gains to pay, but we at least have access to the money we are paying for.

In GA the legal age is 21. We found that out in our research.

I agree that there are young ages to aquire lots of money, and that is one of the drawbacks to these types of accounts. However, there are other types of accounts that you do not have to sign over the money and can manage for someone if you don't think that they will be responsible.

On that note, something to think about that the broker pointed out to us today. TEACH your children to manage money, what it means and what it truly is. At 18 they can be drafted and sent to war. At 18 they can elect the next president to govern this country. At 18 they can pass public policy when it is voted upon. At 18 they can be sued and convicted of a felony. Considering all the social, civic, and life responsibility that is given to an 18 year old, perhaps it is time we start educating our "children" that they are "adults" at 18 and raising them to think and be such. If our children are not growing up at 18 is it because of their age....or because we did not ask them to? Responsibility is taught and learned. We do not just manifest it. If no one shows someone how to budget money, they are not goigj to learn to until they NEED a budget. Necessity is the mother of knowledge and invention, leisure is not the force that drives education and research. Just some food for thought.

[TBH]

Re: UGMA Issues and Problems

I looked into these accounts for our CJ and became dead-set against them.

Yeah, I'm unthrilled by UGMA's, too.

My son has two of them. Both of them were gifts at his birth, one from my grandmother and one from a close friend. My grandmother deposits $100 to the account each year on his birthday. I would rather the accounts were 529s or Coverdells, but my grandma has been using UGMA accounts for years to dole out our inheritances before she dies. I had one, my syblings and cousins each had one, and now my son and his generation are getting them.

What can I do? Of course it's nice to know that money is there for him. I can't really ask her not to put the money in that kind of account if that's what she wants to do. I am 90% grateful that she is thinking about his future, and 10% worried about what the results will be--tax issues, etc. Will it make him have a sense of entitlement? I guess it's my job as his parent to make sure he doesn't.

When the time comes, I intend to use the UGMA money to pay his first college tuition bills. That will mean his financial aid eligibility will be greater when the money is gone, and also that he won't be able to blow it on cars or booze or something right after college.

[Ima saver]

Re: UGMA Issues and Problems

I opened gift accounts at American century when my granddaughters were born. I was able to pick the date that they will get the money. I chose their 35th birthday, because I hope they will be responsible with money by then.