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Q.Do I Need A Minor's Trust To Make An Annual $12,000 Gift To My Child?
A.No. There are many ways to transfer some of your wealth to your children, but the simplest way is to gift up to $12,000 per calendar year ($24,000 if married) to your child to be held in a custodial account with a bank or brokerage firm under the provisions of the California Uniform Transfers to Minors Act (UTMA). The custodianship account under the UTMA may last until the minor reaches age 18 (21, if you specify that age when you establish the account with a financial institution). However, once your child reaches the age of 18, or 21 if you so specified, there is no way for you to stop your child from using the money anyone she or he so chooses (e.g. buying a car, trip around the world, etc.).
With a UTMA account there is no cost of formation and the only tax returns required are the regular 1040 for the child. Hopefully, however, the gifted money will have been spent (by the Custodian) for the child's education by the time the child turns 21.
In addition to the annual $12,000 tax free gift rule, parents can gift additional amounts by directly paying tuition fees and medical expenses to a child's medical provider. While a gift can be made outright to a minor, this would normally trigger a court appointed guardianship.
Remember once a gift is made to a child, even in a UTMA account, the gift is irrevocable. You can't take it back.
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