We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
How We Make Money.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
How We Make Money.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict
,
this post may contain references to products from our partners.
Here’s an explanation for
Editorial Integrity
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
How We Make Money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
Dear Tax Talk,
I opened custodial accounts (was told they were UGMAs) for both grandchildren — first they were with a Young Investor’s Fund, now they are custodial accounts (CDs). One of the minors is now 18 years old; both accounts are under the minors’ Social Security numbers. When I close the account of the one who is 18 and give it to her, does she report the amount as earnings and pay taxes on it? — Eugenia
Dear Eugenia,
The basic way to give or transfer assets to children is to open an UGMA with a bank. An UGMA is the Uniform Gift to Minors Act, “uniform” meaning that the rules are pretty much the same from state to state.
Due to a minor’s limited authority under the law to contract or be sued, the gift act simplifies the transfer of assets to children without the need to establish a trust. While an UGMA has its simplicity, one drawback is that the child receives the account balance at the time they reach majority age, either 18 or 21. The child is then free to use the money as he or she sees fit. The person that created the account may be considered the custodian but has no legal say in how the child uses the funds.
When the account was created, you appropriately placed the child’s Social Security number on the account. The annual income from the accounts is taxable to the child and not to you as the creator or custodian.
A child is allowed to earn a certain amount tax-free every year, which has varied over time for law changes and inflation. I assume that the parents of the child have fulfilled the child’s tax obligations so that the maturity of the account would not in itself cause any further tax implication. This article discusses some of the more recent tax issues involving the taxation of minors. Assuming the child’s tax obligations have been satisfied, there is no tax implication from you turning over the funds to your granddaughter. Any interest the account earns during the current year should be included with your granddaughter’s other income.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
Read more Tax Talk columns. To ask a question on Tax Talk, go to the “Ask the Experts” page, and select “Taxes” as the topic.
Share