Kids & Money: How to Put Stocks in Your Child’s Name

Money lessons we need to teach to our kids from K-12

You can give your kids a jumpstart on building a portfolio.

For parents who want to turn their child’s interest in investing into a full on learning experience, you probably already know that your financially savvy kid cannot begin investing in stocks until the age of 18. Since opening a brokerage account is out of the question for your minor, there are ways around this rule. The Uniform Gifts to Minors Act (UGMA) works almost like a trust. It allows parent’s to setup an account to hold assets for a minor without hiring an attorney or creating a trust, says financial advisor Jesse Abercormbie. Here’s what you need to know about the account:

Custodian needed: Though the assets are considered property of the minor by law, a custodian controls the account until the child turns 18 or 21-years-old, depending on the state.

Gifting Limits: This account is subject to the $13,000 Gift Tax Exclusion. In other words, up to $13,000 per year may be given by an individual to the account without being subject to the Gift Tax.

Kiddie Tax Rule: While any investment up to $850 is potentially untaxed, subsequent investments up to an additional $850 may potentially be taxed at your child’s tax bracket, or 10%, which is known as the so called “kidde” tax. Any extra income can be taxed at the parent’s tax bracket which will most likely be 35%.

Bye, bye financial aid? Possibly: Once of age, the assets are considered your child’s income. This may become a disadvantage if your child tries to apply for need-based aid such as grants, scholarships and even certain types of government loans to pay for college.

2 Responses to Kids & Money: How to Put Stocks in Your Child’s Name

  1. Delano McGregor says:

    Great starter information but there does not seems to be a solution to the situation on the effects of stocks on college aid. Please add some “meat” to this article relative to solutions to prevent financial aid being adversely affected by gifting stocks to your children. Thank you.


  2. Pingback: How To Money In Investing In Stocks | My Stock Market Futures

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