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Investing for My Children

There are a few essential investment vehicles for children. There are two categories, those created to assist children with educational expenses and those that are not.

1. Educational Expense Investment Vehicles

Pros: Tax savings, parental control, higher contribution limits, financial aid treatment.

Cons: Must be used for educational expenses or you pay 10% penalty. Can only be set up with one adult and one minor name on account.

2. Flexible Investment Vehicles for a Minor

  • Uniform Gift to Minors Account (UGMA)
  • Uniform Transfer to Minors (UTMA)

Pros: No limitations on how money is used, can use the gift tax exemption for the first $14,000 of funding on an annual basis.
Cons: No tax advantage.