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.