UTMA Taxable Custodial Account for Child Transferred to 529?

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Mattyman
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Joined: Thu Sep 16, 2021 1:46 pm

UTMA Taxable Custodial Account for Child Transferred to 529?

Post by Mattyman »

Novice investor looking for assistance...When my wife's grandfather passed away, we inherited a small amount for my wife and son. When they set things up for my son, it was put into a taxable Custodial Account in wells Fargo, with my wife being the custodian. The current account value is approximately $20.6k with about $6.5k in unrealized growth. The account is made up of many individual stocks, which I am not a fan. My wife and I both invest through Vanguard utilizing their low cost index funds.

Would it be best for us to transfer this account into a Vanguard 529 for tax purposes with a low expense ratio index fund for simplicity purposes? I'm assuming we would basically have to sell the assets in the current taxable account and pay capital gains on the $6.5k and then transfer the funds into a new vanguard 529? Is there a better way to handle this situation to avoid a tax hit and is the 529 the best option in this situation? (As a note, the executor to the estate did open a 529 for him with some other funds, which I believe was around $3k. I have to find the paperwork indicating who it was through but I plan to move this into Vanguard as well.)
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