Grandparents' Tax free gift

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kobebr
Posts: 31
Joined: Thu Oct 20, 2016 9:51 pm

Grandparents' Tax free gift

Post by kobebr »

Hi Everyone,

I have a simple logistical question for grandparents giving a monetary gift.

My son has a UTMA account and I am the custodian. Vanguard wont let me add the grandparents' bank account to the UTMA account for easy direct transfers.

My question is do the grandparents write me a check (with my name on it) and then i deposit it and subsequently transfer it to my son's utma account? If this is the case, how does this work with regards to gift taxes-- ie how do i prove that since the check was written to me that the money was actually a gift to my son and NOT me personally?

Or do I have the grandparents write my son a check and then i deposit it and subsequently transfer to my son's utma account?

Probably a stupid question based on minutiae, but i just want to make sure that the gift is appropriately allocated to my son for tax purposes since the grandparents have also given me a gift which puts me personally at the limit for tax free gifts.

Thanks!
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TomatoTomahto
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Re: Grandparents' Tax free gift

Post by TomatoTomahto »

I think either way works. If they write you the check, have them write FBO (for benefit of) son’s name on the memo line.
I get the FI part but not the RE part of FIRE.
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anon_investor
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Re: Grandparents' Tax free gift

Post by anon_investor »

kobebr wrote: Wed Dec 01, 2021 1:37 pm Hi Everyone,

I have a simple logistical question for grandparents giving a monetary gift.

My son has a UTMA account and I am the custodian. Vanguard wont let me add the grandparents' bank account to the UTMA account for easy direct transfers.

My question is do the grandparents write me a check (with my name on it) and then i deposit it and subsequently transfer it to my son's utma account? If this is the case, how does this work with regards to gift taxes-- ie how do i prove that since the check was written to me that the money was actually a gift to my son and NOT me personally?

Or do I have the grandparents write my son a check and then i deposit it and subsequently transfer to my son's utma account?

Probably a stupid question based on minutiae, but i just want to make sure that the gift is appropriately allocated to my son for tax purposes since the grandparents have also given me a gift which puts me personally at the limit for tax free gifts.

Thanks!
Can you directly deposit a check written to your son into his Vanguard UTMA account? I know some brokerage accounts allow you to do with.
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Mullins
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Re: Grandparents' Tax free gift

Post by Mullins »

What if grandparents write check to grandson, said check gets sent to Vanguard as a deposit into the UTMA? I've gotten checks made out to me which I've endorsed and deposited by mail to my V. account. Confirm how to do that by calling Vanguard.

Grandparents writing checks to you, in turn, you writing checks to son, that's all counting as gifts to each recipient.
"The Quality of the Answer Depends on the Quality of Your Question."
delamer
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Re: Grandparents' Tax free gift

Post by delamer »

anon_investor wrote: Wed Dec 01, 2021 1:43 pm
kobebr wrote: Wed Dec 01, 2021 1:37 pm Hi Everyone,

I have a simple logistical question for grandparents giving a monetary gift.

My son has a UTMA account and I am the custodian. Vanguard wont let me add the grandparents' bank account to the UTMA account for easy direct transfers.

My question is do the grandparents write me a check (with my name on it) and then i deposit it and subsequently transfer it to my son's utma account? If this is the case, how does this work with regards to gift taxes-- ie how do i prove that since the check was written to me that the money was actually a gift to my son and NOT me personally?

Or do I have the grandparents write my son a check and then i deposit it and subsequently transfer to my son's utma account?

Probably a stupid question based on minutiae, but i just want to make sure that the gift is appropriately allocated to my son for tax purposes since the grandparents have also given me a gift which puts me personally at the limit for tax free gifts.

Thanks!
Can you directly deposit a check written to your son into his Vanguard UTMA account? I know some brokerage accounts allow you to do with.
This eould be the best option, if available.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Wiggums
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Re: Grandparents' Tax free gift

Post by Wiggums »

Any money deposited into the utma account is a gift for the benefit of your child. We would deposit our children’s money into their savings account and then transfer it to the UTMA. I think that is the cleanest way. The gift is to the child and must end up in their account. I don’t see a problem with the grandparents writing a check to the parent as long as the funds ends up in the child’s account. They could just as easily write out a check to the minor child and have you endorse it using whatever language the bank or broker requires. In other words, the money should not be appropriated by the parent from their account. The funds need to end up in the UTMA.
Last edited by Wiggums on Wed Dec 01, 2021 2:05 pm, edited 2 times in total.
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pennywise
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Re: Grandparents' Tax free gift

Post by pennywise »

kobebr wrote: Wed Dec 01, 2021 1:37 pm Hi Everyone,

I have a simple logistical question for grandparents giving a monetary gift.

My son has a UTMA account and I am the custodian. Vanguard wont let me add the grandparents' bank account to the UTMA account for easy direct transfers.

My question is do the grandparents write me a check (with my name on it) and then i deposit it and subsequently transfer it to my son's utma account? If this is the case, how does this work with regards to gift taxes-- ie how do i prove that since the check was written to me that the money was actually a gift to my son and NOT me personally?

Or do I have the grandparents write my son a check and then i deposit it and subsequently transfer to my son's utma account?

Probably a stupid question based on minutiae, but i just want to make sure that the gift is appropriately allocated to my son for tax purposes since the grandparents have also given me a gift which puts me personally at the limit for tax free gifts.

Thanks!
Once more into the breach: there is no such thing as a gift tax.

There is only the requirement to report gift sums in excess of the IRS mandated level in order to record for future possible taxation if the givers' estate(s) are in excess of the current IRS mandated level.

Since the level that triggers reporting is ~$30k and the level of estate that triggers taxes is ~$11 million you almost certainly have nothing to worry about. You for sure don't have to worry about paying federal tax on any gifts now.
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CAsage
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Re: Grandparents' Tax free gift

Post by CAsage »

When I gifted funds to someone.... I wrote a check directly to Vanguard, and simply mailed it to Vanguard with an appropriate deposit ticket. Might work here? Grandies can note which child on each check, or simply pass them the deposit forms?
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
dukeblue219
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Joined: Fri Jan 29, 2016 11:40 am

Re: Grandparents' Tax free gift

Post by dukeblue219 »

My little kids have a UTMA at Fidelity. When someone writes a check in their name I just deposit it to the UTMA via the Fidelity app and shred the check.

Don't overthink it.

Edit - does Vanguard not do mobile check deposit??
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cchrissyy
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Re: Grandparents' Tax free gift

Post by cchrissyy »

dukeblue219 wrote: Wed Dec 01, 2021 2:45 pm My little kids have a UTMA at Fidelity. When someone writes a check in their name I just deposit it to the UTMA via the Fidelity app and shred the check.

Don't overthink it.

Edit - does Vanguard not do mobile check deposit??
i do the exact same thing with Schwab.

to the OP, if they did end up putting your name on the check and "happy new year, GrandkidsName" on the memo line, i don't think you need to spend one minute worrying about some gift police coming along asking you to show it. There are no such people. But if there were, your word, and the memo line of the check, and the electronic transfer you make to the kid, all proves your story.
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Makefile
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Re: Grandparents' Tax free gift

Post by Makefile »

CAsage wrote: Wed Dec 01, 2021 2:31 pm When I gifted funds to someone.... I wrote a check directly to Vanguard, and simply mailed it to Vanguard with an appropriate deposit ticket. Might work here? Grandies can note which child on each check, or simply pass them the deposit forms?
Yes.
https://personal1.vanguard.com/ngf-next ... bapp/forms
1. Add or remove money, trade within your account
2. Buy more shares of an existing account (includes contributions to your retirement accounts and purchases into nonretirement accounts)
3. Add Money to your Retirement or Nonretirement Account - Use this process to add money to your retirement or nonretirement account by check.

Sometimes it's easy to overlook the simple solution when trying to do it the "modern" way (which, if Vanguard allowed it, would allow pulling arbitrary amounts from the grandparents' account(!) - so good thing it is blocked).
brawlrats
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Re: Grandparents' Tax free gift

Post by brawlrats »

pennywise wrote: Wed Dec 01, 2021 1:55 pm Once more into the breach: there is no such thing as a gift tax.

There is only the requirement to report gift sums in excess of the IRS mandated level in order to record for future possible taxation if the givers' estate(s) are in excess of the current IRS mandated level.

Since the level that triggers reporting is ~$30k and the level of estate that triggers taxes is ~$11 million you almost certainly have nothing to worry about. You for sure don't have to worry about paying federal tax on any gifts now.
This is incorrect. There absolutely is a gift tax (though as you state correctly, not in this OP's situation). The $11.7 million exclusion is a unified exclusion for gift and estate tax. If lifetime gifts, prior to death, exceed $11.7 million, gift tax is owed on the excess gifts during the giver's lifetime and the estate will have no exclusion remaining.

IRS form 709 is titled "United States Gift (and Generation-Skipping Transfer) Tax Return" while form 706 is titled "United States Estate (and Generation-Skipping Transfer) Tax Return". Two separate taxes covered by two separate chapters of the IRS code, but with one unified exclusion.

Edit: fixed one word
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