How do I give the money in a Vanguard UTMA back to my parents?
How do I give the money in a Vanguard UTMA back to my parents?
When I was a kid, my parents opened up an UTMA for me on vanguard. I ended up never needing it, so it has just remained untouched. I'm 35 now and the UTMA still shows up under my account when I log into Vanguard (my personal Roth IRA and taxable accounts are in Vanguard). However, when I click the registration details bubble on the UTMA account, it shows my mom's name as the Custodian. I also don't have permissions to buy or sell from the account.
Do I have to get Vanguard to switch the UTMA to my control first? Can the balance of the UTMA be transferred to my parent's own brokerage account in Vanguard without tax penalties?
Do I have to get Vanguard to switch the UTMA to my control first? Can the balance of the UTMA be transferred to my parent's own brokerage account in Vanguard without tax penalties?
Re: How do I give the money in a Vanguard UTMA back to my parents?
Your mother should have transferred the UTMA to you when you reached age. Once you own the assets you could transfer them. It is conceivable Vanguard will make the transfer to you at your request.Puyi wrote: ↑Thu Dec 01, 2022 8:17 am When I was a kid, my parents opened up an UTMA for me on vanguard. I ended up never needing it, so it has just remained untouched. I'm 35 now and the UTMA still shows up under my account when I log into Vanguard (my personal Roth IRA and taxable accounts are in Vanguard). However, when I click the registration details bubble on the UTMA account, it shows my mom's name as the Custodian. I also don't have permissions to buy or sell from the account.
Do I have to get Vanguard to switch the UTMA to my control first? Can the balance of the UTMA be transferred to my parent's own brokerage account in Vanguard without tax penalties?
What is supposed to happen if the parent has not transferred the UTMA is that the minor, now adult, can sue the parent to force them to make the transfer. Probably in this case you mother just forgot and she can fix that now.
Re: How do I give the money in a Vanguard UTMA back to my parents?
At Vanguard, you need to transfer the assets from the UTMA to one of your own non-custodial accounts.
https://personal1.vanguard.com/cwp-chan ... or-welcome
What you do with the money after that is completely up to you.
https://personal1.vanguard.com/cwp-chan ... or-welcome
What you do with the money after that is completely up to you.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Re: How do I give the money in a Vanguard UTMA back to my parents?
Say I do this, and the money from the UTMA gets transferred to one of my own accounts. Then I have to sell to transfer the money back to my parents, won't that result in a large capital gains tax bill?vineviz wrote: ↑Thu Dec 01, 2022 8:22 am At Vanguard, you need to transfer the assets from the UTMA to one of your own non-custodial accounts.
https://personal1.vanguard.com/cwp-chan ... or-welcome
What you do with the money after that is completely up to you.
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Re: How do I give the money in a Vanguard UTMA back to my parents?
If you want to transfer back to them, you could do so in kind, meaning you transfer the shares to them. This would.mean no capital gains for you. You still need to be aware of the total gifted to them, as you may need to fill out additional tax paperwork if you exceed the annual limit.Puyi wrote: ↑Thu Dec 01, 2022 9:16 amSay I do this, and the money from the UTMA gets transferred to one of my own accounts. Then I have to sell to transfer the money back to my parents, won't that result in a large capital gains tax bill?vineviz wrote: ↑Thu Dec 01, 2022 8:22 am At Vanguard, you need to transfer the assets from the UTMA to one of your own non-custodial accounts.
https://personal1.vanguard.com/cwp-chan ... or-welcome
What you do with the money after that is completely up to you.
Re: How do I give the money in a Vanguard UTMA back to my parents?
I don't need it, plus they are retiring next year so it'll be more useful for them
Re: How do I give the money in a Vanguard UTMA back to my parents?
Gift them the shares. Then they'll be responsible for the taxes.Puyi wrote: ↑Thu Dec 01, 2022 9:38 amI don't need it, plus they are retiring next year so it'll be more useful for them
Re: How do I give the money in a Vanguard UTMA back to my parents?
The money is already in "one of your own accounts". The UTMA account belongs to you, and has belonged to you since you passed the age of majority: the fact that it is classified as a "custodial" account has no real bearing on your ownership, your tax obligations, or any gift reporting requirements.Puyi wrote: ↑Thu Dec 01, 2022 9:16 amSay I do this, and the money from the UTMA gets transferred to one of my own accounts. Then I have to sell to transfer the money back to my parents, won't that result in a large capital gains tax bill?vineviz wrote: ↑Thu Dec 01, 2022 8:22 am At Vanguard, you need to transfer the assets from the UTMA to one of your own non-custodial accounts.
https://personal1.vanguard.com/cwp-chan ... or-welcome
What you do with the money after that is completely up to you.
If you wish to give them money for their retirement, you'll just have to figure out the most tax-efficient way to do that. But you shouldn't think of this account as being "special" or "different", other than the fact that you'll have to transfer the assets to an account which allows you to buy/sell etc.
They gave you this money years ago, and that gift is already completed whether you want/need it or not. What you do from here is a fresh decision.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: How do I give the money in a Vanguard UTMA back to my parents?
I'm sure that your parents are very pleased that you don't have need for the money. Slightly different circumstances, but our annual gifts to our children are of zero financial consequence to one of the kids, but we make equal gifts to each of them regardless. I don't know how I'd feel if he returned the gift, but I'd really rather that he keep it and donate it to charity, leave it in case one of his siblings needs it someday, etc.
I get the FI part but not the RE part of FIRE.
Re: How do I give the money in a Vanguard UTMA back to my parents?
The important procedural point is to be sure the custodial status be removed. Then the now adult can do anything they like with the money, including gifting it back, paying attention to any tax issues.
Re: How do I give the money in a Vanguard UTMA back to my parents?
That's good news. At one time, Vanguard required the custodian to transfer the assets to the former minor, and they required a medallion signature guarantee. I thought that proof of age by the minor should have been sufficient.
Re: How do I give the money in a Vanguard UTMA back to my parents?
The funds are legally yours. You'll need to take them out of the UTMA wrapper.Puyi wrote: ↑Thu Dec 01, 2022 9:38 amI don't need it, plus they are retiring next year so it'll be more useful for them
Once you have them, you can gift the shares to them "in-kind" which will maintain their current cost basis.
When they sell them, they will recognize the 20+ years of capital gains. If they do this after retirement and before collecting Social Security, some of those gains might be at the 0% capital gains bracket.
You can gift each parent $16,000 worth of stocks this year without filing additional paperwork. You can gift an additional $17,000 on or after Jan 1, 2023. (The shares you gift will be at the current market value, not the basis.)
If you gift more than that, you will need to file a form with the IRS. There is no tax due, unless you've already given away $12 million dollars. It just reduces your lifetime federal estate tax exclusion when you die, though who knows what that will look like 50-60 years from now!
Re: How do I give the money in a Vanguard UTMA back to my parents?
The money is yours. You can gift it back to them, but you can’t undo the transfer.
Re: How do I give the money in a Vanguard UTMA back to my parents?
The parents should also be sure they are anticipating any possible impacts on Income Related Monthly Adjustment Amounts (IRMAA) with respect to the Medicare premiums.
There might be none (and likely are small if they truly "need" more money), but it should be estimated not overlooked.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch