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Old 09-12-2022, 07:29 AM   #21
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Interesting situation. I note that some posters have missed your actual question. You have a 529b over which you will always control disbursements and your son will likely attend a local public school where the 529b will cover the costs and so far you have no issue with a likely major. Great! Check off school selection and paying for it.

But you also have a large UTMA which you temporarily control but will lose all control of when your son reaches 21 years of age. Since you've kept this from him to this point and in four years, if he desires, you'll be out of the picture, IMHO it's time to get him up to date on the strategy of you opening and funding the UTMA. Perhaps leave out the amount in early discussions but do emphasize possible uses for the money depending on how things work out for him.

I have a 16 year old grandson but we focused more and earlier on his 529b and ESA which now will easily cover his undergraduate degree and, likely, grad school if he desires to go. But we started his UTMA only recently. I put a few kilobux into a custodial account at Schwab and our deal is he owes me that money until he works it off. Whenever he does chores for us, he keeps a log and I relieve him of $20 of debt for each hour he works. (We're pretty liberal on what we call work and in rounding up hours.) If he wants some cash pocket money instead, he can have that but at only $15 per hour. So far, he has strongly preferred the $20/hour situation. So, he's been aware of the custodial account from the get-go, unlike your situation. He knows that at 21, the law says the account becomes his. We work on investing the money together and talk about it from time to time. He has view-only access to the account.

OTOH,grandson is not aware of the size of his educational accounts and our dilemma is when/if/how to let him know (if at all) that he can go to most any school. The money is there. He's frugal by nature and mentions budgeting as part of his educational planning when we chat about it, so I'm not too concerned. And, of course, with educational accounts I'll have control of disbursements forever.

With your 17 year old son's $100k UTMA account, you have the age 21 deadline rushing up in about 4 years. I'd suggest it's probably time to start bringing him into the loop pretty soon, errrrr....... maybe very soon. Only you can try to predict how responsibly he'll handle the situation, the level of interest in investing he'll have, etc.

That much money must throw off significant taxable earnings. How have you handled the income taxes without him being involved?

Have you looked into converting some of it to a Roth commensurate with whatever earned income from summer jobs, etc., he might have?


Edit: You mentioned insisting on having POA. I think you'll find that's up to him at 21. It'll start as the UTMA converting to be his individual account then and if he wants to grant you POA he can.
Thank you ALL for the responses. I really appreciate it. 10 years ago I invested $30K in FAANG stocks in his UTMA. That $30K is now $100K. Dividends have never exceeded the $1500 of income/gains exclusion on UTMA accounts (Apple is really the only one that pays a dividend) so I never had to file a tax return for him. Also, he worked his first job this summer, I let him spend his earnings as he saw fit but I put the $2K earnings into a Minor Roth for him that I funded myself.

He loves the compound interest calculator I downloaded onto his phone and I am trying to show him how much the money in his UTMA could be worth if he keeps letting it compound. (I did not tell him it's $100K, I used a $50K example..... Whatever I can do to plant the seed that this money can be a source of great security for him in the future is what I am trying to do.

My plan is to never tell him about the 529 and just leave any remaining balance there for either potential graduate studies or switching the beneficiary to a grandchild further down the road.
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Old 09-12-2022, 01:07 PM   #22
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Fafsa

Don’t you have to disclose these accounts on FAFSA?
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Old 09-12-2022, 05:16 PM   #23
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Don’t you have to disclose these accounts on FAFSA?
Generally yes, unless one meets the simplified needs test or the automatic zero EFC test.

It sounded like OP wasn't expecting financial aid, though, so they may elect not to even complete the FAFSA. (Yes, there are other reasons to complete FAFSA besides aid.)
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Old 09-13-2022, 11:13 AM   #24
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Generally yes, unless one meets the simplified needs test or the automatic zero EFC test.

It sounded like OP wasn't expecting financial aid, though, so they may elect not to even complete the FAFSA. (Yes, there are other reasons to complete FAFSA besides aid.)
Not expecting Financial aid. Neither was my sister but she completed the FAFSA and would up getting $1K... So I'll probably complete it anyway
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Old 09-16-2022, 04:24 PM   #25
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Hi all, Need a bit of parenting advice here.

We have a 529 and a UTMA for our 17 year old with about $100K in each one. He's looking at attending a local, public college so I don't anticipate needing more than what's in the 529.

Just looking to hear some opinions on when is a good time to tell him about the UTMA money and how you handled it.

I think he would be responsible with it and we would insist on being POA but I'm unclear whether to tell him about it now or closer to the age of majority in my state which is 21.

Thanks for sharing your opinions and experiences
I would just tell him you saved money for college but do not let him manage it, no matter how mature you think he is. Trust me, he is not mature enough.
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Old 09-16-2022, 09:37 PM   #26
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I am curious to know if your child would still want to attend a local, public college if they were aware of $200,000 worth of assets that could be applied to their schooling. Not that they are”settling” for the local school, but perhaps they are trying to keep your costs down. Would they possibly desire a different school if they knew the money was there for it and it was attainable without hardship to you?
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Old 09-17-2022, 09:21 AM   #27
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I would just tell him you saved money for college but do not let him manage it, no matter how mature you think he is. Trust me, he is not mature enough.
Absolutely agree.

Nor would I concede that it is to be used for anything else other than post secondary education.

We have a post secondary edu fund for each of our three grandchildren. Started it when each was born. So far only three but who knows.

It is for education, not for a cash windfall when one of them decides to pass on post secondary or does not use the entire amount. Any balance will be moved over to the other grandchildren.

Nor do we care if one grandchild uses more than another or one does not use a dime. We are not giving each and equal amount of money. It is a about an equal gift of post edu. Take it or leave it. Their choice.

On the flip side, if there is not enough and we are still alive we will pony up the required funds.

Our respective wills are such that that first the first distribution is $100K to each of our grandchildren for an edu trust. We are in our early seventies. They are in primary school. That number will be updated each five years or earlier whenever we update our wills based on the performance/balance in the edu funds.

The reality is that the cost of post secondary education is increasing much faster than the rate of inflation.

We view this as a gift to our children and a gift to our grandchildren. We have not even made our children aware of the entire provision.

Should we pass away they will have whatever balance is in their respective edu funds plus any part of that $100k that is required for their post secondary edu.

We are in a position to gift an education to our grandchildren. The money is not for cars, not for their parents.
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Old 09-17-2022, 09:32 AM   #28
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My kids knew about their 529 when they were young... I never tried to keep it a secret from them...


I am very clear with them about money... for years I told them they had a certain amount of money for college and they will need to stretch it if they do not want to have to pay some on their own...


My daughter just started college and I told her that how quickly she is spending she will only get 3 years... she is already thinking about next year and rooming with others to reduce her expenses...




Edit to add.... my kids also had a UTMA that they knew about... I used it to help teach them about investing.. Daughter picked out most of her stocks which I limited to 25% of the account... I invested the rest.. taught her about diversification...
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Old 09-17-2022, 10:00 AM   #29
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I would just tell him you saved money for college but do not let him manage it, no matter how mature you think he is. Trust me, he is not mature enough.
We've wandered off topic -- OP is asking specifically about the UTMA, not the 529. And the UTMA will most likely not be required for college expenses.

KarenF (+brett, and others of similar positions) --- Not to come across as contentious... but how does a child learn to be responsible with money (potentially large amounts of money) if you, as the parent, refuse to teach those practices because he's "never going to be mature enough"??

The UTMA money WILL become the child's at the age of majority. Would it not be better to make them aware of it early on, teach them over the course of years how to manage it responsibly, and prepare him for that responsibility as he approaches the point that he'll have to take control over the funds?
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Old 09-17-2022, 12:30 PM   #30
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We've wandered off topic -- OP is asking specifically about the UTMA, not the 529. And the UTMA will most likely not be required for college expenses.

KarenF (+brett, and others of similar positions) --- Not to come across as contentious... but how does a child learn to be responsible with money (potentially large amounts of money) if you, as the parent, refuse to teach those practices because he's "never going to be mature enough"??

The UTMA money WILL become the child's at the age of majority. Would it not be better to make them aware of it early on, teach them over the course of years how to manage it responsibly, and prepare him for that responsibility as he approaches the point that he'll have to take control over the funds?
Correct. This is what I am trying to get a handle on. I don't intend on ever mentioning the 529 to him (even though I plan to pay his college expenses from that account). Since we lose control of the UTMA in 4 years (and dont plan on using any of it for college), I want to position it now so that he views it as his sole source of college savings.

The wife and I don't believe in expensive schools with dorms. We want to instill in him that he can get a quality public education while living with his parents and unlike a lot of his peers, have a good chunk of money left over for future goals like a house down payment or emergency fund.
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Old 09-17-2022, 12:33 PM   #31
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I am curious to know if your child would still want to attend a local, public college if they were aware of $200,000 worth of assets that could be applied to their schooling. Not that they are”settling” for the local school, but perhaps they are trying to keep your costs down. Would they possibly desire a different school if they knew the money was there for it and it was attainable without hardship to you?
Honestly I don't know. However, we have really tried to instill in him that rather than a fancy name college with a fancy price and an expensive hotel (dorm), he should focus on keeping this money to help secure his future. I think he gets it.
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Old 09-17-2022, 06:20 PM   #32
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Honestly I don't know. However, we have really tried to instill in him that rather than a fancy name college with a fancy price and an expensive hotel (dorm), he should focus on keeping this money to help secure his future. I think he gets it.
I sometimes bribe my children to make decisions I agree with. I label them as incentives.

For example, last year I offered them $X for Christmas in stock, or they could get any portion of $X in cash at a 25% discount. So it might be $1000 in stock or $750 in cash.

That way it's their decision, but I've put my finger on the scale.

You could do the same thing - give your kid 1/2 the difference between dorm living and home living in cash each semester, or something like that, where they share some of the reward of saving that money.

Some risks to this approach:

1. You might raise "well trained hamsters" - kids who do the right thing but don't understand why. So the discussion of values and reasons and logic and understanding why all need to be part of the discussion.

2. You can put your finger on the scale too heavily and get them to do what you want even if it's not what is best for them. I did this a bit with my sons, where they went to college right out of high school because I made it the most attractive path by far. That probably wasted some money.

3. Some kids might resent the approach and feel manipulated. My kids are very practical and open, so it's not an issue in our family. But some kids might be oppositional just on principal.
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When is a good time to tell your child about their UTMA/UGMA?
Old 09-18-2022, 04:00 PM   #33
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When is a good time to tell your child about their UTMA/UGMA?

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Originally Posted by Ncc1701 View Post
Hi all, Need a bit of parenting advice here.



We have a 529 and a UTMA for our 17 year old with about $100K in each one. He's looking at attending a local, public college so I don't anticipate needing more than what's in the 529.



Just looking to hear some opinions on when is a good time to tell him about the UTMA money and how you handled it.



I think he would be responsible with it and we would insist on being POA but I'm unclear whether to tell him about it now or closer to the age of majority in my state which is 21.



Thanks for sharing your opinions and experiences


I told my sons at about age 14, perhaps earlier. Good portions ( not all,but most) birthday cash and most other cash gifts went into the 529s each was a beneficiary of from the day they were born. It was best they knew why. We encouraged them to work and add to it themselves as well. I would show them quarterly balances as a way to introduce them to investing. Involved them in choosing investments also ( but I ultimately had final say and explained why I was choosing what asset mix).

My spouse and I made monthly contributions also. Grandparents gifted tens of thousands. The ending balance was 3 or 4 times greater than the contributions.

The end result was a debt free graduation gift.
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Old 09-19-2022, 09:41 AM   #34
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not a fan of secrets. i appreciate the comments here on starting kids out on their own financial path and learning early. wish my father had taken that approach.
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Old 09-21-2022, 10:33 PM   #35
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Not really precisely on point, but I have tried always to talk to my kids about money during their entire lives (they're now 27, 22, and 20). I've tried to be honest and accurate, of course. I've also tried to start with simpler things and build to more complex things, and more general comments to more specific ones. I've tried to move the conversation forward by sharing more information as time goes by.

But I've also tried to do a just in time approach, where I share information just a bit before they need to know it. I find their interest level and comprehension level rise greatly when I can connect it to something that's relevant to them.

I also try to share values and lessons along with the facts.

So in your situation, I would first make my kid aware of the 529 and the UTMA, and that the money in the 529 is for college and the UTMA is for college if needed then could be used for a house downpayment or a wedding or a car or whatever it is your family values are and your intentions were.

Then at some point in the next few years I'd probably sit down and show him actual statements with account values and tell him about the age 21 thing, and show how much the college costs are so he can understand the math and how much would be left over. How soon before age 21 sort of depends on the kid and his money personality, but I'd probably at least do a year or two so he has a chance to absorb the news and think through all of his options and allow for time for you and him to have conversations about what to do with the UTMA money.

Insisting on POA is an interesting thought. I have been going the opposite direction with my kids lately. I used to fear them making mistakes with their money and thought I knew more, so I tried maintaining control. Then I realized a few things. First, everyone makes mistakes, especially starting out in a new area. Second, making mistakes early is how they learn. Third, making mistakes early usually involves smaller dollar amounts which are usually not fatal to long term financial health. Fourth, making mistakes while I'm still around and having it be an open topic means I have the opportunity to share my values and discuss with them and learn about their values (which sometimes trump what I think is best to do in some financial situations).

So now my kids are making more and bigger financial decisions on their own. Nearly all the time they do very well. Sometimes they make minor errors, but usually only once and then they course correct because it's their mistake, not mine. Very occasionally I'll disagree with their intended course of action, but they are adults and are the ones who will have to live with the consequences, not me. It also helps turn our relationship into an adult-to-adult relationship rather than parent-child, which is intimidating at first but awesomely wonderful as time goes by.


Just remember that in a 529 account the funds not owned by the student but they are beneficiaries assigned to it, but a UTMA account is diff in that the child (student ) are the owners of the account.
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Old 09-22-2022, 10:55 AM   #36
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Just remember that in a 529 account the funds not owned by the student but they are beneficiaries assigned to it, but a UTMA account is diff in that the child (student ) are the owners of the account.
Yep, I'm well aware of the differences.

I happened to drain my kids' UTMAs before they reached the age of majority in my state. I didn't mention it before because it wasn't relevant to OP's questions.
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Old 09-23-2022, 09:22 AM   #37
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Just remember that in a 529 account the funds not owned by the student but they are beneficiaries assigned to it, but a UTMA account is diff in that the child (student ) are the owners of the account.
When they hit the right age (here in the USA, age 18 for most states)

Until then the custodian has very broad leeway on using those funds:

https://fairmark.com/kids-and-colleg...d-for-support/
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