Tips for Transferring Your Wealth
Wausau WI Buska Retirement Solutions Tips for Transferring Your Wealth

Tips for Transferring Your Wealth

A September 2023 Kiplinger article, Three Ways Parents Can Transfer Wealth to Help Their Kids, has some interesting insights into how you can transfer your assets in ways that may not burden your heirs with extra taxes.


The first possibility is custodial accounts. When a child is still young, some parents open a Uniform Transfer to Minors Act account, UTMA for short, or a Uniform Gifts to Minors Act account, otherwise known as a UGMA.

When the child is still a minor, the custodian named on the account controls all its assets. But when the custodianship terminates — often when the child is between the ages of 18 and 25 — legal control will fall to the child.

But it may not be a wise move to hand a young person that much cash.

Luckily, there are options to avoid that very scenario. An alternative structure like a trust, a limited liability company, or a limited partnership are ways to potentially transfer a custodian account’s assets instead of passing them directly to a child.

Lastly, if, when your child is young, you anticipate that a custodial account would eventually have a considerable amount of money, you may want to focus on a trust structure from the get-go.

Educational and Medical Expenses

Funding a child’s educational or medical expenses may be another way to prudently transfer some of your assets. Many folks, particularly high-net-worth people, may be inclined to simply write their kids a check for these expenses, but that could bring about estate tax or gift tax issues. A better option may be to directly pay the educational or medical institution.

In this scenario, you may be able to utilize the IRS’s qualified transfer rule, which is part of Section 2503(e) and dictates that direct payments made to a child’s educational or medical institution may be excluded from federal gift tax rules.

Additionally, this kind of direct payment may also mean your available annual exclusion and lifetime exemption amounts wouldn’t be reduced. The annual gift tax exclusion amount is presently $17,000 per individual and the lifetime gift exemption amount is currently $12.92 million dollars per individual over a person’s lifetime.

Be sure to discuss this option with your financial services professional and your tax professional.

More Info About Trusts

If your child is the beneficiary of a trust fund, it may seem perfectly reasonable to make distributions from the fund to assist your child. You may even consider ditching the trust altogether once your child reaches adulthood. But that may not be the best strategic move.

One alternative to simply taking cash out of a child’s trust fund, is using some of its cash to purchase assets for a child. For example, if one of your kids is ready to buy their first house, instead of giving them cash from the trust, the trust itself may be able to purchase the home and become the property owner. The child would then live in the home rent-free.

In this example, the home is an asset of the trust and therefore has the same creditor protection as its other assets. This may be helpful if the child one day runs into creditor issues or goes through a divorce.

If your child doesn’t need the money in the trust at any point during their life, leaving those assets untouched within the trust means they wouldn’t be included in the child’s own estate for the purpose of estate taxes after their death. That may benefit their own heirs.


Buska Retirement Solutions, Inc. does not offer tax planning or legal services but may provide references to tax services or legal providers. Buska Retirement Solutions, Inc. may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.


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