Wealth Transfer Tips For Utah Parents (And Grandparents)

People who take good care of their children take good care of their money, and people who take good care of their money take good care of their children.

It has been said that money is at once the root of all potential and also the root of all evil. What is a concerned parent or grandparent to do for their young heirs when so much is at stake, especially when it comes to gifts and inheritances? For some timely insights, a recent Forbes article titled “What Can We Do With Money For Our Kids?” may be a good place to start.

As an alternative to gifting money outright to your children or grandchildren, the article explores Roth IRAs, 529 plans, annuitized gifts, and even UTMA/UGMA accounts. While there are many wealth transfer tools and methods, the key is asking yourself a few important questions upfront.

For starters, what is the purpose of your wealth transfer? Is it education? How involved do you want to be? Do you have specific educational purposes in mind and, perhaps, even limitations? After all, who wants to facilitate a perpetual student?

On the other hand, would you prefer flexibility beyond education alone? What about providing some assistance should your younger loved one ever need a home loan, capital to start a business, or other opportunity to get a leg up? However, could “bailing” a younger loved one out of a bad situation deprive him or her of some valuable life lessons? There is something to be said about the school of hard knocks.

Oftentimes a trust arrangement is an excellent solution for wealth transfers to a younger generation, whether funded now with gifting or later on through inheritance. With a trust you can, with far more particularity and power, articulate both your concrete hopes and goals as well as spell out the specific limitations behind the gift or inheritance. In addition, you may appoint a trustee to stand by and oversee the whole process in your stead.

Easy gifts now such as UTMA/UGMA transfers while have the benefit of transferring money making assets to a lower income tax bracket, have significant problems with flexibility, timing of distributions, and control by the parent. Careful analysis of the goals and objective of such a gift must be done in order to avoid the pitfalls of this type of gift.

If you want to ensure that your transfers are a blessing and not a curse, then it will take some legal work to get it right. You will need competent counsel to help you sort through the many legal options available and to chart a course to get there. Ultimately, however, before engaging such counsel, take time to consider your heirs, review your assets and consider your wealth transfer goals for both.

Reference: Forbes (December 23, 2013) “What Can We Do With Money For Our Kids?