Wiser Wealth: 4 Tax-Smart Ways to Share Your Wealth with Kids

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As you get older, you want to know that your children will be taken care of and receive all the savings you want to bestow upon them.

You likely realize taxes will factor into that, but once you start looking into it the taxes might be significantly higher than you thought.

Kiplinger outlined some of your best avenues for maximizing the amount of money you are able to share with your kids untaxed.

Child IRAs

Setting up an IRA for your child now is a smart way to help them prepare for the future into their retirement. It also comes with the advantage that it can establish to automatically deduct income taxes as money is added, leaving no nasty surprises.

529 Plans

529 plans are popular because they are specifically for setting up an education fund for your child. So if the funds in the account are used for qualifying payments regarding schooling, transfers into the account are not subject to federal income tax, and can even be free of state and local taxes.

UTMA/UGMA Accounts

If you just want a basic account for your child, this option is straightforward in allowing you to set up a gift for your child that they shall receive upon becoming of legal age.

You do need to be mindful, however, of local and federal tax rate applicability for these accounts to ensure the amount you are leaving does not activate an unpleasantly high tax rate.

Trusts

Trusts offer a great deal of versatility in regards to the terms for who is able to gain control of them and when. While that is good, it also complicates things enough to typically require help from an expert.

Fred Hubler, Chief Wealth Strategist for Creative Capital Wealth Management Group which offers retainer-based advice and access to accredited investments shared that most of his clients feel a responsibility to save and help their children save while they are young. “Between trusts, custodial accounts and even putting them on the payroll if they can actually work for you are all ways to help out your children,” advises Hubler.

According to Hubler, there are more than a few “gotchas” and rules to watch out for. Working with a tax professional or financial advisor to make sure you do it right is sound advice, according to Hubler.

Regardless of what you decide, having a plan now will stave off disappointment later on from realizing what you wanted to bestow has some extra challenges.

For more strategies on preserving as much of your money as possible untaxed when sharing it with your kids, read the Kiplinger article here.

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Want to know if you’re on the right path financially? CCWMG’S Second Opinion Service (SOS) is a no-obligation review with one of  Creative Capital Wealth Management Group‘s Wealth Strategists. 

It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.

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