• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The Mendel Law Firm, L.P.

Attorneys & Counselors

Call Now: (281) 759-3213

  • FB
  • TW
  • IN
  • RSS
LP Payment button
  • Home
  • Our Firm
    • About Our Firm
    • About The American Academy
    • Advantages of Working With Our Firm
    • Attorney and Staff Profiles
    • Mission Statement
    • Multimedia
    • Published Books
    • The Academy Fellow Designation
  • Services
    • Asset Protection & Business Planning
    • Elder Law & Medicaid Services
      • Are You A Caregiver
      • Coping With Alzheimer’s
      • Guardianship & Conservatorship
      • Hospice Care
      • Emergency Medicaid & Nursing Home Planning
      • Medicaid Planning
      • Veteran’s Benefits
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration & Probate
  • Seminars
  • Testimonials
    • Client Testimonials
    • Representative Clients
    • Review Us
  • Resources
    • Areas We Serve
      • Baytown
      • Conroe
      • Galveston
      • Houston
      • Pasadena
      • Woodlands
      • West University Place
    • Elder Law Reports
    • Elder Law Resources
      • Galveston Elder Law
      • Houston Elder Law
      • Sugar Land Elder Law
      • West University Place Elder Law
      • Woodlands Elder Law
    • Estate Planning Resources
      • Estate Planning Checkup
      • Estate and Gift Tax Figures
      • Estate Planning Definitions
      • Estate Planning Reports
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top Estate Planning Techniques
      • Top 10 Estate and Legacy Planning Techniques
    • Frequently Asked Questions
      • Asset Protection Planning
      • Avoidance Tax Planning
      • Avoiding Probate
      • Business Succession Planning
      • Charitable Gifting
      • Elder Law
      • Estate Planning
      • Frequently Asked Questions for Families Without an Estate Plan
      • IRA and Retirement Planning
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Living Trusts
      • Medicaid
      • Medicaid Planning
      • Nursing Home Planning
      • Pet Planning
      • Power of Attorney
      • Probate
      • Trust Administration
      • Trust Administration & Probate
      • Trusts
      • Veterans Benefits
      • Wills
    • LGBTQ Resources
    • Probate Resources
      • Houston Probate
      • Sugarland Probate
      • Woodlands Probate
      • West University Place Probate
    • Probate & Trust Administration Resources
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss of a Loved One
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
    • Special Needs Resources
    • Newsletters
  • Contact Us
  • BLOG
Home » Estate Planning Articles » Gifts to Minors: Sharing Your Wealth the Smart Way

Gifts to Minors: Sharing Your Wealth the Smart Way

November 30, 2013 by Stephen A. Mendel, Estate Planning Attorney

Compliments of Our Law Firm,
Written By: The American Academy of Estate Planning Attorneys

One way to reduce your estate tax bill is to give money away during your lifetime. If you are a parent or a grandparent, giving to the children in your life is a great way to accomplish this. By doing so, you can help your children or grandchildren build their financial futures, with tax savings as a natural by-product. With a top estate tax rate of 40%, this by-product can be quite significant.

IRS rules limit how much you can give away each year without reducing your overall gift and estate tax exclusion of $5 million (adjusted for inflation, $5.34 million in 2014). Through 2014, the annual exclusion is $14,000. This means that an individual can give up to $14,000 each year to any other individual without reducing their lifetime exclusion. Parents or grandparents can combine their annual exclusions to give $28,000 annually per couple.

UGMA/UTMA Accounts

This situation gets complicated if your children are still minors. Until they reach adulthood, the law requires that minors have someone manage their money for them. Many parents fulfill this requirement by establishing a Uniform Gifts to Minors Act (UGMA) or a Uniform Transfers to Minors Act (UTMA) account. This is a simple, efficient arrangement that allows you to manage funds on behalf of your child until your child is legally able to take control of the account.
The problem with these accounts is that you are required to turn the entire balance over to your child when he or she reaches age 21 (18 in some jurisdictions). As every parent knows, children mature at different ages and not every young adult is ready to manage a large sum of money at that age.  A great way to address this issue is to set up an Irrevocable Trust.

Irrevocable Trusts

An Irrevocable Trust is one alternative to an UGMA/UTMA account. Estate planning attorneys often recommend this option because an Irrevocable Trust can be tailored to the needs of an individual child. There is no set age at which Trust assets must be distributed to a beneficiary; instead, the assets can be held in Trust for as long as the parents wish. Trust funds can be distributed at periodic intervals instead of in one lump sum. The distribution of assets can even be tied to the achievement of goals such as college graduation or maintaining full-time employment.

An Irrevocable Trust carries greater up-front and administrative costs than an UGMA/UTMA account; however, when deciding between the two options parents should consider the potential risks of handing over a large sum of money to their child at a young age.

As you plan your estate, it is important that you consult with an experienced estate planning attorney. He or she can help you balance the needs of your family with the latest in tax and estate planning law and strategy.

About Stephen A. Mendel, Estate Planning Attorney

Mr. Stephen Mendel is an attorney who focuses a substantial part of his practice on estate planning. Mr. Mendel’s guiding principle is to provide his clients with quality legal services tailored to each client’s specific needs and goals.

Primary Sidebar

The Mendel Law Firm

Follow Us

  • FB
  • TW
  • IN
  • RSS

Plan For Your Future and Protect Your Legacy

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

  • This field is for validation purposes and should be left unchanged.

HOUSTON

The Mendel Law Firm, L.P.
1155 Dairy Ashford, Suite 104
Houston 77079
United States (US)
Phone: (281) 759-3213
Fax: 281-759-3214

Map

map

Office Hours

Monday8:00 AM - 5:00 PM
Tuesday8:00 AM - 5:00 PM
Wednesday8:00 AM - 5:00 PM
Thursday8:00 AM - 5:00 PM
Friday8:00 AM - 5:00 PM

Footer

The Mendel Law Firm

The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an
attorney-client relationship.

© 2023 Mendel Law Firm, All Rights Reserved. Privacy Policy | Contact Us | Disclaimer | Site Map | Powered by American Academy of Estate Planning Attorneys