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We need to open a brokerage account to transfer shares to…

Dear Sir/Madam, We need to open...
Dear Sir/Madam,
We need to open a brokerage account to transfer shares to it. These shares are a gift from the family member. We want to put it under our son's name and never touch it until our children grow up. We want also to pay the minimum fees possible. We want also to have an option to transfer it back without paying for that transfer.Our friend recommended us to go with "TD Ameritrade" or "Schwab". Giving that we are not going to have any activity on that account, I do not think we need to hire a broker. My understanding is that we just need to open the right account.Giving the conditions above, and before contacting brokers, I would like to get a recommendation on what kind of account we should look for. And the second opinion on what broker company is better to go with.Best regards,
Viktor
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Answered in 12 minutes by:
1/17/2018
Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 32,856
Experience: Personal Investment, Tax Preparation
Verified

Your friend provided good recommendations for you to open brokerage account with either TD Ameritrade" or "Schwab"
I would add several other brokerage services - and you will not likely have to pay any fees.
You definitely do not need full service broker.
You may ask your banker if they may recommend any specific financial service providers - most banks do - and then you may ask for possible fees to ensure you woudl not be overcharged.
As your child is a minor - you may consider to have account through the Uniform Transfers to Minors Act (UTMA) and the Uniform Gift to Minors Act (UGMA).
That will allow you to manage such account as a custodial - but your child will be listed as an actual owner.
And all income will be reported to the IRS as your child's income.
Your child will be able to take full control of it once he/she reaches age 18 (or 21 depending on state laws).
For instance - that is Schwab's offer for recommended account type
https://www.schwab.com/public/schwab/investing/accounts_products/accounts/college_savings/custodial_account
See a link to the application at the bottom of that page.

Let me know if you need any help.

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Customer reply replied 4 months ago
I talked to "TD Ameritrade" representative. He was not sure about some details. And his colleague is also going to call me back. So far he told me the following:1. The difference between UTMA and UGMA is how it is done from state to state. And in the age of when children will be eligible to use the money. He did not remember exactly, but he said it might be 18 years old for UGMA, and up to 25 years old for UTMA accounts.2. We will be taxable from IRS perspective if any dividends are paid. Or, if we liquidate the account.3. He raised another problem. We, as custodians, cannot easily split this account into two accounts. Or liquidate this account. We might be accused of not acting in the best interest of our son. Now, if we get future children, we might want to split this shares among our children. Or, in certain circumstances, we want to be able to return these shares."TD Ameritrade" representative suggested us to talk to State Planning or Trust Planning specialist about it.So, we can do a trust for our children and have the account under that trust name, to avoid being liable in case if we have another child, and if we want to split these shares.However, I am not sure how we can technically have these shares under our son's name. And maybe just act as custodians for his trust. And at the same time be able to return these shares in the future without any liability.I'd appreciate If you have any advise on this.

Your understanding is correct.

When you are making a gift to your child - gifted assets are HIS - and are not yours anymore.

While as a custodian - you will manage these assets for your child - you have to manage in his best interest - and may not treat your child's assets as yours.

When account is liquidated - that means assets are sold - and capital gain or loss will be realized.

Income realized on that account - either dividends or gains when assets are sold - will be reported to your child as the owner of that account - and will be taxable for your son - and not for you.

.

You may create a trust and manage your assets in the trust - but that is a different issue as there are different types of trusts and there will be additional costs to manage the trust which in my understanding you want to avoid.

If you worry that assets are passed to your child when you will be passing - you may name your child as a beneficiary on your investment account - and you will have the full power over such account during your lifetime.

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Customer reply replied 4 months ago
Thank you.
I got a call from a manager of the previous person. And he suggested me to speak with our Trust attorney about the following:1. revokable open trust
2. to put my son as a beneficiary
3. and my wife as trusteeIn that case, if confirmed by the attorney, we should be able to split these shares between current and future children. And return these shares, if such necesity arises.

Please be aware that for tax purposes - a revocable living trust is ignored - all all income realized by the trust is reported on grantor's tax return.

You may also dissolve the trust any time without any tax consequence.

But you will have a relatively small cost to draft trust's documents.

Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 32,856
Experience: Personal Investment, Tax Preparation
Verified
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Customer reply replied 4 months ago
Thank you. We are going to see our attorney in regards ***** ***** trust tomorrow.
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Lev
Lev
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Satisfied Customers: 32,856
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