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UTMA or Coverdell?

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  • UTMA or Coverdell?

    Would love to get some advice and insight on strategies to pay for kids' private school and life cycle events (sweet 16/bar mitzvah type)

    My understanding is that both the UTMA account and Coverdell may be creative ways to decrease tax burden in the short term and grow penalty free. These ideas have popped into my head but I am not sure if its validated. Any help is greatly appreciated!!

  • #2
    You need to go with the Coverdell. All growth is tax-free if used for qualified expenses, including school at any age. The problem with the UTMA is that it becomes the child's at age of majority (18 in almost all states) and can be spent on anything the new owner wants. While the growth on the UTMA is taxed to the child, the first $2,100 of investment income is not taxed.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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