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Saving account for niece with chronic medical condition

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  • Saving account for niece with chronic medical condition

    I liked a lot recent WCI's post on charity work, donations etc. Along those lines I have a question that maybe someone here will be able to help me with. I have niece in my home country in Europe that was born with chronic medical condition (form of autism). She's 10 now and has a good support from her parents, but likely will need help throughout her life. As our budget looks better every year, I'd like to set up some saving structure for her that one day can pass to her. So far I'm the fellow and my means are limited, but would like to start putting 3K a year for her and invest it in some vanguard fund (investing part I have figured out).

    Do you have any good recommendation what would be the smartest way to do it? I could always open separate account in vanguard under my name and put 3K a year there and keep it for her. But wonder if there is any other way to do it, something that would allow me to use my pre-tax money, instead of post-tax and decrease my AGI? Either by qualifying it as annual donation, or setting up some specific account. As I gonna do it for years, I would like to make it smart. Major problem is she's not American and has no SSN, so probably can't open for her any specific accounts like UGMA, UTMA, 529, IRA etc. Are you aware of any solutions how to save money for child that is not an American citizen? Can I donate to person that is not American citizen? Is there any option of opening some specific account or maybe foundation and collect money there?

    Any help and good input highly appreciated.

  • #2
    what a nice idea.

    you are going to have to get some legal help to make sure you do this right for sure.

    as with other people who have posted on here at least while you're alive never underestimate the power of a rich aunt/uncle with their financial house in order. i would just be generous ad hoc while i was alive and then set up something with a trust attorney for her once you're gone.

    i used to have all these plans for accounts for each niece/nephew but i follow the above principle now -- simpler and easier.


    • #3
      What a kind and special person you are, even though you're still in training yourself. There will be no tax savings, unfortunately, because gifts must be made to an IRS-recognized charity to be deductible. To do this the smart way, however, I would keep it simple for now, as suggested by @MPMD. Keep the account in your own name until it reaches just under $15k (or whatever the annual gift exemption is at that point in time). At that point, you might want to transfer it to a trust FBO (For Benefit Of) your niece.

      While it is in your name, you'll pay income taxes on any reported growth (end of year capital gains distributions and dividends paid). When it transfers to the trust, the income will be reported and taxes paid according to the terms of the trust and any tax treaties between the US and your niece's country of citizenship. If you want to continue paying taxes on the income, you can, of course.

      What you choose to do will depend upon your goals for the account and the timeline for which you will allow the money in the trust to be used for her. If you are comfortable giving the money directly to her family to save for her, it will be much less complex, but I wouldn't recommend that unless you are absolutely sure it will be saved and invested appropriately for future use (if that is your intent).

      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087