Irrevocable Trust and Children Tax

What is the name of your state (only U.S. law)? Wisconsin

My children's great grandma passed away and they were named as beneficiaries under an irrevocable trust. Checks were cut under UTMA for each child with their uncle as the custodian. I would like to put this money into a 529 plan for college for each child.

Questions**************if this money is used to open a new 529 plan, will there be any income or inheritance or kiddie tax consequences? If so, who reports and pays the taxes? (me as parent, uncle as custodian of the accounts, or the trust itself?)

Also, if taxes must be payed, is there a way to take out taxes now instead of having to pay them later?

Thanks for any help on this confusing issue.

DR

If I remember correctly, Wisconsin does not have an inheritance tax. And any Wisconsin estate tax should have been handled by the trustee.

If UTMA accounts were established, they can be converted to "UTMA 529's." Most state 529 plan applications will have specific instructions for the conversion of the UTMA to the 529. There would be no specific tax consequences for the conversion. [I guess I should add.... Unless the UTMA assets had been invested in some instrument - stocks, bonds, etc. - that had increased in value and would produce a capital gain if liquidated. 529 contributions have to be made in cash, not in kind.]

Just remember: once an UTMA always an UTMA. In a regular 529, the "owner" retains control of the funds and can withdraw them or change the beneficiary. With an UTMA 529, the kids are still the "owners." It still becomes their money when the kids reach the age of UTMA termination - 21, I believe, in Wisconsin. And there is no changing of the beneficiary.

Assets in 529 plans grow tax-deferred and withdrawals are tax free if used for qualified higher education expenses. And, for financial aid purposes, UTMA 529's are counted as the parents' asset.