Poor advice on Children college investment

[tnpuddleduck]

What is the name of your state? TN
When my children were born (89 and 90) I went to my financial advisor to discuss college funding. She had me put money in an account for both of them. I have now found out this was horrible choice. One child is making outstanding choices and headed for college, the other is making terrible descisions. Each child has close to $70,000 in their account. I do not need the money for my retirement, it is there money for college. I am just horrified at what the wayward one will do with it when he finds out it is all his. I am told now by my advisor, that I have nothing I can do. In 4 months all this money will be his. I would expect if he finds this out, in 4 more months it will all be gone. Can anyone give me any hope of something I can do to prevent this? It is not in any kind of special account, just stocks and mutual funds. My advisor told me I could take some money out to pay for the car he has.....its not worth much. Thanks in advance for any help.

 

[anteater]

What is the name of your state? TN
...One child is making outstanding choices and headed for college, the other is making terrible descisions. Each child has close to $70,000 in their account. I do not need the money for my retirement, it is there money for college. I am just horrified at what the wayward one will do with it when he finds out it is all his. I am told now by my advisor, that I have nothing I can do. In 4 months all this money will be his. I would expect if he finds this out, in 4 more months it will all be gone. Can anyone give me any hope of something I can do to prevent this? It is not in any kind of special account, just stocks and mutual funds. My advisor told me I could take some money out to pay for the car he has.....its not worth much. Thanks in advance for any help.

This sounds like it might be an UGMA/UTMA account. You should confirm that. And, also, that you are the custodian.

I would not take this as the last word, but a quick check on the TN Statutes says:

35-7-221. Termination of custodianship. —

The custodian shall transfer in an appropriate manner the custodial property to the minor or to the minor's estate upon the earlier of:

(1) The minor's attainment of twenty-one (21) years of age; provided, that this transfer can be withheld until the minor's attainment of up to twenty-five (25) years of age if the instrument so provides, and if the gift is an inter vivos gift, the instrument further expressly states that deferring termination of custodianship beyond the minor's attainment of twenty-one (21) years of age will cause the transfer to be a gift of a future interest which may have adverse federal and state gift tax consequences; or

(2) The minor's death.
[Acts 1992, ch. 664, § 1; 1995, ch. 513, § 1; 1999, ch. 491, § 8.]

You may be able to "earn" a few more years of control before the wayward son gets the money. Also, as the financial advisor mentioned, you do have fairly wide latitude in spending the money for the minor's benefit, as long as it is not for items that would be considered normal parental support. While you are still custodian, nothing says that you can only spend it on what the minor wants it spend on.

35-7-215. Use of custodial property. —

(a) A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to:

(1) The duty or ability of the custodian personally or of any other person to support the minor; or

(2) Any other income or property of the minor which may be applicable or available for that purpose.

(b) On petition of an interested person or the minor, if the minor has attained fourteen (14) years of age, the court may order the custodian to deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the court considers advisable for the use and benefit of the minor.

(c) A delivery, payment, or expenditure under this section is in addition to, not in substitution for, and does not affect any obligation of a person to support the minor.
[Acts 1992, ch. 664, § 1.]