Cash gift to minor child

[reverbn]

What is the name of your state? Florida
I want to give cash gift $10,000 to my 14 year old child. I read https://www.investopedia.com/terms/u/ugma.asp that “UGMA accounts can be opened through a bank or brokerage institution…. the assets are usually placed in UGMA accounts on behalf of minors, eliminating the need for an attorney to establish a special trust fund”.
Is it mandatory to put that gift money in a UGMA account? Is it legal to give that cash directly to my child and let him decide how to spend? Alternatively, is it legal to give that cash to someone else (e.g., grandfather of the child or uncle or family friend) if they agree to act as a custodian of that cash gift until the child becomes 18 years, without ever opening an UGMA account?

 

[Zigner]

You may give cash directly to the child. The wisdom of such an act would be very questionable...

https://law.justia.com/codes/georgia/2020/title-44/chapter-5/article-5/

 

[Taxing Matters]

Is it mandatory to put that gift money in a UGMA account?

No, it is not mandatory. There are lots of ways to give the money to your child.

Is it legal to give that cash directly to my child and let him decide how to spend?

Yes, you may do that. It's probably foolish to do, as 14 year-olds are, in general, not very money wise. But that's up to you.

Alternatively, is it legal to give that cash to someone else (e.g., grandfather of the child or uncle or family friend) if they agree to act as a custodian of that cash gift until the child becomes 18 years, without ever opening an UGMA account?

You can do that too, but what you are doing is creating a trust, and it is much better to have a written trust instrument for that, which means going to a lawyer to have the trust drawn up. Why should it be written? So you have clear evidence of the trust later should it be needed to protect the child against unwise use of the money by the relative or should a creditor of the relative take the money. An UGMA account accomplishes this for you without the need to see a lawyer to get a trust drafted. You can have that other relative be the custodian of that account if you want. UGMA accounts are very easy to set up -- generally simply a matter of filling out a form at the bank. Why do you seem so resistant to the idea of an UGMA account? What are you concerned about?

 

[zddoodah]

Is it mandatory to put that gift money in a UGMA account?

No.

Is it legal to give that cash directly to my child and let him decide how to spend?

You want to give a 14-yo $10k in cash? It's legal, but...really?

Alternatively, is it legal to give that cash to someone else (e.g., grandfather of the child or uncle or family friend) if they agree to act as a custodian of that cash gift until the child becomes 18 years, without ever opening an UGMA account?

Yes.

 

[reverbn]

You may give cash directly to the child. The wisdom of such an act would be very questionable...

https://law.justia.com/codes/georgia/2020/title-44/chapter-5/article-5/

My apologies, the child lives in Florida. I am also moving to Florida next month. To avoid confusion, I changed the state to Florida in my earlier posting.

 

[adjusterjack]

I want to give cash gift $10,000 to my 14 year old child.

Why?

 

[not2cleverRed]

Why?

I'm thinking OP is a non-custodial parent.

 

[Taxing Matters]

I'm thinking OP is a non-custodial parent.

Then that's an even bigger reason why not to give the money to the kid in cash. The other parent may take the money and spend it on things the OP would not approve, all without lowering his/her support obligation at all. The UGMA or a trust would provide protection against that possibility.

 

[quincy]

What do you want/expect your 14-year-old child to do with the $10,000?

Any of the suggestions you mention are doable - but the UGMA seems to be the easiest and best way to gift your child a large sum of money, especially if you want your child to use the money for expenses after high school (e.g., college, car). Once s/he turns 18, your child will be able to access the funds without your signature.

 

[Taxing Matters]

Once s/he turns 18, your child will be able to access the funds without your signature.

That varies by state and which type of account is used. In Florida, for example, the UTMA account transfers to the child automatically at age 21 unless the parent set it up to delay that to age 25. (UTMA and UGMA accounts are very similar but there are few differences, particularly in the assets they can hold. Both types of accounts can hold money and financial investments. But UTMA accounts can hold a lot of other things, including real estate. UGMA is the older of the two uniform laws. Every state has UGMA, and all but two have UTMA.) So you need to check out the laws for the state in which you will set up the account.

 

[quincy]

That varies by state and which type of account is used. In Florida, for example, the UTMA account transfers to the child automatically at age 21 unless the parent set it up to delay that to age 25. (UTMA and UGMA accounts are very similar but there are few differences, particularly in the assets they can hold. Both types of accounts can hold money and financial investments. But UTMA accounts can hold a lot of other things, including real estate. UGMA is the older of the two uniform laws. Every state has UGMA, and all but two have UTMA.) So you need to check out the laws for the state in which you will set up the account.

Thanks. I didn’t check Florida. My mistake.

 

[not2cleverRed]

Then that's an even bigger reason why not to give the money to the kid in cash. The other parent may take the money and spend it on things the OP would not approve, all without lowering his/her support obligation at all. The UGMA or a trust would provide protection against that possibility.

I don't disagree.

I am just speculating that's OP's rationale, since apparently the child lives in a different place.

 

[adjusterjack]

I am just speculating that's OP's rationale, since apparently the child lives in a different place.

OP is moving to Florida next month. Though I share your speculation. The ex may have custody in Florida.

 

[quincy]

Giving cash to the 14-year-old seems to be the riskiest of all of the options available. Setting up a UGMA/UTMA is not difficult and the account will protect the money for the now-minor child so the child has it available to use when s/he is (presumably) a responsible adult.

The possible drawback for reverbn with a UGMA/UTMA is that, once the account is set up for the minor, the money that funds the account belongs only to the child. reverbn cannot change his mind later about the $10,000 gift, even if his child turns out to be an unlovable and obnoxious 16-year-old.

 

[Taxing Matters]

The possible drawback for reverbn with a UGMA/UTMA is that, once the account is set up for the minor, the money that funds the account belongs only to the child. reverbn cannot change his mind later about the $10,000 gift, even if his child turns out to be an unlovable and obnoxious 16-year-old.

It can also be hard take back an outright gift of cash, too.