Custodial Fees

[Jack G]

What is the name of your state? Pennsylvania

Approxiamately 5 years ago a family member asked that I hold on to a large sum of money with the intentions that when they passed away the money would be given to my children for their education, weddings, etcetera. In order to avoid additional income tax, I had deposted these funds in a tax deferred savings plan. Since the relationship between this member of the family and my immediated family has deteriorated significantly and they are requesting the return of their money.

My question. Although these funds were collecting a small amount of interest, is it normal in situations like this to charge a "custodial" fee to help defray the taxes that are much more than the interest applied that will immediately be deducted upon the withdrawal of this money?

 

[JETX]

Although these funds were collecting a small amount of interest, is it normal in situations like this to charge a "custodial" fee to help defray the taxes that are much more than the interest applied that will immediately be deducted upon the withdrawal of this money?

Yep. You can charge 'custodial fees' to the full amount stipulated in your WRITTEN 'custodial' agreement.

 

[efflandt]

It is not clear what sort of "tax deferred savings plan" you put the money into, but the only tax the other party would be responsible for would be tax on the "small amount of interest".

The principal should not be taxed unless you used the money for tax deductable contributions, in which case you never paid tax on a like amount of your own money, and therefore, you would be liable for that tax.

Without something in writing, how is the taxman going to know where that money passing back and forth originated. With homeland security and drug money laundering, banks are obligated to record suspicious activity.

It was very foolish of the other party to give you the money in the first place, since they could have kept it in a brokerage account with whoever they wanted as beneficiary at time of death. Or is fraud involved (hiding assets)?