Minimizing Kiddie Tax After Tax Reform: Transferring Wealth Through Trusts, 529 Plans and UTMAs

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Monday, June 10, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will address several ways to transfer wealth to children, and how children's earned and unearned income is taxed. Transferring wealth to children is often referred to as income-shifting. The panel will discuss various vehicles to transfer assets to the next generation, including custodial accounts, Section 529 plans and trusts as well as strategies to minimize tax paid by children.

Description

A Uniform Transfer to Minors Act (UTMA) account can easily be set up by a custodian acting on behalf of the minor at any bank. A 529 college savings plan allows money to be set aside to pay for a child's education. A trust can be set up to transfer investments to a child.

With each method, there are advantages and drawbacks. Will a child be mature enough at 18 or 21 to spend his UTMA account wisely? What if the beneficiary doesn't attend college? What type of trust should be set up and what stipulations should be in place?

Along with tax reform came the purported simplification of the Tax on a Child's Income (Kiddie Tax) calculation. As always, simplification is mythical, but planning opportunities are numerous. Whether a child's income is subject to this tax depends on his age, filing status, earned and unearned income. These factors open-up planning opportunities to avoid the tax and take advantage of the minimum threshold.

Congress enacted the kiddie tax to reduce the tax savings a family tried to achieve when parents in high income tax brackets shifted income-producing property to their children in lower tax brackets. The revised kiddie tax creates a unique set of tax brackets for a child based on his unearned income, which can cause the child to pay tax at much higher rates than in the past.

Listen as our panel of experts discerns between various methods of transferring wealth to children, explains the new kiddie tax rules and provides tips on how to lessen its impact.

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Outline

  1. Wealth transfers to children
    1. UTMAs
    2. 529 plans
    3. Trusts
  2. Calculating Kiddie Tax
    1. Kiddie Tax before tax reform
    2. Kiddie Tax post-tax reform
    3. Examples and strategies

Benefits

The panel will review these critical issues:

  • Determining effective ways to transfer wealth from parents to children
  • Strategizing to minimize a family's overall tax burden
  • Completing Form 8615 after tax reform
  • Calculating the new kiddie tax

Faculty

Mantzke, Kate
Professor Kate Mantzke

Donna R. Kieso Professor of Accountancy
Northern Illinois University

Prof. Mantzke was previously a tax manager at Arthur Andersen in the firm's state tax consulting practice. Her...  |  Read More

Meyer, Deborah
Deborah L. Meyer, CPA/PFS, CFP®

Founder
WorthyNest

Ms. Meyer, CPA/PFS and CFP®, is a fee-only financial planner and the author of Redefining Family Wealth: A...  |  Read More

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