We are no longer together after 13 years and her son is graduating high school this year at 17. I would like to give him $1000 worth of some ETF to get him started with investing/saving, but without slapping him with some tax burden. Just looking for any advice on the best vessel for this transaction. If I could get it invested a few months before I get it to him, even better. Not a guardian.
Gift to ex-girlfriends son
byu/East_Difficulty_9512 inpersonalfinance
Posted by East_Difficulty_9512
7 Comments
> but without slapping him with some tax burden
So you don’t actually hold this ETF yet?
You can give him him millions of dollars without him paying taxes. Only you would pay taxes if you gave him more than 15 million dollars. Please don’t worry about 1K.
Do you normally buy gifts for your ex’s son?
This sounds mean, but my advice to cut the cord 100% with your Ex & everyone connected to your Ex.
It stinks that the innocent kid is collateral damage… but this is a part of life.
This is a protecting-your-mental-health issue, really.
Keep your $1000 & invest it for yourself.
You cannot open an account in the name of a minor unless it is some sort of custodial or UTMA account.
Do you trust his mother to be the custodian of a UTMA account for him? Depending upon the state she could make it so the account gets handed over to him at age 18, 21, or 25.
If you wait until he is 18 he can open a brokerage account and you can transfer the stock or ETF to him.
The recipient of a gift never owes taxes on the gift. The cost basis of the gifted securities is your cost basis at the time of gifting (unless it is at a loss, in which case there are more complicated rules).
I would tell him about the gift now but that you will fund it on his 18th birthday. It’s not that you don’t trust your ex, it just makes it a cleaner transaction.
When he’s 18 teach him how to open a brokerage account. You can transfer cash or stocks into his account. Let him go through the steps to buy something. I did this for my kids and it really helped them understand how it all works — the account, login, buy, sell. The biggest gift is teaching a young adult how to invest.
I opened an IRA for my kid with Schwab. Took ten minutes, but I believe I needed his SSN and that he needed to sign a form.
If it were me, I’d tell him you would like him to open his first IRA and that you’d fund the first 1K.
Then I’d sit down over lunch and run scenarios on a compound interest calculator. If it sticks, you would be doing him the biggest favor ever.
I know kids whose parents opened them while they were studying in college, and they kept it up until and still backdoor today. They are set up to retire about ten years early.