custodial account
IRA Discussion Forum
We wondered if you knew anything about electing age 25 on a UTMA custodial account in Washington State? I have a client that may be interested in doing this. They pointed out the Washington state code and the warning given. If a client elected age 25 would they lose their ability to give future $14,000/yr gifts? What are your thoughts?
This was the paragraph I was talking about from RCW 11.114.090:
(Electing the following paragraph is optional to the transferor):
I elect to extend the custodianship to the minor’s twenty-fifth birthday. I UNDERSTAND THAT ELECTING TO EXTEND CUSTODIANSHIP TO AGE TWENTY-FIVE MAY CAUSE ME TO LOSE MY ANNUAL EXCLUSION FROM FEDERAL GIFT TAX AND THAT I SHOULD CONSULT WITH AN ATTORNEY OR TAX ADVISOR BEFORE MAKING THIS ELECTION.
Permalink Submitted by Alan - IRA critic on Thu, 2015-08-13 20:08
Extension of the custodianship beyond 21 results in the contribution being deemed a future interest instead of a present interest gift. A gift must be a present interest gift in order to qualify for the 14k exclusion. Therefore any contributions to an extended UTMA account would not be eligible for the annual exclusion. Not sure, but if an account is extended to 25, prior excluded gifts to that UTMA would probably have to be reported on gift tax return. No reason that the 14k exclusion would not be available for non UTMA gifts to the same beneficiary.