Investment options for kids

[BalanceLife]

I have currently 3 and 2 year old's, started 529 last year, have about $7k each and contributing $200 per month each. But I want some other form of investment as well (mostly for kids education but should be able to use for anything). Something like starting with 10K and putting $100 every month for next 15 year period.

Any resources to  investment options other than 529 for kids would be great help.

[ooeei]

How about just a taxable investment account in your name? 

[themagicman]

How about just a taxable investment account in your name? 

I thought about doing this as well but was not sure about giving it to them when it is time. Am I able to transfer the shares directly to avoid me paying tax on it? Also what about gift tax? Just transfer the legal amount each year for a few years?

[MDM]

See https://en.wikipedia.org/wiki/Uniform_Gifts_to_Minors_Act for an overview, and https://personal.vanguard.com/us/whatweoffer/college/vanguardugmautma for one brokerage's implementation.

Fidelity, Schwab, etc. will have similar offerings.

[Scandium]

How about just a taxable investment account in your name? 

I thought about doing this as well but was not sure about giving it to them when it is time. Am I able to transfer the shares directly to avoid me paying tax on it? Also what about gift tax? Just transfer the legal amount each year for a few years?

Sounds like a good plan to me. Assuming you are married to their other parent, you can give $28,000 to each every year.

Remember, any assets in their name will be expected to be used (100%?) for college on FAFSA. Parent's assets count much less, around 5% I believe.

[ooeei]

Couldn't you just consider the gift "inheritance" and be done with it?  As of 2016 you don't pay any taxes on inheritance/gifts up to $5.45 million per giver over their lifetime, or $10.9 million for a married couple.  Giving them even $100k each when it's time will barely put a dent in your exemption.  I suppose you need to see if your state has a gift tax you're not exempt from though.

I'm sure there are more tax efficient vehicles, but if you want it to be usable for anything, a taxable account seems the way to go. 

[Scandium]

Couldn't you just consider the gift "inheritance" and be done with it?  As of 2016 you don't pay any taxes on inheritance/gifts up to $5.45 million per giver over their lifetime, or $10.9 million for a married couple.  Giving them even $100k each when it's time will barely put a dent in your exemption.  I suppose you need to see if your state has a gift tax you're not exempt from though.

I'm sure there are more tax efficient vehicles, but if you want it to be usable for anything, a taxable account seems the way to go.

Though "using up" the inheritance limit is probably extremely, extremely unlikely for the wast majority of people, it does seem like you might as well stay under the gift tax exclusion per year and just spread it out. If you start late one year, you could in 1.5 years gift $84,000 to each child with no tax.

I agree if it's for education use a 529. For everything else use a taxable account in your name. If they have a job as teenagers set up a Roth for them and put in as much as allowed (also excluded from college aid calcs).

[tonysemail]

How about just a taxable investment account in your name? 

I thought about doing this as well but was not sure about giving it to them when it is time. Am I able to transfer the shares directly to avoid me paying tax on it? Also what about gift tax? Just transfer the legal amount each year for a few years?

yes, but if you sell stock in your kid's name, then they have to file a tax return along with yours.
https://en.wikipedia.org/wiki/Kiddie_tax

If you're willing to go through that inconvenience, then you can harvest capital gains up to the 3k limit.