Author Topic: Uniform Transfer to Minors Act - changing ownership  (Read 1170 times)

RetireAbroadAt35

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Uniform Transfer to Minors Act - changing ownership
« on: April 17, 2015, 10:22:05 AM »
A while back I started a Vanguard UTMA account for a sibling.  It's worth about $3k and my sibling is graduating college and never actually assumed ownership.

I'm trying to decide if it makes sense to liquidate and pay down student loan debt (federal debt at ~6%) or leave invested.  I think I'll help figure out if the debt can be refinanced to a lower rate, which case I'll advise keeping the account invested at Vanguard.

Assuming my sibling starts working this year, I think a trad/roth IRA might be a good target.

Would the process be:

1) Transfer ownership to my sibling in a normal taxable account.
2) If this sibling earns more than $5500 this year, start an IRA and take advantage of tax protections

Questions:
1) Can we transfer directly from the UTMA to an IRA or does it have to go to a taxable account first?
2) Would there be capital gains incurred when moving to an IRA?  Would it be a sell & buy or a conversion?

seattlecyclone

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Re: Uniform Transfer to Minors Act - changing ownership
« Reply #1 on: April 17, 2015, 10:58:43 AM »
I believe if your sibling is old enough, they actually have ownership, regardless of whether they've done anything with the account or even know it exists!

The UTMA is a taxable account already. Your sibling should have been reporting any dividends and capital gains on their tax return since you started the account. You'll have to ask Vanguard whether you can transfer directly to an IRA, or if you have to move the money to an intermediate location first. Regardless, your sibling would have to pay capital gains tax when selling the funds to move to an IRA.

RetireAbroadAt35

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Re: Uniform Transfer to Minors Act - changing ownership
« Reply #2 on: April 17, 2015, 06:12:25 PM »
There have been no dividends or capital gains to date but thanks for the confirmation.  The process to end my custodianship is referred to as a change of ownership by Vanguard, but that's just semantics I think.  As for asking them questions ... hah.  I'd rather not.  Painful process IMO to speak to them on the phone :)  I'll do what I can online.