I have a few questions about Gift to Minor accounts.

We have a grandfather who opened an UTMA for his grandson. Tax information is sent to the G-father as that is the only address we have on file. Recently, the grandson, who is now 16, came in and opened another account in his own name. We did not tell grandson about the other account but now I have two separate tax reportings for the same social security number.

Do I have to report these separately? Doesn't grandson need to know about his other interest earned for tax reporting purposes? I am not even sure our system will handle this but I wanted to know what other Banks do in this situation.

Thanks!

At a recent seminar I was informed that the tax address had to be the minors to make sure that the parents were aware of the account; additionally, at the same seminar I learned that only the parent can certify the W-9, so you should have contacted the parents for the tax address. This is according to MA UTMA's not sure if California follows.

I also think most systems aggregate 1099 info based on TIN but again I am not an expert

There is no IRS guidance dictating the correct mailing address for a UTMA, certainly not any that would require your bank to disclose the existence of an account to the minor's parents. Your system should be capable of generating two 1099's with the same name/TIN combination, but different mailing addresses.

Thank you Ken, but to play devil's advocate...

Suppose the account Grand dad opened is interest earning but the account the minor opened was not. If I send the tax info to the minor, am I not disclosing the fact that the other account exists?

Also, is it true that only the parent can certify the TIN? We have UTMA's opened by grandparents all the time and I always worry that the parents don't know about the tax information.

The custodian on a UTMA can certify the child's TIN and use his or her own address for the account.

So doesn't that create a dilemma for the parents who don't know about the account and may not have all of the interest earned information for tax purposes?

I guess as long as the Bank has no responsibility for reporting other than by SS#, it shouldn't matter. But I am curious.

We always strongly insist that the grandparent make the parents aware of the UTMA as the child may have reportable interest, but usually a grandparent will establish a UTMA so the parents don't know in the first place.

Be prepared, Grandpa might very knowingly tell you that there are a number of nuances to this and it's really not your concern.

Without trying to stir up a hornet's nest, though, what happens if the IRS determines that there's unreported interest income because the 1099-INT is going to Gramps' address and never getting included on a 1040 filing, even though Junior has filed 1040s for a couple of years because of other income?

I guess my stance would be to remind Gramps that Junior or his parents may have a tax filing obligation and that he should consider whether to provide them with the needed information. It has to be rough being in a family where there's a perceived need for such secrecy from one another.

Given today's interest rates it would take a heck of a deposit to generate enough interest to trigger the filing of a tax return. However, my concern is wholly whether the banker across the desk is in any way competent to provide advice on the subject...

I am just throwing this in as an aside - but where would Grandpa get the child's social security number from; if not the parents? Unless you have a really subversive situation here, the parents know about the account.

Ken, are you saying that you'd prefer the banker not say anything at all to Gramps about a possible tax filing obligation?

Zoo Mama: We had a situation where a birth mother opened an account for a minor and didn't want the mother who adopted the minor to know about it. They both had access to the SS# but didn't communicate with each other. Odd situations seem to come up all the time.

Ken: I agree with you. With low interest rates it's not such a pressing problem right now, but it does seem to be an issue that many banks are struggling with (or ignoring).

mtngrl,

No, I did not say that. Please distinguish between telling Grandpa:

* We stongly encourage you to tell your grandchild's parents about this account because this interest will be reported in the name and SSN of the child.

vs.

* This interest will be reported in the name and SSN of the child. Just like you and me, it will need to be included with any other income he has when it's time to file an income tax return.

The second example does nothing more than point out the obvious and it's not something I would encourage line personnel to say.

True, and if they say that, that's when the subject gets dropped

Very interesting issues here, privacy to the minor and to the g-pa who is a trustee, tax reporting, and I think it may come down to risk management - where is the bank obligated to provide information and where is the bank liable for its actions?

This is worth slicing and dicing but is it also one of those once in a million accounts type of issue? (My grandparents didn't put $100K in an account for me, so I've no experience here.) I also wonder what contingency plan gramps has for this account if he passes.

Yeah, I wish we were all that lucky right?

I know this is a little off the original subject, but as a contingency plan in Missouri our UTMA allows for a successor custodian to take control if something were to happen to them or if they wish to resign.

I've dealt with it a few times, but only when I was a trust officer. There, every customer had lots and lots of money and grandparents were oftentimes trying to find ways to get rid of it. Sigghhhh....