Since she is only 2, I can't open a bank account in her name. I know I could put the money into an education fund, but I don't want to do that. What are my options? Can I keep the money in my account? will I be legally liable if I were to use it for personal expenses?
Divorce / Separation Lawyer
I would suggest opening a money market account or other joint account (if possible) with her. Another alternative is to purchase bonds in her name. You really have a lot of options if your father wishes to ensure that the funds are in your child's name.
I invite my colleagus to weigh in as well.
I wish you all the best.
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Estate Planning Attorney
You can open a bank account in your daughter's name, but the account would be set up by the bank as a custodial account, governed by the Massachusetts Uniform Transfers To Minors Act (Chapter 201A). When you open the account, you can name yourself as the custodian, and the money in the account can only be used for the benefit of the minor. As custodian, you are allowed to collect, hold, manage, and invest the money for the minor's benefit, but you must keep an inventory of records of any transactions concerning the account. When your daughter reaches the age of 14, she would have the right to ask for information about the account.
Doing it this way at least buys you time, since you can just let the money sit in that account until you decide to put it somewhere else for her, like an education fund or a trust.
Hope this helps.
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Both attorneys offer sound advice. Setting up custodial accounts is the simplest way to go but understand if the fund builds up she may be getting a large amount when the account must terminate in many states at age 21. This could be problematic but maybe not. You should speak with an estates attorney directly as the totality of your situation may call for other strategies.
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Real Estate Attorney
You have so many wonderful options.
You could put the money into a specific account and then make a provision in your estate plan for the distribution of that account to your daughter.
You could also place the money in trust, which may be a good idea if your father intends and wishes to make additional gifts in the future.
I think if your father gives you money to hold for the child, you want to be very careful if and how you use it. Later on, your decision on how to handle that money could cause conflict both with your father and your daughter.
This is a great problem to have! $13,000.00 for a 2 year old is a wonderful thing, now sit down with an estate planning attorney and make sure it is protected for you and for your daughter!
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Wills and Living Wills Lawyer
If your parents are still working, they might also want to consider a 529 college savings plan as part of the gift. It has some preferential tax treatment for them. If they do not want to do this, the other attorneys are right that a UTMA custodial account, savings bonds are good one-time options and trusts may be feasible if this is just the start of a long-term gifting plan.
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Estate Planning Attorney
Your father intends this money to be a gift for your daughter. If you put the money in your account, it is subject to the claims of creditors, (car accident, business failure, nursing home spend down, divorce, etc.). I am certain you would feel horrible if this asset which you consider to be your daughters was taken by a creditor. A joint account is exposed to both parties creditors, don't go there.
A UGTMA account is a good idea, but has several draw backs. If you are custodian (likely) the assets of this account are included in your estate for estate tax purposes. As soon as your daughter turns 21 the account is her's and you will have no ability to say how it is used. Because you specifically asked for alternatives to a 529 education account I will not address that option.
Massachusetts just adopted the Massachusetts Uniform Trust Code, which generally makes it very easy to create a trust. A trust need not be complicated or expensive to be effective. To obtain asset protection the trust should be irrevocable.
If your father is in a position to make a $13,000 gift I wonder if he is intending to gift other assets in the future or leave her assets at death? What would be ideal is for your father to establish a trust, name you as trustee, put this gift and any future gifts for her in this trust. You could then protect these assets from your creditors, and avoid both estate and possibly income taxes on the investments made on her behalf. Because this trust old last for your dughter's entire lifetime, you could retain control until she is mature enough to assume this responibility. the trust assets would be protected from her creditors and protected from her spouse should she suffer a future divorce.
Speaking to a parent about money is rearely easy, but If you keep the focus on the advantages to his grandchild your father may be receptive to this conversation, and should be impressed with your thoughtfulness.
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