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UTMA (uniform transfer to minors) accounts are pretty easy to setup. The first $1000 in income is tax free, second $1000 is taxed at the minor's tax rate. Anything over that is taxed at the parent's or child's rate (which ever is higher). The UTMA reverts to the child's control at 21 and can be used for any purpose the child decides they want to use the money for. Prior to 21 you can still withdraw money but it has to benefit the child past "normal" expenses.
If you are sure you want this money for educational expenses then a 529 College plan would probably be best as it grows tax free and withdrawals are tax free within certain limits.
While there probably is some concern, honestly, the best way to do either would be for the custodial parent to be named the custodian OR possibly one of Mike's parents (the grandparents) could be the custodian of the account. Maybe a brother or sister.
You could setup either with a non-relative as the custodian as long as you are 100% confident you want the burden of maintaing these accounts until the child is 21 (UTMA) or through college (probably 21-22).
Either of these accounts can continue to be added to over the years. I'm not too sure about the 529 investment options but my daughter's UTMA's are treated as a cash brokerage account (without margin) and can invest in pretty much anything.
The expense of creating a full out trust would probably use up the $6000 goal pretty quickly. Thee two options above can be setup at $0 expense.
Anyway, my .25 cents.
If you are sure you want this money for educational expenses then a 529 College plan would probably be best as it grows tax free and withdrawals are tax free within certain limits.
While there probably is some concern, honestly, the best way to do either would be for the custodial parent to be named the custodian OR possibly one of Mike's parents (the grandparents) could be the custodian of the account. Maybe a brother or sister.
You could setup either with a non-relative as the custodian as long as you are 100% confident you want the burden of maintaing these accounts until the child is 21 (UTMA) or through college (probably 21-22).
Either of these accounts can continue to be added to over the years. I'm not too sure about the 529 investment options but my daughter's UTMA's are treated as a cash brokerage account (without margin) and can invest in pretty much anything.
The expense of creating a full out trust would probably use up the $6000 goal pretty quickly. Thee two options above can be setup at $0 expense.
Anyway, my .25 cents.
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