Gift tax when giving money to minor children?

[Slicer]

If I'm giving money to my minor child, do I still need to follow the gift tax rules? Or, can I just give him $20k?

By the way, "give him" means put it in his UTMA.

Thanks.

[sweeps]

Yes, it is subject to gift tax rules.

[Slicer]

Ok. Just curious.

How do really wealthy people give their minor kids things?

Like right now, I buy birthday & Christmas presents, video games occasionally, etc... For me, these "gifts" wouldn't come anywhere near the 12k limit.

But, someone that makes a ton of money could give cars, electronics, whatever; that's well over 12k (or 24k for two parents) in a year. Do they really jump through hoops to be able to give them these things?

Or perhaps the parents simply buy them for themselves and allow the kids to use them? I guess buying a physical gift is a bit harder to quantify the "owner" than actually putting $xxx in a specific person's account.

Again.. just wondering...

[sweeps]

It's a good question. I would guess a couple reasons this is usually not a problem is:
(1) Most of these items could still be considered owned by the parents. For example, a parent buys a $1,000 video game system. Though the child is the only one playing the game, it is still technically owned by the parent.
(2) It's hard for the govt to track all these little purchases vs. tracking the opening of a $20,000 bank account for a child.

[jasanderson]

you are allowed to gift so much $$ in a year w/o the recipient paying taxes. At one point I thought it was $10,000. Check with your tax man.

[disneysteve]

you are allowed to gift so much $$ in a year w/o the recipient paying taxes. At one point I thought it was $10,000. Check with your tax man.

Actually, gift tax is paid by the giver, not the recipient.

[Like2Plan]

you are allowed to gift so much $$ in a year w/o the recipient paying taxes. At one point I thought it was $10,000. Check with your tax man.

It's actually up to 12K per year per person. As DisneySteve pointed out, it is not a tax the recipient pays--it goes against the estate of the person who gifts more than 12k in 1 year to someone (other than a spouse). That person giving the gift will have to fill out an additional form when filing taxes.

Who pays the gift tax?

[Slicer]

After doing a little more research, I think I'm just going to put it into a brokerage account in my name earmarked for his education and other things (car and such).

When / if he needs to apply for financial aid, you're required to contribute 35% of the child's assets before financial aid is given; compared to 5.6% of the parent's assets.

Thanks for the input!

[aida2003]

I always wonder how the IRS can track substantial gifts. Unless you put more than $12k (or $24k for married people) in an account, how would a new car be tracked? I think it all boils down to the honesty of givers, doesn't it? If you disclose it to the IRS, they'll be happy, if not, unless you're audited, they'll never know, I guess.