TOD accounts

[taxbrewster]

Well, getting ready to wrap things up, but one last item.

Had a last minute college student stop in. Pretty simple stuff - w2, education, brokerage acct, etc. A nice piece of cake to close up shop..

Then his father faxes me 40 pages of another brokerage account - titled under the students name with "TOD on File" in students SS# on account.

Now, I have dealt with these when someone dies and receives the monies. But does he include these on his return and have to pay tax on all these dividends, interest, and cap gains?? Why would the father send them to me now? Aren't they being captured in a trust or by the father since he still has control?

My brain is mush...Need some help.

[joanmcq]

Maybe it's TOD in case the student dies?

[Kea]

"TOD on file" just means that the account is set up to be paid to someone when the student dies -- no affect on the tax return as long as he is alive. You can disregard that line.

So, yes, the student has to pay tax on all the interest, dividends, & capital gains. It could even trigger "KIddie Tax."

May want an extension!

[taxbrewster]

Ok, that makes sense, the way you describe it. And, it makes sense to include the income on the return. The student said the father was shifting income to him before death, he has never taken any funds and I don't think has access, but has to pay tax. That is what I get for listening to the student and just not go directly to the father. Long day....

Thanks again.

[joanmcq]

Dad probably doesn't give him too much information since the kid could go and drain all the accounts. That was always the problem with UGMA accounts; kids had full access to the money upon maturity, usually age 18 but sometimes age 25.

[BulldogTom]

OK, I am dumb. What does TOD stand for?

Tom

Hollister, CA

[michaelmars]

transfer on death

[BulldogTom]

OK, now I get it. Father set up a UGMA account and named himself as the beneficiary.

Thanks. First time I had seen TOD acronym.

Tom

Hollister, CA

[ljwalters]

Bulldogtom,

You can set the registration on an auto up the same way in CA. Not just financial accounts

[Randall]

And the TOD doesn't mean it's a UGMA account. Father was trying to shift income. But the kiddie tax will offset that. And they recently raised the age for kiddie tax for full time students. This will surprise them. Most people don't know about it just like the AMT when they first get hit by it. Say what???