What is an Investment account for kids'?
A UNest investment account is a custodial account, also known as a UGMA/UTMA. These accounts are opened by a custodian for the benefit of a beneficiary. A custodian can be anyone! Parents, Grandparents, Aunts, Uncles or friends. The beneficiary is typically a child. When signing up for an account, the custodian can pick the age the beneficiary will get the account, depending on the state that the custodian is in.
How is your education account different from your investment account?
Our education accounts are an account used to save money for educational expenses, with special tax advantages. 529 plans have an account owner, who controls the funds, and an account beneficiary, whose education the funds are intended for.
A investment account does not have restrictions on what the money can be spent on, as long as it is for the benefit of the beneficiary. Accounts get automatically transferred to the beneficiary when they reach a certain age. This age is determined by the state and is selected when signing up for the account.
Education accounts and investment accounts are taxed differently.
What are the benefits of UNest investment accounts?
Unlike education accounts, UNest investment accounts do not have to be spent on college. These funds can be used for a down payment on a house, a future business or other items for the benefit of the beneficiary! The beneficiary gets control of these funds at a certain age (determined during account sign up) and the account will transform into a regular investment account.
How are UNest investment accounts taxed?
While UNest does not offer tax advice, and we always recommend talking to a tax professional, we have included a general breakdown of how Unest investment accounts may be taxed.
In 2020, the first $1,100 is typically considered tax free. The next $1,100 is taxed at the beneficiaries tax rax. Anything above that amount is usually taxed at the account owner’s rate.