Grandchildren's savings accounts

Gnerally minors would not be able to contract for such an account, and so a parent or grandparent might gift them some money, and open an account known as a Uniform Gifts (or Transfers) to Minors Account UGMA or UTMA. An adult custodian would also be named to manage the account for the minor. The minor's SSN would then appear on the account.

Such an account is then owned by the minor and managed by the custodian, and any earnings would be reported by the minor, if reporting is required.

So you might wish to close out this account and place the funds into the minor's UGMA/UTMA account.

You might consider following the Nominee procedures described in IRS Publication 550 to tell the IRS these earnings reported to you really belong to the minors, but that would depend on whether the account was set up so it really did belong to them. If it's not too much money, report it as yours and consider it an additional present :^)

If everything is set up right, the kids would either:

(1) Pay tax on the interest on their own tax return. (form 8615) (2) The people who they are a dependent of (usually the parents) would pay interest on the tax on their own tax return (form 8814)

In 2008 the first $900 of investment income is tax-free, the next $900 is taxed at 10%, and the remainder is taxed at the parents' rate. For

And these forms 8615 and 8814, known as the "kiddie tax", apply too teenagers and young adults as well.