Today my wife and I opened up two new savings accounts for our two kids...
First, my wife is a US Citizen and PR of Canada, I am a Canadian Citizen only and our kids are dual US/CAN Citizens. We all live in Canada and all income is from Canada.
I am still investigation RESP's (my wife won't be touching them), but in the meantime we wanted something where we could deposit money each month for the kids - things like birthday money, gift money, universal child care benefit, canada child tax benefit and the additional child tax credit from the IRS, etc.
I just wanted to make sure that the accounts we opened up today at the bank do NOT generate the requirement to file f3520....
There are two accounts with separate account numbers. Each account shows my name, my wife's name and in trust child's name.
The accounts are personal deposit accounts in the form of a savings account - the ones that generate little to no interest....these accounts are linked to our main checking account so that I can do manual transfers online or setup monthly pre-authorized transfers.
My wife and I are joint holders so either of us can sign and there is survivorship so that in the event one of us passes, the monies go to the surviving spouse.
I am aware that these will have to be shown on the TDF90 for 2012 under my wife's name with me as the primary joint holder.
Am I correct in assuming that these do not require a f3520?
Thanks
Question re savings account for child and IRS filing
Moderator: Mark T Serbinski CA CPA
Savings accounts a reperfectly fine for kids, and do not incur trust reporting -- IF they are not trusts. Any particular reason you made them "in trust"?
In canada, of course, these accounts remain taxable in the hands of the parents.
In US they are taxable in the childs name, but they are allowed $700 (?) of investment income before having to pay tax (so-called kiddie tax).
In canada, of course, these accounts remain taxable in the hands of the parents.
In US they are taxable in the childs name, but they are allowed $700 (?) of investment income before having to pay tax (so-called kiddie tax).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks for the quick reply!
I just got off the phone with the banking officer who set these up and she confirmed that they are not trusts but rather "everyday savings accounts".
The monies that would be in the accounts belong to my wife and I as we are the account holders, and the money can be used for whatever reason we would need. Of course, we would not use the money as it is for the kids.
She said the reason the paperwork showed our names and then in trust with the child's name was so that we would know which account held who's money - more of a means to keep things from getting confused. She did say that the kid's names could be removed from the accounts all together if that makes matters easier. I would just have to remember which account belongs to what child which would be easy to do as I would make note of which account number goes with who.
Would you recommend having the kids names removed?
If they stay on there as they are now - "in trust" - could these savings accounts be potentially looked at as an informal trust?
I would think not as they are clearly labeled as personal deposit accounts: everyday savings and therefore not subject to trust reporting.
At the end of the day, the reason for doing it this way was that these accounts could be directly linked to our daily checking account (as my wife and I own the accounts) which makes it much easier for my wife or I to do any transfers online or through the bank using our bank cards or online profile.
The other method would be to open a youth account in the children's names but it would then be difficult to link their accounts to ours because technically they own the accounts...then, anytime we want to deposit funds we would have to go into the bank and use their bank cards, more of an inconvenience...
I just got off the phone with the banking officer who set these up and she confirmed that they are not trusts but rather "everyday savings accounts".
The monies that would be in the accounts belong to my wife and I as we are the account holders, and the money can be used for whatever reason we would need. Of course, we would not use the money as it is for the kids.
She said the reason the paperwork showed our names and then in trust with the child's name was so that we would know which account held who's money - more of a means to keep things from getting confused. She did say that the kid's names could be removed from the accounts all together if that makes matters easier. I would just have to remember which account belongs to what child which would be easy to do as I would make note of which account number goes with who.
Would you recommend having the kids names removed?
If they stay on there as they are now - "in trust" - could these savings accounts be potentially looked at as an informal trust?
I would think not as they are clearly labeled as personal deposit accounts: everyday savings and therefore not subject to trust reporting.
At the end of the day, the reason for doing it this way was that these accounts could be directly linked to our daily checking account (as my wife and I own the accounts) which makes it much easier for my wife or I to do any transfers online or through the bank using our bank cards or online profile.
The other method would be to open a youth account in the children's names but it would then be difficult to link their accounts to ours because technically they own the accounts...then, anytime we want to deposit funds we would have to go into the bank and use their bank cards, more of an inconvenience...
They are not trusts, and because of how you set them up, they are taxable in youyr hands in boith countries -- that would always be taxable in canada in your hands.
I'd leave it as it is.
I'd leave it as it is.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best