US Investment account for minor

US Market & Sectors
1

Hi,

Just wondering is it possible to open an account for my minor child( Indian by birth) to invest in US stock from india and ETF for long term, primarily take advantage of capital gain taxes once he/ she is an adult at the age of 18.

Is it legal ? What are the tax implications? Is there any other aspects that we need to keep in mind ?

Thanks in advance…

2

Hi @Suprajit_Axis_551
Currently, our broker-partner does not allow minors (those under 18 years of age) to open brokerage accounts. We are working with them to facilitate this and will keep you informed when it becomes available.

For Indian residents, the account when opened, should function in the same manner as a normal brokerage account, but would have a beneficiary/guardian who would hold custody of the account’s assets until the child is above 18 years old. Capital gains should similarly apply for assets depending on whether they have been held for a short-term or long-term period, as tax-advantaged brokerage accounts for minors are only available to US residents.

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Thank you @Naman-Vested for addressing my query.

If I understand it correctly then before my child turns 18 all the capital gain/ dividend will be taxed as my income. Only when my child turns 18 then the capital gain/ dividend will be taxed as my child’s income and my child will be legal owner for the trading account at that time.

Please do let me know an rough timeframe when vested is planning to allow this facility?

Also what is the difference between ‘tax-advantaged brokerage accounts for minors, only available to US residents’ and 'brokarage account for minor opened and maintained by parents from India. Apart from former being exclusively available to US residents.

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Hi @Suprajit_Axis_551
Yes, that is correct on the first point. When custody of the account sits with you, all capital gains and income received will be taxed as per your income. When custody shifts to your child, he will bear the taxes on capital gains and other income.

We don’t have a timeline yet on this, but we will keep you notified when this facility is available on Vested. For the difference question, US residents are allowed to open UGMA/UTMA accounts ( Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA)) in the name of their child, where the account is taxed as per the child’s income rather than the parent/guardian.

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