Why People Send a Message to My Godson About Money
In 2024, many family members use a message to my godson to outline financial gifts, savings goals, or investment plans. The IRS allows individuals to give up to $18,000 per person per year in 2024 without triggering gift tax, and couples can double that amount. According to the IRS, this annual exclusion applies to cash, securities, and custodial account transfers, and it helps families reduce taxable estates while supporting younger relatives. For godparents and close relatives, a clear message can set expectations about how the money will be used, whether for education, a first car, or long-term investing.
A message to my godson often includes practical steps for managing a financial gift, such as opening a custodial brokerage account or a 529 college savings plan. Fidelity reports that custodial investment accounts allow minors to own assets while a parent or guardian manages them until the child reaches the age of majority, typically 18 or 21 depending on the state. The SEC notes that custodial accounts can hold stocks, ETFs, and mutual funds, and they offer a way to teach basic investment concepts before adulthood. Families may also use these accounts to hold shares of well-known companies, which can make the message to my godson feel concrete and educational.
Tax Rules and Reporting for Gifts to a Godson
Annual Gift Tax Exclusion and Lifetime Limits
The IRS sets the 2024 annual gift tax exclusion at $18,000 per recipient, and any amount above that requires filing Form 709, the United States Gift Tax Return. For 2024, the lifetime gift and estate tax exemption is $13.61 million per individual, according to the IRS. A message to my godson that exceeds the annual exclusion does not necessarily mean a tax bill, but it does reduce the remaining lifetime exemption. The IRS also requires that gifts of future interests, such as trusts that delay access, count against the lifetime exemption even if they fall below the annual limit.
Gift Tax vs. Income Tax for the Recipient
For the godson receiving the gift, the IRS generally does not treat cash or investment gifts as taxable income, so no federal income tax is due at the time of receipt. However, if the gift generates income, such as dividends from stocks or interest from bonds, the child may need to file a tax return under the "kiddie tax" rules. The IRS applies the child's unearned income to the parent's tax rate if the child's investment income exceeds a specified threshold, which for 2024 is $2,500 of unearned income. This means a message to my godson that includes investment assets should also mention the tax implications of any earnings.
Investment Options to Include in a Message to My Godson
Custodial Brokerage Accounts and ETFs
Custodial brokerage accounts allow adults to purchase stocks, ETFs, and mutual funds on behalf of a minor, with the child taking control at the age of majority. Vanguard and Fidelity both offer custodial accounts with no account fees and low-cost index fund options, making them popular choices for family gifts. A message to my godson can specify that the gift will be invested in broad-market ETFs, such as those tracking the S&P 500, to provide diversified exposure from an early age. According to Forbes, starting an investment account for a child can help build long-term wealth and financial literacy before college or a first job.
529 Plans and Education Savings
A 529 college savings plan offers tax-free growth and withdrawals for qualified education expenses, and contributions can be made by anyone, including godparents. The SEC explains that 529 plans