Liz Weston: Aunt wants to gift mental health care to nieces and nephews – oregonlive.com

Dear Liz: This is a little unorthodox, but Im hoping you can help. I have six nieces and nephews from my various brothers and sisters. They range in age from babies to teenagers. When they get older, I want to be able to assist them with therapy sessions not because I think their parents will mess them up, but because I believe mental health is important to success. I imagine telling them about this fund when they are about 18 or so, so Id need money I can access in five to 10 years. How should I start saving for this? What accounts should I use? Should I open one account for each of them, and how can I manage this the best way for my taxes?

Answer: Custodial accounts could save money on taxes, but the money would become entirely theirs at a certain point (typically age 18 or 21) and you would lose control over what they did with it. You could hire an attorney to draft trusts that would have more restrictions, but that will cost hundreds or even thousands of dollars to set up and administer.

The simplest solution would be to set up one or more accounts in your own name that youve earmarked for this purpose. You would pay taxes on any interest, dividends and capital gains accrued, but you would maintain control of the money and it wouldnt affect the childrens ability to get financial aid in college.

Keeping control also gives you the flexibility to use the money for another purpose, in case your young relatives dont need or want therapy. Mental health challenges although widespread arent universal. A survey funded by the National Institute of Mental Health found 46% of adults had a psychiatric disorder at some time in the past, and one-quarter had experienced a problem in the previous year. The most common disorders were major depression (17%), alcohol abuse (13%) and social anxiety disorder (12%).

If youre concerned about their success and want to help with money theyre even more likely to need, consider funding 529 college savings plans. The money can grow tax-deferred and be used tax-free at virtually any post-secondary school in the U.S., as well as some abroad. You can maintain control and have the flexibility to move money to other beneficiaries, or to withdraw it at any time (although youd pay penalties and taxes on any earnings).

Liz Weston, certified financial planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the Contact form at asklizweston.com.

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Liz Weston: Aunt wants to gift mental health care to nieces and nephews - oregonlive.com