Opening a warehouse for children or grandchildren – you need to know it

This is what awaits you in this article

Would you like to give a stake or an ETF to your children, grandchildren or third parties? With a gift like this, it will surely stand out and make the recipient happy. After all, a gift of money at best multiplies and grows as the child receives the gift.

In addition to emphasizing or emphasizing, there are many other occasions for such gifts: your first car, for example, furnishing your first apartment or a long trip after school. And the longer you have time to do this, the more profitable it is to put the amount you want to give the child into low-cost exchange-traded funds (ETFs) that track stocks.

In order to buy and sell stocks or ETFs, you need a securities account. You can open this with your child’s name. But you can also set it up in your name – and give the content to the child immediately or later.

How do you find the right warehouse for your child?

Many banks offer special custody accounts for children or young children of minors. So you can first ask your bank if they keep these deposits and how much they cost. Many institutes have custody accounts for minors without a monthly fee. However, buying stock usually costs something. In other guides, we will show you direct banks and online brokers with which you can find good and inexpensive junior accounts and where you can even have an automated advisor that works for your offspring.

What do you need to open a children’s warehouse?

A custody account in the name of the child can only be opened by the legal representatives of the child. These are usually the parents. Singles or unmarried couples must prove to the bank that they have custody of the child.

First you have to fill out the application for opening a children’s warehouse. Many banks have it online. ING’s “Live Small Warehouse Contract” explains what such an application looks like. Among other things, you will need your child’s tax identification number.

Importance: Both parents must sign the application. In addition to the application, submit other documents. This includes the child’s birth certificate. If the child is over 16, some banks will also require a copy of the child’s ID. Finally, the parents must legitimize themselves using the postident or videoident action.

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What should you consider with a child custody account?

After opening, the parents have a power of attorney for the small custody account and thus access to the securities and funds in the clearing account. You can only manage assets. It belongs to the child, not the parents. So you cannot use it for your own purposes. “Parents are not allowed to simply withdraw money from a child’s account, for example to buy a new kitchen,” says United Income Tax Aid. Even expenses that benefit the child are taboo – for example to furnish a nursery or for a school trip.

Also considered: At the age of 18, the offspring alone has the authority to dispose of the assets in the trust account. If your child squanders all the money, there is nothing you can do about it. So you should make it clear in advance whether and how much you want to give your child in the end – for example, in anticipation of a future inheritance.

What about the tax on the children’s warehouse?

Children are also taxpayers – at least if they have an income of their own. So you also have the usual allowances. This is important because the securities in the portfolio (hopefully) generate interest and profits. This flat rate withholding tax of 25 percent is due – unless it’s below the tax-exempt threshold for capital gains. In 2022, the so-called savings allowance will be €801 per year for individuals. It also applies to children’s warehouse. To claim the exemption amount, you must file an exemption order with the bank.

If a higher income has been expected over the years, you can also apply for a Certificate of No Child Assessment from the tax office. You submit this to the bank and then you get the basic tax credit for the child as well as the tax credit for the saver. In 2022, the price was 984 euros.

You should also monitor how much money you put into your child custody account over the years. Because the tax office looks at that, too. Each parent can give their children up to €400,000 in ten years without incurring gift tax. For grandparents, this limit is 200,000 euros.

When does it make sense to open a custody account in your name?

It is generally easier to create a nursery account in your own name and only then give the child the securities in it than to open a junior nursery account for the child. Opening a securities account in your name is not much of a hassle. Later, simply transfer the shares or funds from one custodian account to the other.

Holding the securities in your custodian account initially has one advantage: you always have unrestricted access to the assets: the money is yours until you give it up. Then you have to pay tax on it yourself – at least if your investment income is above the €801 savings allowance. For married couples 1602 euros.

In order to be able to give away securities from your trust account, the recipient also needs a trust account. The simplest case: the child has grown up and already has a deposit. Then simply transfer the securities you want to transfer to a child custody account. Many banks offer online forms for this and offer a transfer service, such as the DKB’s “Warehouse Switching Service”. You can only transfer individual securities to the child or the entire trust account. Warehouse moving is free. It lasts between one and six weeks.

If your adult child does not yet have a custody account, they must open one themselves. On the other hand, if the child is still a minor, the parents must create a small repository for the child before abandoning him.

What about taxes when transferring a deposit?

The bank usually considers the transfer of deposits as a sale. Withholding tax is automatically collected for this. Therefore it is important to inform the bank that it is a gift. It is best for a person giving up securities to do so in writing in his bank. Then the institute withholds from paying the final withholding tax. We have designed an informal letter that you can use for this. If the stock account is abandoned, the bank usually notes the original purchase costs per share. It is the basis for taxes when the gifted child sells shares later.

Donation allowances of €400,000 for fathers and €200,000 for grandparents during the ten-year period also apply to gifts of a full custody account. Anything after that is subject to the gift tax. For siblings, nieces, nephews or parents, this allowance is €20,000. The same applies to recipients who do not belong to the family.

Should you report donations to the tax office?

Yes, this is required by law. It applies even if the deposit amount is less than the gift allowance. According to the inheritance tax law, both the recipient and the donor must notify the tax office of the donation within three months. In every federal state, some tax offices are responsible for the gift tax. You can usually find out what’s on the website of your state (LfSt) or regional tax authorities.

The tax office notification is unofficial. This should include:

  • First name, surname, date of birth, address of recipient and donor,
  • Recipient-donor relationship,
  • Tax identification number, tax number and the responsible local tax office for participants,
  • Donation time
  • Information on whether there have already been donations in previous years,
  • The subject and value of the donation.

You can use this form, which is provided by the Bavarian tax authorities, as a guide.

If the donation is certified by a court or notary, you do not have to inform the tax office yourself. The court or notary will take care of this for you.

Your questions about the theme of children’s warehouse and stock gift

Do you have any other questions not answered in this guide? Our reader service is at your disposal to ask your questions, as long as they are general and do not constitute individual advice. Just write an email to redaktion@biallo.de. If necessary, we will update this article or write a new guide.

Other Important Questions About Children’s Warehouse

Below we answer the most frequently asked questions about child custody account and investment security:

Now parents, grandmother and grandfather regularly pay sums. But who actually owns the money invested?

The money invested belongs to the child. In the case of a children’s warehouse, only parents or grandparents are allowed to manage the warehouse. Funds cannot be disposed of prematurely.

The child needs money from the deposit before the age of 18. How can the parents access it?

The same applies here: withdrawing funds prematurely is not possible. Even if it is used for a child.

Is the approval of the legal guardian sufficient to open a securities account? What happens when parents separate? So who is responsible for the children’s warehouse?

It always depends on the nursery. If both parents have custody, both must agree to the deposit. In the case of sole custody, one signature is sufficient.

How can 18-year-olds access the repository if they don’t have access to its data?

From the age of 18, the deposit can either be dissolved or converted into a conventional deposit. In most cases, the offspring will be notified in writing by the Custody Bank. Then he has to identify himself and sign the documents himself. If necessary, an adult child can also contact the mediator.

Could the assets in the child custody account be unfavorable to the child, for example if he wants to receive social benefits or apply for a BAföG?

A child’s assets are always taken into account when calculating the benefit rate. The same applies to the amount of BAföG. Official exemption limits apply.

If grandparents or parents regularly pay the children’s deposit and later need financial help themselves, for example due to staying in a nursing home, should the money be returned?

The Seal Higher Regional Court gave the answer to this question in its judgment of February 13, 2020. Cash gifts that serve to create a capital stock are not privileged gifts within the meaning of Section 534 BGB. So, a social agency can, for example, demand a refund of the money given to the children in case of need for care.

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