I need to sell stocks in order to buy a house. I have some unrealized gains. If I realize the gains, I may lose my EIC, and it will make my income rise (regarding gov. programs). Can I transfer it to a UTMA account, sell it there and use the proceeds to purchase the house, as it is being used as a home for my children? Any help is appreciated..
Besides the Gift Tax issue of a transfer over $17k
https://www.thebalancemoney.com/spending-childs-utma-money-illegal-358134#:~:text=Under%20the%20Uniform%20Transfers%20to,child%20at%20the%20appropriate%20age.&text=A%20UTMA%20custodian%20may%20be,and%20benefit%20of%20the%20minor.%22As the account custodian, you owe a fiduciary duty to your child
In the United States, a child's money does not belong to the child's parents or guardians. Once the paperwork is in order, as a custodian of a UTMA you become a fiduciary or you owe a fiduciary duty to the beneficiary of that account.
"Fiduciary duty" means you can only use the money in their best interest. You must invest it in a manner consistent with the "prudent person rule." Y
ou also can't use the funds for necessary expenses such as food or shelter, because you are legally obligated to provide those as a parent.
"Once you've put someone in that fiduciary capacity, no they can't be paying if the child support obligations is theirs individually," Jason Haselkorn, an investment fraud attorney and Partner at Haselkorn & Thibaut told The Balance in an interview. "They can't be taking money that belongs to the beneficiary to pay a child support obligation because as a trustee and as a fiduciary you are basically pilfering the beneficiary's money even if the money is going towards the benefit of that beneficiary," he added.
This fiduciary obligation is also what makes it so hard to understand what is permissible and what is not because the law varies by state. "Now you're under that state's common law and each state has its own common law case law and principles that'll develop," said Haselkon.
Note
As part of the fiduciary obligation, you are also required to keep detailed accounting records, down to the penny, of every cash flow into or out of the account. If the child requests accounting records, even decades after it was first established (as is often the case when babies or young children are gifted stock), you'll be compelled by the courts to produce it (if you don't do so voluntarily).