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Child Gift/Investment question

Bogleheads • View forum - Personal Finance (Not Investing) - www.bogleheads.org
My uncle (who has no children), recently gave money to each of my small children to be used for their future educations. It is a generous gift based on his fixed income (I have little knowledge of his finances), though a small amount (currently about 5%) relative to my childrens' current 529 balances, ages 2 and 4 (invested in broad based index funds). He set up a custodial account to have the gifts invested in a single mid-cap value stock (from what I've learned about it on Morningstar) with automatically reinvested dividends which currently pay in the 2-3% range. I do not believe it was set up as a UTMA but I am the designated custodian of each account.

While I think we are fortunate enough that his gifts will not make-or-break my children's education going forward, and I am grateful as much for the symbolic measure (generational gifting to help the only members of his family of the new generation) as anything else, I can't help but approach it as a Boglehead who would never invest any meaningful money into a single stock (I do, in a taxable account have ~1% of my total assets invested in single stocks, so maybe I just don't like the idea of this stock). In delving further (and testing the waters), I discussed the gift with my father (uncle's brother), who, when I mentioned the individual stock, said, "Yes, that's a great investment. We have money in that stock as well" Apparently, it is a family assumption that this stock is "good" and the last two generations of my family have invested faithfully in it as their father (my grandfather) had a portion of his retirement invested in it. It leads me to wonder whether there is some family "emotional" attachment to the stock, and therefore the gift of the stock.

I mention this because I'm wondering if I should close the account, take the proceeds and apply them to the 529s. I do not want to upset my uncle, nor seem like we are not grateful for the gift. It may be a better tax move (as well as better diversification) since annual gains are not taxable within a 529 but may be with this custodial account (?). Or, as a better question, if I did do move the money, how I would address any future comments/discussion in the family regarding the stock (should I tell him what I'm doing or only mention it if it comes up in conversation)?

Thanks for the collective insight!
Date: Jun 19, 2017   


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