My niece and I came up with a good idea that I think will make some money. I want to compensate her accordingly for what she has done.

I don't want to give her the money now, and I don't want to put it in a college fund. I would like her to be able to access it when she is around 25 years old.

What is the best way to get this to her? If all goes well it would probably be about 10-50k.

Thank you!

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    What are your main concerns? Are you concerned about the legal structure (e.g. a trust) or the financial performance (risk vs. return)?
    – D Stanley
    Sep 3 '19 at 16:13
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    You could write her a check for $15k or hand her cash. You could do this every year with no tax implication for her or you until you have paid her as much as you like. But because you are asking the question, I assume you don't want to do this. What about a cash transaction don't you like?
    – spuck
    Sep 3 '19 at 16:16
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    @spuck given the OP says the money is in compensation for business services (given "I want to compensate her accordingly for what she has done." and "on joint business venture?") its probably dubious to try and count it against the 15k gift allowance. Unless there are special rules for minors?
    – Vality
    Sep 3 '19 at 17:42
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    Re: "If all goes well..." So do you intend to give a set amount of money to your niece in advance, or is the amount of money and timing contingent on some level of the idea's success in the future? I think the answer is important with respect to structuring the eventual reward, unless you're OK with giving the money regardless. And is it money that you wish to award, or some kind of equity in the eventual business that's worth a designated amount of money at the time of reward? Sep 3 '19 at 18:23
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    @Chris W. Rea It is all contingent on success of the product. Basically she has helped me with a personal idea I had that is geared towards children. She has been very helpful on giving me insight into what kids are looking for. I potentially see her getting 12.5% of revenue, someone else 12.5%, me 25% ( I am doing the vast majority of the work and connection building) and a non profit getting 50%(maybe that's too high?)
    – Trey
    Sep 5 '19 at 15:23

Consider a UTMA:

One common form of custodial account is known by the acronym UTMA. UTMA stands for the Uniform Transfers to Minors Act, which is the legal provision in many states that authorizes a custodian to hold assets on behalf of a minor child until the child reaches the age of majority -- typically either 18 or 21. Although the custodian has legal possession of the minor's assets in a UTMA account, UTMA also imposes a fiduciary duty on the custodian to hold the assets on the minor's behalf. In addition, for tax purposes, the account is treated as the minor's, rather than as the custodian's, which has its advantages.

This does not meet your criteria for being 25 years old.

An irrevocable trust may allow you to enforce that age restriction:

An irrevocable trust is a type of trust where its terms cannot be modified, amended or terminated without the permission of the grantor's named beneficiary or beneficiaries. The grantor, having effectively transferred all ownership of assets into the trust, legally removes all of their rights of ownership to the assets and the trust.


Have you considered that compensation for services provided could be considered wages deductible from your own personal business income [which is perhaps what you will be earning from this idea]?

You will be in a higher tax bracket than your niece, so it is not a penalty to do things correctly [provide compensation for services rendered, instead of pretending it is a gift]. In fact, in this case, it may provide an overall beneficial outcome for you.

In order to do this, likely you can't provide the money to a trust on her behalf, so she may have access to it. It is possible that her parents may have the right to control her access to funds as a minor, I'm not sure - but if that's a route you take, make sure her parents control her money in her best interests.

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