Children's Savings

I have child #1 very soon to arrive. In the midst of all the other preparations, I've been thinking about whether to open some children's savings accounts, ever since I saw this article. I currently hold cash in other savings accounts paying around 1% so if I could double that I'd be pretty happy.

The kid will be a dual US/UK citizen, and it seems like the US tax consequences would be:

• Child must file an FBAR; parent must report the account in the "signature authority" section of their own FBAR
• US would tax the child, not the parents, on the interest earned

What I'm not so clear on is US gift tax - does anyone know whether this would trigger it? Or any other consequences I haven't thought of?

I don't know if the US gift tax rules apply to US citizens living in the UK but if they do then each person can give ~15k per year without having to report it, so parents can easily give $30k/year for each child.

This would be in excess of the gift tax amounts. What then?

This would be in excess of the gift tax amounts. What then?

I think the amount given has to either be recorded against the tax-free allowance of the giver when they die or the recipient can pay the tax now.

Currently a person can leave a little over $5m tax free when they die and they can essentially give that away before they die.

https://en.wikipedia.org/wiki/Gift_tax_in_the_United_States

The gift tax is a backstop to the United States estate tax. Without the gift tax, large estates could be reduced by simply giving the money away prior to death, and thus escape any potential estate tax. Gifts above the annual exemption amount act to reduce the lifetime gift tax exclusion.[12] Congress initially passed the gift tax in 1932 at a much lower rate than the estate tax, a full 25% under the estate tax rate, while also providing a $50,000 exemption, separate from the $50,000 exemption under estate tax.[13] The benefits were clear: a $10,000,000 gift would be taxed only $2,300,000, effectively only 23.0%, well below the estate tax rate.[14]