Transfers and categories (Q Mac)

JayDC

I am transferring money from my brokerage account to a one of several new Merrill Edge joint accounts that I have set up with my grandchildren. I can see my accounts and all of theirs on Quicken in the left column. So when I transfer, say $100 from the brokerage to "grandchild" account, I use the traditional method where the opposite account is listed as a transfer. Of course, this works perfectly, just as if you are transferring $100 from brokerage to checking, both your accounts. However, I want to assign the category "gifts" to the transfer to from my brokerage account to my grandchild's account. There does not seem to be a way to do this. I have scanned through the community and found that in 2020 there was talk of doing this in Quicken for Mac. Any help would be appreciated.

jacobs

The answer is a bit complicated, I'm afraid.

First, I should note that there actually is a way you can do what you want if you enter the fields in the correct order (enter the category in the category field first, then enter the transfer account in the Transfer field). But you might not want to do so, for several reasons…

As a practical matter, a transaction with a transfer and a category will behave unexpectedly in reports; your transfer transaction won't show in a transactions by category report under your gift expenses as you'd expect.

The broader issue here is that having a transaction act as both a transfer between assets and an income or expense violates the basic rules of accounting. When you record an expense, such as a gift, it represents money that is being removed from your net worth; but in this case, you are only transferring the money from one asset account to another, which is not actually an expense.

That the ability to do a transfer with a category exists at all is a quirk of history and how Quicken Mac was developed from a predecessor program with limited capabilities, and I won't go into that here. The important thing is that product management has said that they do plan to close this loophole and prevent such transactions in the future. The former Quicken Mac product manager said:

Our leadership team has decided that categories on transfers violates core accounting principals that our products should be based on and we are slowly removing this functionality from the Mac… This decision was made at the highest levels of our company so it's not going to be revisited.

They haven't implemented it fully yet because it's a change that impacts a number of parts of the code, and they need to insure that their implementation won't ruin the records of people who have been doing transactions this way for years. But it is still on the development roadmap for implementation in the future.

So what do you do as a practical solution? First, assess whether you really do want these transfers tracked as expenses; if the money is still in an account in your name, do you want it showing as an expense? You have the option of including selected transfers in reports or budgets, if that's your aim. But if you do want it to be an expense for your purposes, you might want to consider entering two separate transactions in Quicken. In your main brokerage account, either the $100 out as a Type=Payment/Deposit transaction, using your gifts category. In your joint account, if the money is going into a money market account where you record the shares, you could enter an Add Shares transaction for the $100 appearing in the account. If it's going into a cash account where you don't track shares you could enter a Payment/Deposit transaction and use a category of "Transfer". (That's not a linked transfer to the other account; it's a generic "transfer" which means the money is coming from somewhere not linked in Quicken.) Use the Memo field in both transactions to provide whatever notation you want to make clear that this was a transfer from/to your brokerage account.

RickO

Thanks to @jacobs for the very thorough answer. This is why I held off answering because I knew he'd do a much better job than I would. :-)

That said, I have one more suggestion. I sense that your goal may be to be able to generate a report on just these transfers/expenses. If that's the case, I'd suggest recording them as ordinary transfers between Quicken accounts. But also use a Tag to mark them as something like "Grandchild Gift". When you generate a report, you can choose to include transfers in the report under the Advanced tab in report customization. You can also limit the report to just the "Grandchild Gift" tag under the Tags tab. Then you'd have a report showing just these transfers.

jacobs

Ha, I meant to mention tags as another option, but I got so caught up in my long-winded answer that I forgot. Thanks for batting clean-up, @RickO! 😀

JayDC

Sorry for not getting right back to you @Jacobs. Was out in the car. What a thorough answer and well thought out. I understand the issue of proper accounting for sure. The transfer is from an account that I own solely to an account owned jointly by my grandchild. So, the money is actually not going to me, but to them, so an expense would be appropriate, however to get the money to show up in the grandchild's account it would necessarily have to be a traditional transfer.

In experimenting, I think I have found the answer. From the Brokerage account input Payment/Deposit, Name of Grandchild, Category Gifts:Grandchild's name, $ amount.

Then go to the Grandchild's Account and enter Payment/Deposit, Grandchild's Name, [Brokerage Account] $amount.

Then, the money is taken out of the brokerage account via Transfer from the entry in the Grandchild's account and the Gift Category is utilized by the original transaction in the Brokerage account. From the looks of things, this works. The funds are taken out of the brokerage account and the report shows the gift. Am I missing something?

RickO

If I'm understanding the entries you are describing, you will have the money removed from the brokerage account twice, once for the Payment/Deposit in the brokerage account, and again from the Transfer entry in the Grandchild's account.

JayDC

I would have thought so too, but it didn't.

jacobs

I agree with @RickO that what you describe doesn’t add up. When you enter the first transaction, does the balance in the brokerage account go down? I’m sure it does. When you enter the second transaction, the balance in the brokerage account doesn’t decrease again? Does the transfer transaction show up in the brokerage account at all? I’m guessing it doesn’t. It doesn’t sound like the transfer transaction is actually a linked transfer pulling money out of the brokerage account.

RickO

It would be helpful to see screenshots of these transactions in the registers (including the column headers).

JayDC

Sorry about taking so long to get back on this. Guests here for a few days.

I went back and checked and you guys are correct. I entered the transaction as a "gift" from my brokerage. Of course, it did not show up in the grandchild's account. Then went to the grandchild's account and entered the transaction as a transfer which required me to enter the brokerage account from which it was transferred. A dialog box popped up saying that it had found a duplicate transaction and a Yes/no option for matching it. If I say yes, it replaces the "gift" transaction in the brokerage account. If I say no, it creates a totally new transfer in the brokerage account. The result is that the amount was subtracted twice from the brokerage account. Back to Square One! Going back to explore options presented by @jacobs

JayDC

Okay….here is a solution. Enter the transaction in the brokerage account as a "gift" category.

Then go to grandchild's account and do a new transaction for same amount From Brokerage, but leave it as "uncategorized".

I typically clean up uncategorized transactions by going to a Cash Flow Account and scroll down to Uncategorized. Then one by one edit them to get all this correct. I would need to remember to recognize those that say From Brokerage, for instance and know that they need to remain Uncategorized.

Or, to make sure that the Uncategorized Category remains "Zero" I set up a new Checking Account and named it Uncategorized Adjustments. There I enter a transaction to offset the total of the transactions in the Uncategorized Category that are associated with gifts to my grandchildren into the ML Edge Accounts. This can just be one transaction, adjusted as needed rather than making an entry each time you make a gift to a grandchild into one of their ML Edge Accounts.

On the Net Worth Report, simply turn off the Uncategorized Adjustment Checking account and all is well.

JayDC

One more thing….

The only reason that this becomes a problem, of course, is if the account that you are giving money to your Grandchildren in is a joint account or custodial account that shows up and is downloaded via Quicken from Merrill. If it is an account that they own in another institution, or even in Merrill, where you are not associated with the account, you only make one transaction in the Brokerage Acct. Just as a gift.

jacobs

instead of leaving the category uncategorized, use the category “Transfer”. This unlinked transfer puts the money in the account without subtracting it elsewhere. And it doesn’t leave you with any messy uncategorized transactions.

JayDC

@jacobs So you are saying that if you use the account "transfer", this does not appear in Cash Flow accounts at all? Interesting! Then I can delete the Synthetic Checking Account to balance out the Uncategorized transactions, right?

jacobs

Yes, "Transfer" and "Adjustment" are two special Quicken categories which are not counted as either income or expense; they simply make money appear or disappear. Which is what you want in this case. That's why in the first reply in this thread, I suggested using "Transfer". You don't need a dummy account to accomplish what you're doing.

JayDC

Thanks everyone for their expert help! @jacobs @RickO