1. breach of fiduciary duty for the younger child.
Once you gifted the money to your younger child into his UGMA, it is his money and you are merely acting as a fiduciary (受托人）. I don't think your younger child could give a informed decision of giving away his/her money to his/her sibling, so essentially you are stealing his/her money to give them to your older child.
You don't need to laugh, you are trying to get around $17000 gift tax allowance, so we are in legal domain.
2. evasion of taxation
If it is shown that you performed bad act (such as breach of fiduciary duty), the finding of evasion of taxation is the next step.
3. It is unnesessary to do what you did. Gift tax exemption is 11 million per person.
Every year you can gift $17,000 to anyone WITHOUT any tax consequences. However, it doesn't mean any gift above $17000 is taxable. In US federal tax code, gift tax is combined with estate tax that has an exemption of 11 million per person. That is to say, you can give away 11 million during your life time OR after your death, without paying gift/estate tax.
So if you give your older child $37000 per year, the $17,000 is completely invisible to tax return. The $20000 ($37-17) has to be reported in your tax return gift form 709, and it will be added up every year. If your lifetime accumulated gift amount is less than 11 million, you don't have to pay any gift tax when you are live. After your death, your estate will be combined with all the gifts you reported during your lifetime (remember that's after $17000 annual gift allowance), and if the amount is less than 11 million, your estate don't pay any estate tax.
