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Subject:  Re: Education IRA info? Date:  8/6/1999  3:28 PM
Author:  RobinB Number:  12908 of 78166

I am thinking of setting one up for my soon-to-be nephew (hopefully tonight). I am looking for specific info like: If I set it up, can it later be transferred into his parents' names (as custodians)? Can someone else contribute to the account (e.g. if I should someday exceed the income maximum)? I've heard that one way to avoid the income max is to give the money as a gift to the child and then set up the Ira in their name so they are technically contributing to their account? Can you make a contribution the year the child turns 18? Or do they have to be under 18 the entire year to contribute?

It sounds to me like you're mixing ideas. You can gift $10,000 a year to one individual (child or otherwise) and take that as a tax deduction. I think the maximum you can gift in any one year is $100,000. You can also open up a Uniform Gift/Transfer to Minor Act (UGMA/UTMA) account. This account is under the child's social security number and is the child's money, with an adult (such as yourself) as custodian. Anyone can contribute to this account, parents, grandparents etc. Now, if all of these people are going to take these gifts as tax deductions they should probably keep a copy of the check used for the gift.

Now, whether you use UGMA/UTMA depends on which state the child lives in. But, by setting up a custodial account the money becomes the child's money. The custodian is responsible for the money and how it is used. It has to be used for the benefit of the child. So, in 18 years when your nephew goes to college, the money can be withdr