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Author: dakota2020 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74776  
Subject: Can I set up a ROTH IRA for a 2 year old child? Date: 9/3/1999 3:23 PM
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I am the owner of a small corporation and I have a 2 year old son. I run a camp for kids and I'm planning on using his picture for my brochure and website promotions. I know you can't set up an IRA unless you make a salary. If I pay my son say $500 from the corporation can I use that money to fund a ROTH IRA for him? I'm curious to know if there is a minimum age for someone setting up a Roth. Even a few hundred dollars a year starting will add up to a lot if you are starting as a 2 year old.

Please let me know if this is legal.

Appreciate any info you can give.

Feel free to email me or post to the board.

Thank you,

Dakota
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13643 of 74776
Subject: Re: Can I set up a ROTH IRA for a 2 year old chi Date: 9/3/1999 3:48 PM
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Greetings, Dakota, and welcome. You asked:

<<I am the owner of a small corporation and I have a 2 year old son. I run a camp for kids and I'm planning on using his picture for my brochure and website promotions. I know you can't set up an IRA unless you make a salary. If I pay my son say $500 from the corporation can I use that money to fund a ROTH IRA for him? I'm curious to know if there is a minimum age for someone setting up a Roth. Even a few hundred dollars a year starting will add up to a lot if you are starting as a 2 year old.

Please let me know if this is legal.>>


Yes, paying your son a going rate as a model would qualify as earned income for the purposes of an IRA contribution. I assume the company would issue him a Form 1099, and that would supply necessary documentation for IRS purposes. Thus, if he earns $500, that $500 can be used to open a Roth IRA for him. If he can earn up to $2K, then he will be able to fund the IRA fully. Otherwise, his contribution will be limited to the actual earnings.

Your trick will be to find a provider who will accept the account. For many reasons, most don't. Basically, that has to do with the contractual nature of the IRA agreement and the fact minors cannot enter into an enforceable contract. However, I understand that Vanguard does, so that might provide a starting point for you.

Regards..Pixy



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