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I am very new to investing and have some money that I want to put in a custodial account to pay for my child's education. After reading some of the information here at the fool it seems that the Foolish thing to do is to buy stocks. What are the tax implications of putting money into a custodial account and when is the best time to buy stock or just transfer stock I own into his account rather than give money?
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Come on JBax - why not go to Vegas and invest? Nothing
against the market but you're talking about a child's
education money! I don't believe the stock market
is the right vehicle for this fund.
Hope some Fools jump in with positive ideas.
Bob
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Stock market?!? Vegas?!! C'mon, everyone knows that the best (and maybe only) way to get rich is to play the lottery! So start taking those coins and buy some Powerball tickets now!
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i don't think our new Foolish comrade has gained any value from the last two comments. Im no expert, (weasle worded disclaimer) but I'd say if you have 5 or more years to hold, that stocks are definitely the way to go. Im looking for the same answers myself, with a 2 and a 4 year old. I've been weighing off the benefits of using a Roth IRA vs. Education IRA vs. custodial account vs. las vegas. The problem Im having with education iras is that i want to choose my own individual stocks, so i'd like a dirt cheap commission structure (like $7 or so) for stock purchases. The problem is that the deeply discounted online brokers like Ameritrade and Scottrade dont offer Ed IRAs. Etrade does, but at 14.95 a trade, even if you make one purchase a year for your 500. limit in the the Ed IRA per year, you've already paid almost 3% in commissions. Another option is the Roth IRA, here's a link that talks about the benefits of that avenue http://www.irs.gov/prod/hot/not97-604.html
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The problem is that the deeply discounted online brokers like Ameritrade and Scottrade dont offer Ed IRAs. Etrade does, but at 14.95 a trade,

I hate to do this. They are adequate, but no better. But SureTrade meets your needs. Ed IRAs and $7.95 market orders.
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<<I am very new to investing and have some money that I want to put in a custodial account to pay for my child's education.>>

Before you do that, you'll really want to read more about custodial accounts and how they work in the Taxes FAQ area. I have a number of posts on that information there.

You'll also want to check out Kay Thomas' site (http://www.fairmark.com) and read his musings on custodial accounts...both good and bad. It's really a good discussion.

And, after reading the custodial account information in the Taxes FAQ area, don't forget to check out the "kiddie tax" post. Depending upon the ages of your children, the kiddie tax could rear it's ugly head.

<< After reading some of the information here at the fool it seems that the Foolish thing to do is to buy stocks. What are the tax implications of putting money into a custodial account and when is the best time to buy stock or just transfer stock I own into his account rather than give money?>>

In the taxes FAQ area, you'll also find out how to transfer appreciated stock out of your name and in to your child's name...potentially saving thousands of tax dollars. It's certainly not for everybody, but for many people it's a great way to go.

In my new book, we discuss custodial account and gifting issues in much more detail. You might want to check it out.

TMF Taxes
Roy
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<<Come on JBax - why not go to Vegas and invest? Nothing
against the market but you're talking about a child's
education money! I don't believe the stock market
is the right vehicle for this fund. >>

Huh? This is a joke post, right? The market isn't the place for a child's funds? I'm looking for the scarcasim or irony here. Can't seem to find it. I guess my sense of humor is out of whack this afternoon.

But I can't believe that you're really serious. If you are, perhaps I'll be over to dig around your back yard and find that coffe can full of loot that you'll use to pay for your kid's educucation. :-)

TMF Taxes
Roy
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