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Author: zaxis One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75379  
Subject: Education IRA info? Date: 8/4/1999 9:01 PM
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Is there a page on the Fool that discusses the Education IRA in detail? I tried a search using "education&ira" and came up with zilch.

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?

Thanks.

-zaxis
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Author: zaxis One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12821 of 75379
Subject: Re: Education IRA info? Date: 8/4/1999 9:02 PM
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That "hopefully tonight" is for the nephew not the account.


-zaxis

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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: 12843 of 75379
Subject: Re: Education IRA info? Date: 8/5/1999 9:57 AM
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Greetings, Zaxis, and welcome. You wrote:

<<Is there a page on the Fool that discusses the Education IRA in detail? I tried a search using "education&ira" and came up with zilch.

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? >>


See Chapter 3 of IRS Publication 590 (Individual Retirement Arrangements)for the answers to your questions in detail. You can get that at http://www.irs.ustreas.gov/prod/forms_pubs/index.html.

In brief, the EIRA you set up can be transferred to another EIRA the parents establish for that child if you so desire. Anyone may contribute to that account, but those contributions may not exceed a combined total of $500 per year. Contributions may be made until the child's 18th birthday. If that birthday is on March 31, then the contribution may be made as late as March 30.

Regards..Pixy

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Author: CJHutch Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12858 of 75379
Subject: Re: Education IRA info? Date: 8/5/1999 3:38 PM
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<<In brief, the EIRA you set up can be transferred to another EIRA the parents establish for that
child if you so desire. Anyone may contribute to that account, but those contributions may not
exceed a combined total of $500 per year. >>

So could I set up 2 separate EIRA's for a single child, and contribute the max of $500 to each, for a total of $1000 per year?

CJHutch

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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: 12860 of 75379
Subject: Re: Education IRA info? Date: 8/5/1999 4:31 PM
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Greetings, CJHutch, and welcome. You asked:

<<So could I set up 2 separate EIRA's for a single child, and contribute the max of $500 to each, for a total of $1000 per year?>>

No, you cannot. The EIRA contributions for the same child from all sources in one year cannot exceed $500. You could in the same year contribute $250 to two EIRA for the same child, though. That's assuming you could find a custodian willing to take that little becauseit's tough enough finding those that will take the $500.

Regards..Pixy


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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: 12861 of 75379
Subject: Re: Education IRA info? Date: 8/5/1999 4:32 PM
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Greetings, CJHutch, and welcome. You asked:

<<So could I set up 2 separate EIRA's for a single child, and contribute the max of $500 to each, for a total of $1000 per year?>>

No, you cannot. The EIRA contributions for the same child from all sources in one year cannot exceed $500. You could in the same year contribute $250 to two EIRA for the same child, though. That's assuming you could find a custodian willing to take that little because it's tough enough finding those that will take the $500.

Regards..Pixy


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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12862 of 75379
Subject: Re: Education IRA info? Date: 8/5/1999 4:33 PM
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CJHutch writes:

So could I set up 2 separate EIRA's for a single child, and contribute the max of $500 to each, for a total of $1000 per year?

I reply:

No. All Education IRAs that are set up for the same person are a single account as far as the IRS is concerned. --Bob

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Author: RobinB Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12908 of 75379
Subject: Re: Education IRA info? Date: 8/6/1999 3:28 PM
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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 withdrawn from the account and you can start paying his tuition. Also, the age that the child can gain access to the money depends on whether the account is set up as an UGMA or UTMA and which state the child lives in. (I know it's repetitive). But, UGMA and UTMA don't necessarily mean the same thing in every state. In some states the age of majority for UGMA is 21 in others it's 18. The same is true for UTMA.

This is different than an education IRA, but can house more money. I have access to some information at work that can provide some guidance if you let me know what state the child lives in.

Hope this helps
RobinB

PS - Has the baby come? And is everyone doing well?


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Author: jocave One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12915 of 75379
Subject: Re: Education IRA info? Date: 8/6/1999 4:35 PM
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<<<<<
You can gift $10,000 a year to one individual (child or otherwise) and take that as a tax deduction.
>>>>>

You may gift $10,000 per year per individual without paying gift tax, but that gift is not deductable. The recipient of such a gift owes no taxes on it.

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Author: zaxis One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12930 of 75379
Subject: Re: Education IRA info? Date: 8/6/1999 10:38 PM
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RobinB wrote:

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 eductions 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 withdrawn from the account and you can start paying his tuition. Also, the age that the child can gain access to the money depends on whether the
account is set up as an UGMA or UTMA and which state the child lives in. (I know it's repetitive). But, UGMA and UTMA don't necessarily mean the same thing in every state. In some states the age of majority for UGMA is 21 in others it's 18. The same is true for UTMA.

This is different than an education IRA, but can house more money. I have access to some information at work that can provide some guidance if you let me know what state the child lives in.




Oops, its a niece- 9 lbs, 12 oz. Mom had a rough time (she was in labor so long the pain killers wore off during the delivery) but everyone is okay.

I really was refering to an EIRA not an UGMA/UTMA. I read somewhere that if you exceed the maximum income level allowed for an EIRA you could give the kid the money and he/she could set up their own account. I don't know if this is possible, it seems a little odd to me since you can't set up an account if you are under 18.

I looked into a mutual fund that specialized in UGMA/UTMA accounts several years ago and my understanding was that whoever put money into the account had to pay gift tax on it no matter what the amount. I've never heard of getting a tax deduction for a gift to a relative. Are there any benefits to setting up a UGMA/UTMA instead of an EIRA (or maybe in addition to)? Would a tax return have to be filed each year? Aren't the capital gains still taxable even if she has no income?

She lives in New York.

Thanks,

-zaxis :)

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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: 12939 of 75379
Subject: Re: Education IRA info? Date: 8/7/1999 9:57 AM
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Zaxis writes:

<<Oops, its a niece- 9 lbs, 12 oz. Mom had a rough time (she was in labor so long the pain killers wore off during the delivery) but everyone is okay.

I really was refering to an EIRA not an UGMA/UTMA. I read somewhere that if you exceed the maximum income level allowed for an EIRA you could give the kid the money and he/she could set up their own account. I don't know if this is possible, it seems a little odd to me since you can't set up an account if you are under 18.

I looked into a mutual fund that specialized in UGMA/UTMA accounts several years ago and my understanding was that whoever put money into the account had to pay gift tax on it no matter what the amount. I've never heard of getting a tax deduction for a gift to a relative. Are there any benefits to setting up a UGMA/UTMA instead of an EIRA (or maybe in addition to)? Would a tax return have to be filed each year? Aren't the capital gains still taxable even if she has no income?>>


From your posts I see you are confused about a whole host of issues in this area. The Motley Fool has a detailed section on Investing for Kids that may help you eliminate some of the confusion I see in your comments. You can find that information at
http://www.fool.com/money/InvestingforKids/InvestingforKids.htm.

Do some reading there, and I think you may be able to answer many of these questions.

Regards..Pixy

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Author: RobinB Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13018 of 75379
Subject: Re: Education IRA info? Date: 8/10/1999 7:41 AM
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Zaxis,

In the state of New York a custodial account created by a gift under UGMA transfers to the minor ath the age of 18. And an UTMA account transfers to the child at the age of 21, if the account was created by a gift, will or trust.

Hope everyone is doing well.

Good Luck
RobinB

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