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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121217  
Subject: Re: Investing for children Date: 1/19/1999 7:19 PM
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[[My wife and I would like to start investing for our 1 year old. Presumably, this money would be for
college, but since our daughter can't speak yet, I would like to choose a vehicle that is flexible
enough to accomodate the possibility that she will not go to college.]]

Good thinking. But making long term plans makes for difficult decisions.

[[ I have therefore been considering either a Roth IRA in my name or a DSP/DRIP in her name. We
will be starting the account with her gift money (birthday, x-mas, you're cute, etc.), so since it has
already been taxed, I don't see the point of putting it in an education IRA.]]

Why not? An additional $500 per year can only help. And, even if your child doesn't go to college, these funds can be transferred to another sibling for college expenses. So the Ed IRA is really a nice supplement.

[[ I am leaning toward the DSP/DRIP as the most flexible vehicle. I don't anticipate that she will have
any significant taxable income for the next 15 to 20 years, so any stock earnings should be
effectively tax free during that period.]]

But you will STILL want to go to the Taxes FAQ area and read my post on the kiddie taxes, gifts to children, gifts in general, and custodial accounts. You'll also want to read some of the excellent posts in the last two or three days by DowDanny and William Lipp. There is a lot of good information there.

Once you do the reading, you may have a better understanding of what you are up against. It may help you to narrow down your questions.

TMF Taxes
Roy

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