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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 76075  
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 So, in 18 years when your nephew goes to college, the money can be withdrawn from the account and you can start paying his tuition.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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