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Author: Shaniqua Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6776  
Subject: Re: grandchildren Date: 8/14/2000 5:39 PM
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There are a lot of people who visit here and want to set up accounts for their grandchildren, nieces/nephews, even their friends' kids, without having the parents or the children ever be aware of the money. If that's your situation, don't consider a custodial account. Go with an account in your name and designate the grandchildren as the beneficiaries. Remember to update the beneficiary list as more grandchildren are born.

Ric's post was very good, but oversimplified a little. He did say he was ignoring tax consequences. But I had to add to what he said ... If you make your grandkids aware of their accounts, then they will know exactly how much they have saved up.

If you set up a custodial account (UTMA/UGMA), the grandkids will have to know after a certain point, and THEIR PARENTS will have to know (depending on child's age), since either the child or the parent is legally liable for any income taxes due on that account since it's legally their money - even if they don't know it exists. Assuming that you only purchase growth stocks that don't pay any dividends, never transfer the money, never sell any stocks, never invest in any mutual funds, and don't have any cash left in the account to earn interest after you've purchased these stocks, I suppose you wouldn't have to tell them about the account. Although I certainly wouldn't thank someone for incurring the wrath of the IRS for me.

Shaniqua (currently being audited by the IRS, so maybe I'm a little oversensitive on this aspect)
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