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Subject:  Re: custodial IRA Date:  10/12/1999  11:41 AM
Author:  DownwardSpiral Number:  14442 of 103346

Pixy replied to ACVC:

<<<<Greetings, ACVC, and welcome. You wrote:

<<Having trouble finding a online discount broker to transfer two custodial accounts for my sons ages 9-10, currently in CD accounts at local bank.Any advise.>>

Other than to keep searching, I can't offer any help. Many (if not most) IRA providers are highly reluctant to act as the custodian for a minor's IRA even though it's perfectly legal for a minor to have one. (I understand that Vanguard does, but their brokerage fees are higher than a discounters.) That's because minors cannot enter into a binding contract, and an IRA custodial agreement is a contract. All you can do is to keep on looking. I wish you luck in the search.

If you find a discount broker who will accept the IRAs, please come back and tell us so others in your situation can benefit.

Regards..Pixy >>>>

First, I wasn't sure that this was an IRA except by the title of ACVC's message. If this is NOT an IRA, this is a whole different kettle of fish.

Second, my full-service broker has told me that he has several IRA accounts for minors. I don't believe that this is unusual based on what he says. My impression, open to correction by all of the legal gurus out there, is that the holding entity is the custodian of the funds (often the banking arm of the brokerage firm), similar to the parent or other custodian in UGMA accounts.

Last, here is how I tackled the situation:
--If you call up the discount brokers, they will say "no way". They don't want to mess with it. So, get all the forms, fill them out [with truthful & honest ages & birthdates] and send them in WITH A SIZABLE (above minimum account opening amount) CHECK. I'll wager that [Waterhouse & some others] they will cash that check immediately, and send you the account opening documents.

--Then, and only then, fill out the form for trading authority for the parent to invest in vehicles other than money-market accounts.

I would anticipate that not much "trading" will be done over the first few years anyway; probably just a few "investments" until the balance builds up.

Hope this helps. I've followed this strategy for two children, and although the account rep shakes his head & clucks his tongue when talking on the phone about the minor's account, they have yet to turn down a chek or close an account once it is open. Typically, I guess, the accounts are opened for a kid with a first job at, say, 16; opened when they are 17; so there is only a year or two until they become of age anyway.
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