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Subject:  Custodial Account? Date:  7/16/2005  11:36 AM
Author:  Leia28 Number:  80057 of 131394

I've been looking at everything I can find about custodial accounts in the last few days, but I still am a little confused.

My son is 2. We're considering sending him to private school in the next few years, but haven't made a decision. We'd like to put some money away, in case we decide on private school. We're going to make a decision in the next year.

I'd like to put $3K in a 12-month CD for him. I found a local CD at 4.25%. I'm trying to decide if it's worth it to put it in a custodial account, or just keep it in my name. If we put about 3K in the CD, he's only earning about $127. If I understand correctly, the first $700 in interest is tax-free. The second $700 in interest is taxed at the child rate. After that, it's taxed at the parents rate.

Are there any reasons I shouldn't put the money in a custodial account?

Thanks for your help.


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