While I am at least a few years away from marriage, I am willing to bet that one day I am going to be sending some kids to college. May I start an education IRA now even though I do not even have a twinkle in my eye yet?-etan
While I am at least a few years away from marriage, I am willing to bet that one day I am going to be sending some kids to college. May I start an education IRA now even though I do not even have a twinkle in my eye yet?Etan, Hello and welcome to the Motley Fool! An education IRA does not have to be delegated specifically towards one of your own children (can be any member of yuoir family) but I do not believe it would be feasible to start one now for an unborn child because you need to designate the beneficiary at the start. For more info on the Education IRA, check out:http://www.fool.com/Money/AllAboutIRAs/AllAboutIRAs10.htmFool on and thanks for writing!Frank *~<:o)TMFRacer
I don't know about if you can start an education IRA but if and when you do, make sure the kid can't touch the money until they are 21 or make sure you have control of it when they are in college. Because handing over a chunk of money to a 17-18 year old kid does not guarantee that they will use it for college.
I am not sure when the child has control of the moneybut there are steep fees and taxes due when money froman educational IRA is withdrawn but not used for education expenses...for a college-bound child I wouldthink one could convince them to use the IRA forcollege (to avoid the fees) and get a job if they wantmoney for another expense.As far as whether this is legal, I would think not.You need to designate a beneficary for the accountwhen it is established, can only contribute until thebeneficiary becomes 18, and must close out the accountby the time the beneficiary is 30. While you canchange the beneficiary to your own child, there is alot of rules to deal with and it may not be worth thetime/effort.A single co-worker of mine decided to put money into aROTH IRA for possible children he might have someday.You would have to read up on the details first but itsounded promising since you can use ROTH IRA money forcollege without penalities, keep control yourself,and can use any "excess" for your retirement.
>> May I start an education IRA now even though I do >> not even have a twinkle in my eye yet?Yes, it's "allowed" (possible according to rules). But, you have to find someone under 18 who you can designate as the beneficiary, and you have to trust this person to go along with a transfer of the EIRA to your child after he/she is born. I believe it may have to be a relative and they can't transfer until they are 30. Eric Morton
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