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Investing for Grandchildren
Posted on 2/11/19 at 8:20 pm
Posted on 2/11/19 at 8:20 pm
My parents have indicated they wish to start an investment account for my two small children (1 and 3). They would start with an initial deposit of $500 and automatic monthly deposits of $50. This is not earmarked for education and will be handed over to them when they are 25 to spend/save as they chose.
My initial thought was to start a vanguard account and invest in vti until they have the minimum amount for vsmax. I'm looking for advice on what type of account they should open and ways that may benefit them tax-wise or reduce tax for my children upon withdrawal.
Any input is greatly appreciated.
My initial thought was to start a vanguard account and invest in vti until they have the minimum amount for vsmax. I'm looking for advice on what type of account they should open and ways that may benefit them tax-wise or reduce tax for my children upon withdrawal.
Any input is greatly appreciated.
3
Posted on 2/12/19 at 8:52 am to readysetgeaux
Roth IRA
Posted on 2/12/19 at 9:33 am to OleWarSkuleAlum
So the Roth IRA would have to be in the grandparent's name and handed over as a gift at the appropriate time, correct?
I am leaning towards a custodial account - decided Fidelity over Vanguard due to minimum investment amounts on mutual funds - for the sole reason is my parent's finances are a big question mark. They are 70 and while in good health now, the outlook for these accounts are 22 and 24 years. I was thinking a custodial account may be beneficial as the assets are in the child's name and would not be eligible for the medicaid look-back period.
I am leaning towards a custodial account - decided Fidelity over Vanguard due to minimum investment amounts on mutual funds - for the sole reason is my parent's finances are a big question mark. They are 70 and while in good health now, the outlook for these accounts are 22 and 24 years. I was thinking a custodial account may be beneficial as the assets are in the child's name and would not be eligible for the medicaid look-back period.
Posted on 2/12/19 at 9:41 am to readysetgeaux
The Grandkids would have no earned income and would be ineligible for any type of IRA.
I setup UGMA accounts and dollar cost average into Fidelity Total Stock Market Index Fund FSTVX
I setup UGMA accounts and dollar cost average into Fidelity Total Stock Market Index Fund FSTVX
This post was edited on 2/12/19 at 9:49 am
Posted on 2/12/19 at 9:55 am to readysetgeaux
quote:
I am leaning towards a custodial account - decided Fidelity over Vanguard due to minimum investment amounts on mutual funds - for the sole reason is my parent's finances are a big question mark. They are 70 and while in good health now, the outlook for these accounts are 22 and 24 years. I was thinking a custodial account may be beneficial as the assets are in the child's name and would not be eligible for the medicaid look-back period.
Yes, custodial account is the way to go.
As to choosing a broker, just depends on what you are trying to do...There are plenty of commission free options for certain assets.
I set one up for my niece and ended up going with Stockpile.com since it had the lowest commissions of any of the options that allowed fractional shares and custodial accounts.
My goal is to get her a handful of actual individual stocks (Amazon Apple and Google) for her to watch over the years to get her interested in the stock market, rather than just trying to maximizing the amount of money in the account when she turns 21. I buy $100 worth of one of those 3 a couple of times a year.
Posted on 2/12/19 at 10:56 am to tigeryat
I believe UGMA can count against potential scholarships in some cases.
A friends grandparents just dole out the max of 28k a year as another option or you they would pay for whatever higher ed she desired.
A friends grandparents just dole out the max of 28k a year as another option or you they would pay for whatever higher ed she desired.
Posted on 2/12/19 at 11:17 am to readysetgeaux
Do you have a 529 setup for them? Why not have them invest into it?
Posted on 2/12/19 at 6:47 pm to TimeOutdoors
We have 529s setup for the kids. My parents intend for this to be money for the kids after college and spent however they wish so tying it to education doesn't meet the parameters.
Thanks for everyone's input. I will go with custodial account.
Thanks for everyone's input. I will go with custodial account.
This post was edited on 2/12/19 at 6:49 pm
Posted on 2/12/19 at 9:27 pm to tigeryat
UGMA is theirs at 18. Might be ok but if they want to take the money and surf for a few years there is nothing u can do about it.
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