Can I Put Money Into A Roth Ira For My Adult Child

IRA as gift to adult children

May eight, 2000: 4:00 p.thousand. ET A secret savings account tin can be a real treat for decorated, newly minted 'adults'

NEW YORK (CNNfn) - You'd like to set upwards a undercover Roth IRA every bit a gift to your adult children. The account would begin to grow, and after a certain number of years, yous could spring it on them, as a groovy long-term savings program that they didn't even know that they had. Sounds keen, but is it possible?

In response to a reader's question, Elissa Buie, a certified financial planner from Falls Church, Va., and a member of the financial planning association, discussed the potential claim and challenges of such an effort.

Ask the experts a question

Nosotros would like to take out $2000 Roth IRAs for our two children who are both in their early twenties. We want to do this investment on a ane-time basis and only let it ride. Is in that location any way of doing Roth IRAs for them and still keep it a undercover from them until they go older? Should we create a trust first? Our son is 26 and single and our girl is 21 and merely got married. We were wondering about how to handle the beneficiary issue. Can we control the investment funds without them knowing? Will the Roths withal be tax-free for them no matter how much the account builds up to in approximately 34 to 39 years? With a picayune luck, it could exist a multimillion dollar total past then.

Because your children are adults and the Roth would be in their names, they would need to know about the accounts and they would have command over the investment of the funds. They would also have to select the beneficiaries. You lot could practise Roth's in your name(s) with them as beneficiaries, but they wouldn't accept admission to the funds until after your decease.

The tax benefits do non change no affair what the value of the business relationship does.

You will want to be sure that your children qualify for a Roth IRA. The qualification rules are:

The contribution cannot exceed 100 percent of [your child's] compensation, up to $2,000. (A spousal Roth would also be bachelor for another $2,000).
The maximum contribution is coordinated with regular IRA's to the $2,000 total.
The income limits are as follows: (a) A single individual with AGI under $95,000 (reduced contributions available upwardly to $110,000); (b) A married individual filing a joint render with AGI under $150,000 (reduced contributions bachelor up to $160,000); and (c) A reduced contribution is available for a married individual filing a split return with AGI betwixt $0 and $10,000.

If all of these rules leave you interested in making this investment, your children should be very thankful to y'all. A $2,000 investment could grow to be worth over $55,000 if invested for 35 years at 10 pct. And no taxes would always be due on this account.