investing for grandchildren
I would like to set up a small mutual fund for each of my grandchildren . How to? Which ones? If in their names , who pays the taxes? Will they inherit directly?
Terry Says
A lot depends on the age of your grandchildren. If they are under the age of 11, I would suggest setting up a 529 College Savings plan. Read this article for instructions. The money in the account will grow tax-free for college expenses. I suggest under age 11 to give the money time to grow, although you could certainly use this type of plan for older children, choosing the most conservative investment option.
If you’re just trying to teach them about investing, go to www.stockpile.com. There you can open an account and buy individual stocks, with the child learning about investing in the process. The accounts will have to be “custodial” accounts — and you can be custodian. The tax implications won’t arise till they make a LOT of money! Until that point any gains or dividends can be reported on their parents’ return. Since they are presumably investing for the long run, that shouldn’t be much of a problem.
