A custodial IRA still requires the kid to have earned income. How are you going to do that with a new baby? Custodial IRAs are intended for 15-16 year olds who are able to work however, not yet permitted to open up their own investment account. If you believe you are going to pay your child for “being pretty” or doing tasks or whatever, good luck with this.
You have to list them as children worker and then pay work taxes to them. The hoops to jump through for that are not worth it, and you could be saving that money of paying employment taxes with it instead. College could be free in the future, your child could get a scholarship or become an actor, etc. A Roth IRA custodial accounts offers more options on their behalf. Already, if your child gets a scholarship or grant you can remove the equivalent amount using their 529 without charges (fees are owed, of course). One would presume that future “free tuition” program would be treated in a similar way.
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I can also stay below the Obama health care 2013 taxes. I’ve considered the 2010 option to split the conversion income but that would just make the main one yr problem a two 12 months problem. I have also looked at preserving each year conversion to control the Part B superior limits. Jerry, Have never seen an online calculator that incorporated this added premium, but it is simple enough to assess the additional Part B Premium as yet another marginal tax rate and for that reason a price of the conversion.
In many cases the added superior would be retrieved later on when higher RMDs would be prevented by the conversion. Obviously, this is interdependent on other factors as well such as future tax changes, which Part B surcharge tier is activated, and future unknown investment leads to your TIRA had you not converted that would increase those RMDs.
In most instances, it is not a decision changer probably. The affect is also reduced with large conversions since the Part B surcharge is a set dollar amount and represents a smaller tax rate increase on larger conversions. Since you might be recharacterizing a few of these conversions with the cherry picking strategy anyway, the cost will be known by you of the conversion including the surcharge prior to the 10/17/2011 recharacterization deadline. Crystal clear. Thanks for confirming my understanding of the complex stuff.
Good luck to the people who do not use this website. D My plan is convert 50% of My IRA over another couple of years and a potential to futher convert in future low income years. I plan on giving my wife an option never to inherit my staying IRA and go to the kids.