Mutual Fund gifts for grand kids

[Dave C.]

I am seeking some recommendations on mutual funds that would be most appropriate as gifts to my two grandchildren.

Sophia is 2 1/2 and Max is 5 months.

I want to put $1,000 in each of two new accounts, one for each. I'm thinking of Wellington or Wellesley.

1. What funds do you think fit these long-term gifts?
2. Is it best to put them in my daughters (Mom) name and the kids name?
3. I will be retiring in a few months, so I don't know how often we'll be adding new deposits.

Thanks in advance for your thoughts and possible recommendations.

[umfundi]

I am seeking some recommendations on mutual funds that would be most appropriate as gifts to my two grandchildren.

Sophia is 2 1/2 and Max is 5 months.

I want to put $1,000 in each of two new accounts, one for each. I'm thinking of Wellington or Wellesley.

1. What funds do you think fit these long-term gifts?
2. Is it best to put them in my daughters (Mom) name and the kids name?
3. I will be retiring in a few months, so I don't know how often we'll be adding new deposits.

Thanks in advance for your thoughts and possible recommendations.

Dave,

Given a similar question, I chose Vanguard LifeStrategy Moderate VSMGX. They may have a $3,000 minimum.

So far as ownership is concerned, discuss that with your daughter. My opinion (a little weird) is you might set up a 529 fund for each kid with the kid as the owner and yourself as the trustee. Then, make each kid the other's beneficiary.

Or, if taxable, set up a UTMA for each kid with their Mom as the trustee / custodian. Ask your daughter, in part since the kids may need to be filing tax returns in a few years. The kiddie tax calculation is a real pain.

Keith

[robertalpert]

Wellington and Wellesley both have $3000 initial purchase minimums. But if you happen to reside in Ohio, then Ohio 529 plan has Wellington as one of their funds with an initial minimum of $25.

[Meg77]

If you put the money in your daughter's name, then it's a gift to her - not to your grandchildren. If you want this money to be saved and grow to be used for education one day, then just open a 529 investment account. That account type will shelter the funds from income tax and also ensure they are used for education for the beneficiary you select. And 529 plans often come with much lower account minimums than regular taxable accounts do. Plus that way your daughter doesn't have to keep track of the funds, pay taxes on them, make sure they stay separate from her own investments, and/or resist the temptation to dip into that money "for the kids' sake" down the road.

[investor]

Several years ago I had the same problem, wanting to give just $1000 to newly born great nieces. I set up a UGMA and bought OAKBX. Oakmark will take $1000 and it is a good fund. Though the expense ratio is high by some standards at 0.77%.

investor

[Padlin]

If you want to start out small, the minimum initial investment amount for Vanguard Target Retirement Funds and Vanguard STAR® Fund is just $1,000. Wellington and Wellesley is $3000 except for education savings accounts, which are $2000.

I've heard that if it's for college, when it comes to financial aid eligibility putting it in the parents name is better as the students are required to use a larger percentage of assets towards school costs then the parents.