Investing for nieces/nephew outside of 529

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jimmac9
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Investing for nieces/nephew outside of 529

Post by jimmac9 » Sun Sep 02, 2018 8:06 am

Hi all. I have 6 nieces/nephews that I have been gifting money to into each of their savings account for their birthdays/Christmas, instead of purchasing material gifts. The money is starting to build up however the account pays a very low interest rate (.25%). And I have been trying to research some other options but most roads lead to a 529 account. I am seeing some savings accounts that pay around 2%, and some CD's that will automatically rollover (I believe through Fidelity). However I think there has to be something a little better, or a "hack". Everything has a hack, right?!?!?!

Why I am against a 529.
-One family is in Kentucky (and up until recently, moves from state to state every year or so), and one family is in Florida.
-In our entire family, no one has gone to college. I know this is probably a bad reason, but we have all been very successful in our trades, and working our way up to better than average positions. I would hate to build a nice sum in a 529 only to have the beneficiary not be able to use it, if any of them follow in our footsteps.

Any pointers would be great, Thanks for the help!

amitb00
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Re: Investing for nieces/nephew outside of 529

Post by amitb00 » Sun Sep 02, 2018 8:24 am

Even if kid in question doesn’t use it, they can pass on to their own kids. So as a gift, sounds like a good idea.

mega317
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Re: Investing for nieces/nephew outside of 529

Post by mega317 » Sun Sep 02, 2018 8:31 am

What is the problem you are trying to solve? If it is lower interest rate there are a million ways to beat the current rate and the whole question has nothing to do with a 529. Also what do their guardians think?

Broken Man 1999
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Re: Investing for nieces/nephew outside of 529

Post by Broken Man 1999 » Sun Sep 02, 2018 8:55 am

Nothing wrong with trades.

A plumber visit costs less than a doctor visit. Good money to be made in the trades for people not afraid to sweat and get dirty.

What is the range of ages of the nephews and nieces?

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

PFInterest
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Re: Investing for nieces/nephew outside of 529

Post by PFInterest » Sun Sep 02, 2018 9:22 am

jimmac9 wrote:
Sun Sep 02, 2018 8:06 am

Why I am against a 529.
-One family is in Kentucky (and up until recently, moves from state to state every year or so), and one family is in Florida.
-In our entire family, no one has gone to college. I know this is probably a bad reason, but we have all been very successful in our trades, and working our way up to better than average positions. I would hate to build a nice sum in a 529 only to have the beneficiary not be able to use it, if any of them follow in our footsteps.

Any pointers would be great, Thanks for the help!
- the state doesnt matter for 529s. it can be used in any state....its the beneficiary that matters.
- you could do half and half. you could also encourage them to attend some sort of post HS education (doesnt have to be college)

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leeks
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Re: Investing for nieces/nephew outside of 529

Post by leeks » Sun Sep 02, 2018 9:55 am

We have a taxable brokerage account to which we make monthly contributions for a nephew. It's invested in a vanguard lifestrategy fund. It offers no tax advantage, but we like that it is still our money with no restrictions on use. We think of it as "earmarked" for him (he doesn't know about it) but we could always change our minds and use it for something else. I would like to make some investment in his future after he turns 18 (but maybe at an older age depending on his life choices) whether it is education/training, travel abroad, help purchasing his first home, or supplies if starting a business. If he does end up attending college, I am more likely to gift after he graduates (ie a surprise that pays off his student loans), rather than offering it to him up front. Let's just say that he is unlikely to be learning any financial responsibility at home (he has a difficult home life), so we don't want his parents to know there is any money for him.

deeppizza
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Re: Investing for nieces/nephew outside of 529

Post by deeppizza » Sun Sep 02, 2018 4:30 pm

After reading an article from Paul Merriman a couple of years ago (https://www.marketwatch.com/story/make- ... 2014-08-13), we decided to invest $1/day for each of our nieces and nephews as well. We bought Vanguard index funds & ETFs (S&P 500 & total US), and invest & hold them in our brokerage account. We didn't want to create a UTMA/UGMA account for them due to possible future financial aid implications, and essentially buy $365 worth of mutual fund or ETF on their birthday. This is outside of any extra contributions to their 529s we make as well. When they turn 18 (or maybe 21), we'll sit down and have a conversation with them regarding the money we've saved for them, and maybe give them a head start on investing and lessons in saving (understanding that they have the freedom to do whatever they want with the money), and then gift the shares to them.

jimmac9
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Re: Investing for nieces/nephew outside of 529

Post by jimmac9 » Sun Sep 09, 2018 4:12 pm

mega317 wrote:
Sun Sep 02, 2018 8:31 am
What is the problem you are trying to solve? If it is lower interest rate there are a million ways to beat the current rate and the whole question has nothing to do with a 529. Also what do their guardians think?
The problem is, their parents don't think, lol. Unfortunately after many discussions with them, I feel it is impossible to break through and get them to start thinking about their finances, let alone their kids.

jimmac9
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Re: Investing for nieces/nephew outside of 529

Post by jimmac9 » Sun Sep 09, 2018 4:13 pm

Broken Man 1999 wrote:
Sun Sep 02, 2018 8:55 am
Nothing wrong with trades.

A plumber visit costs less than a doctor visit. Good money to be made in the trades for people not afraid to sweat and get dirty.

What is the range of ages of the nephews and nieces?

Broken Man 1999
2, 2.5, 5, 6, and 15

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Gamma Ray
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Re: Investing for nieces/nephew outside of 529

Post by Gamma Ray » Sun Sep 09, 2018 5:10 pm

leeks wrote:
Sun Sep 02, 2018 9:55 am
We have a taxable brokerage account to which we make monthly contributions for a nephew. It's invested in a vanguard lifestrategy fund. It offers no tax advantage, but we like that it is still our money with no restrictions on use. We think of it as "earmarked" for him (he doesn't know about it) but we could always change our minds and use it for something else. I would like to make some investment in his future after he turns 18 (but maybe at an older age depending on his life choices) whether it is education/training, travel abroad, help purchasing his first home, or supplies if starting a business. If he does end up attending college, I am more likely to gift after he graduates (ie a surprise that pays off his student loans), rather than offering it to him up front. Let's just say that he is unlikely to be learning any financial responsibility at home (he has a difficult home life), so we don't want his parents to know there is any money for him.

Did you make any special arrangement for that account or is it just under your name intended for your nephew? If it's under you, then won't it create a tax burden when you are selling it (eventually you have to sell it and give it to him).

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leeks
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Re: Investing for nieces/nephew outside of 529

Post by leeks » Mon Sep 10, 2018 8:43 pm

Gamma Ray wrote:
Sun Sep 09, 2018 5:10 pm
leeks wrote:
Sun Sep 02, 2018 9:55 am
We have a taxable brokerage account to which we make monthly contributions for a nephew. It's invested in a vanguard lifestrategy fund. It offers no tax advantage, but we like that it is still our money with no restrictions on use. We think of it as "earmarked" for him (he doesn't know about it) but we could always change our minds and use it for something else. I would like to make some investment in his future after he turns 18 (but maybe at an older age depending on his life choices) whether it is education/training, travel abroad, help purchasing his first home, or supplies if starting a business. If he does end up attending college, I am more likely to gift after he graduates (ie a surprise that pays off his student loans), rather than offering it to him up front. Let's just say that he is unlikely to be learning any financial responsibility at home (he has a difficult home life), so we don't want his parents to know there is any money for him.

Did you make any special arrangement for that account or is it just under your name intended for your nephew? If it's under you, then won't it create a tax burden when you are selling it (eventually you have to sell it and give it to him).
Yes, gains will be taxable.

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Gamma Ray
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Re: Investing for nieces/nephew outside of 529

Post by Gamma Ray » Wed Sep 12, 2018 10:26 am

Just remember that 529 can also be used for K-12 - including private high school education expenses now and you can also switch from one nephew to another, or they can pass to their kids.

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