IRA contributions as gifts to minors You can contribute funds directly to your child or grandchild's IRA. However, it must not exceed the annual contribution limit or the child's earned income, whichever is less. Let's review how Roth IRA donations work and what you should consider before donating retirement account contributions. You can set aside money in a custodial Roth IRA and manage your child's account until you're eligible to do so.
But if you want to help a loved one get their retirement fund up and running, can you open a Roth IRA for someone else? You can, and here's how to do it. This vehicle, basically like an IRA but with a different twist, isn't always on the menu, so you'll have to ask your provider if they have a child IRA (which they can call a “minor IRA” or “custodial IRA”). The first step is to determine if the beneficiary is eligible to contribute to a Roth IRA based on their adjusted gross income (AGI) and their tax-reporting status. A Roth IRA (individual retirement account) can make your child financially secure and teach them valuable lessons about the money they can use on their trip.
Just sitting down with them and reviewing the enormous potential benefits of regularly opening and funding a Roth IRA could be a great gift. Only beneficiaries who inherit a Roth IRA from their spouse can make additional contributions to the account and only if they choose to treat it as their own IRA. Either way, you can create a loved one with years of growth and tax-free income by leaving them your Roth IRA. Once they reach the age of majority in their state, the beneficiary can convert their Roth IRA with custody into a regular Roth IRA and control it for themselves.