Tax Law and Business Organization Strategy

Gifts by Parents to Fund a Child's Roth IRA

A recent article (Family tax savings compound when a parent funds a child's Roth IRA, R.E. Coppage and L.M. Blum, 82 Practical Tax Strategies 212 (April 2009).) presents an extremely interesting idea – gifting to provide a child funds to contribute to a Roth IRA. Article describes how, not only does the child reap the usual benefits from a Roth IRA and from early retirement savings, but there is also a net tax savings within the family as a whole when such a plan is implemented. Considering the magnitude of the accumulated tax savings, the authors believe a cash gift to fund a child's RIRA contribution is one of the most caring, thoughtful, and practical gifts a parent can make to a child, and I would agree with their conclusion.

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