Graduation Gift of Funds to Purchase ROTH IRA
Consideration is being given to donate funds to college graduate to purchase ROTH IRA. Grad has current year earnings to support value of proposed gift (within tax free gift limits). If for instance a Vanguard ETF is purchased as the ROTH IRA, can those ROTH IRA funds be transferred to another investment firm for purchase of an alternate ROTH ETF, Mutual Fund, Stock, Bond etc. Of course, that transfer would be subject to any fees associated with the transfer by either firm and should be a Trustee-to-Trustee transfer rather than taking possession of the funds risking taxation. Grad has strong interest in learning about financial investment opportunities and this gift might support that activity.
Permalink Submitted by Alan - IRA critic on Sat, 2019-12-14 04:32
As long as the person has earned income at least equal to the contribution, they can open a Roth IRA anywhere they please with a cash contribution. That account can be transferred to another custodian at a later date, however it might be less work to simply open the account with the second custodian to start with and avoid the transfer. Don’t know if you are thinking of a self directed Roth IRA, but that might not be appropriate for a novice investor due to the prohibited transaction rules.
Permalink Submitted by Herm Brames on Sun, 2019-12-15 02:06
Not sure what you mean by prohibited transaction rules?