Matching Funds for Grandkids Roth IRAs
My spouse and I have eight grandkids, ages 13-25 (we are a blended marriage with four kids on each side). To help with their financial education and getting a good start on savings, we have told them that we will match up to $2500 per year the amount that they themselves contribute to their own Roth IRA. Everyone is aware of the Roth IRA rules, earnings requirements and maximum contributions, etc. There is no specified number of years that we will continue this as long as funds are available. The question is what is the best way to carry on this matching for n years if we both die simultaneously, or after the last living spouse dies. This may be more of an estate/trust question but looking for ideas or suggestions and a practical solution. As long as either one of us is still alive, we are happy to trust the living spouse to carry on the idea.
Permalink Submitted by Alan - IRA critic on Mon, 2025-06-09 15:51
By the time the last of you passes, these kids will probably all be over 30. In the meantime, the younger ones may have no earned income to qualify for a Roth contribution at all, and in a few years some of them may have MAGIs too high to contribute. While use of their money is fungible, after you are gone and even before then, what role will your own children have in this process?
This plan may also be burdensome for the surviving spouse in advanced years to deal with 8 times a year, but if you want to control the process after your deaths, you will have to leave funds to a trust upon your death, and any gains on that trust balance will be taxable at the higher trust tax rates and of course a 1041 will have to filed each year.
Finally, once a child reaches the age of majority, they have full control of their IRAs. They could make contributions but could also be taking distributions each year.