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ROTH IRA for niece
Old 01-20-2012, 10:09 PM   #1
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ROTH IRA for niece

I want my 17 year old niece to open up her 1st ROTH. She earned a little over 3K (taxable) in 2011.

Here's the problem:

Her father is a selfish jackass who ONLY thinks of himself. His wife (my sister) whom I've tried discussing this with is afraid to broach the subject with him because of impending arguments. (She's tried in the past and fights ensued)

My questions are:

1. Can I open the ROTH with/for my niece and fund the ROTH? I know taxes must be paid by April 15th when filing taxes. Problem is, my niece must file under her parents, correct? Any way around this or WITHOUT parents finding out?

2. Have any of you encountered this issue with family members and face resistance? My bro-in-law believes this would be an issue with FAFSA in terms of college. I called Vanguard and researched on-line as well and both claim ROTHS are NOT viewed as "touchable" savings/investments for college. In other words, this should NOT be an issue, technically speaking.

Sometimes I just wanna choke these folks that don't get it!!!

3K compounded over 40-50 years can REALLY add up!!!

Thanks, all!!

Space Mountain
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Old 01-20-2012, 10:36 PM   #2
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Quote:
Originally Posted by Space Mountain View Post
I want my 17 year old niece to open up her 1st ROTH. She earned a little over 3K (taxable) in 2011.
1. Can I open the ROTH with/for my niece and fund the ROTH? I know taxes must be paid by April 15th when filing taxes. Problem is, my niece must file under her parents, correct? Any way around this or WITHOUT parents finding out?
T. Rowe Price is one of the few fund companies that will sub-custody a Roth IRA for a minor. She just has to consent to Mom or you being the custodian for her minor property.

Once she turns 18 then she can go do her own Roth IRA wherever she wants.

She's a dependent of her parents, but they don't need to know about her tax return. They'll take a deduction for her, and they might possibly declare her investment income on their return-- although they don't sound like the kind of parents likely to raise a teen with investment income. My guess is that they'll just take the deduction and maybe a child-care credit.

That leaves your niece free to file her own tax return, which she has to do to declare the $3000 of income in order to buy the Roth. Of course $3000 might even be below the filing threshold, let alone a 1040 EZ. But whether she files a tax return or not, her parents don't have to know.

In other words, if the two of you are willing to skulk around until she's legally an adult, then you can help her hide the whole scheme from her parents.

Roth IRA assets are not considered in FAFSAs.

That's what I know on the finances. I can't help you with the family issues, other than to say that it's usually better for the family to talk it out. Maybe the cleanest way to do it would be to have your niece do the paperwork with her mother as custodian, leaving you pretty much blameless.
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Old 01-20-2012, 11:04 PM   #3
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Spacemountain,

+1. As Nords says, once she turns 18, then she can open one up one her own.

I feel for you as I have a sister who went through a bitter divorce and she had two girls that were young at the time. Luckily, now the youngest one is 17 so pretty soon they both will be free to do what they deem is best (perhaps with a little friendly suggestion from you).

As a caring uncle myself, sometimes I feel I walk a delicate line. On one hand, I don't want to step on my sister's toes as for giving guidance to her kids. Yet, on the otherhand, it's difficult to see them not taking steps towards making things better for them. I've learned pretty much to bite my toungue, and just have an open door policy for my nieces.
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Old 01-21-2012, 01:16 AM   #4
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I think this is really none of your business and the damage you could do to her relationship with her mother and father will cost her far more than whatever she might earn on your Roth.

Don't you have some other projects that could occupy your mind?
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Old 01-21-2012, 01:58 AM   #5
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See the quote below from pub 4012. It is possible that no tax return is
necessary depending on what other income there is. Even if a tax return
is necessary, if you fund the Roth, how would it show up? You don't declare a Roth contribution (or earnings) on a tax return.

Of course, a statement of the account and a 5498 documenting the Roth would be sent somewhere later.


from pub 4012:

TIP Chart B – For Children and Other Dependents
If your parent (or someone else) can claim you as a dependent, use this chart to see if you must file
a return.
In this chart, unearned income includes taxable interest, ordinary dividends, and capital gain
distributions. It also includes unemployment compensation, taxable social security benefits, pensions,
annuities, and distributions of unearned income from a trust. Earned income includes salaries, wages,
tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of
your unearned and earned income.
Single dependants. Were you either age 65 or older or blind?
□ No. You must file a return if any of the following apply.
1. Your unearned income was over $950.
2. Your earned income was over $5,800.
3. Your gross income was more than the larger of —
a. $950, or
b. Your earned income (up to $5,500) plus $300.


□ Yes. You must file a return if any of the following apply.
1. Your unearned income was over $2,400 ($3,850 if 65 or older and blind).
2. Your earned income was over $7,250 ($8,700 if 65 or older and blind).
3. Your gross income was more than the larger of —
a. $2,400 ($3,850 if 65 or older and blind) or
b. Your earned income (up to $5,500) plus $1,750 ($3,200 if 65 or older and blind).
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Old 01-21-2012, 09:14 AM   #6
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Quote:
Originally Posted by haha View Post
I think this is really none of your business and the damage you could do to her relationship with her mother and father will cost her far more than whatever she might earn on your Roth.

Don't you have some other projects that could occupy your mind?
I lean in HA's direction. She is 17. Don't step between her and dad over this.

And a question: are you trying to convince her to save her own money or are you offering to gift her to get the Roth started? If the later, why not just save it up yourself and gift her a few years' worth when she is 21 or so and more independent? The fact that it might not all be able to go into a Roth at that point is not the end of the world.
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Old 01-21-2012, 03:55 PM   #7
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Why hide it. As long as the 17 year old can stand up to her old man, have her come home and say my uncle wants to do the greatest thing for me. Have her do it with all the paperwork signed, your check made out to the custodian and have the mother not the father sign it, but let him see.

What is he supposed to complain about anyways, his uncle is looking out for his kid and he didn't get a cut or something? Has zero impact on your nieces taxes nor the dads. BFD.

If the guy rants and raves you, the niece or the mother should just say: "are you really complaining about some one looking out for your kid?"
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Old 01-21-2012, 04:42 PM   #8
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Originally Posted by Sesq View Post
Why hide it. As long as the 17 year old can stand up to her old man, have her come home and say my uncle wants to do the greatest thing for me. Have her do it with all the paperwork signed, your check made out to the custodian and have the mother not the father sign it, but let him see.
I may be over-interpreting, but I'm picking up overtones of authoritarian behavior, possibly domestic violence, with intimations that he'll coerce her into giving him the money.

But that's just my read.
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Old 01-22-2012, 07:44 AM   #9
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I think this is really none of your business and the damage you could do to her relationship with her mother and father will cost her far more than whatever she might earn on your Roth.
I have to agree with Ha on this. Too touchy at this time.

I don't think that it would not hurt to talk to the girl about the importance of a Roth, though.
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Old 01-22-2012, 09:45 AM   #10
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If the guy rants and raves you, the niece or the mother should just say: "are you really complaining about some one looking out for your kid?"
Some people do get bent out of shape about this -- they consider it to be "undermining their parental authority."
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