Roll UTMA to Roth ?

[KenZ71]

Financially this won't really make much difference as the amount is small - about $2,200 but I am thinking more the psychology.

17 year old son has a UTMA account with about $2,200 - I am thinking of cashing that out (assuming I can legally) then put the funds into a Roth in his name. He had $4,400 in earnings as the Director of Grocery Cart Operations (title for humor) at our local grocery store.

My goal is both to lock up the cash in the UTMA that he is not aware, save him taxes and start the FIRE process for the young lad. Future college expenses is already funded by myself & his grandparents.

Sure he could use the UTMA $$ for a car or some other expense that a teen would deem necessary but I am thinking this could grow then in 5 - 10 years he could take it out for a home or whatever when he is hopefully financially wiser vs now. Obviously Roth contributions can be withdrawn in 5 years.

Good idea? I'm thinking too much?

 

[euro]

Assuming his grocery store earnings occurred in 2019 or 2020 and were property reported, I believe you should be fine doing this. You have to spend the money for your son’s benefit, so turning it into his Roth should be ok. Make sure you do it soon though in many states your access will be cut off on the day Jr turns 18.

 

[njhowie]

No issue as far as legality - read the paragraph on Converting an UTMA Account:

https://finance.zacks.com/transfer-utma-mutual-funds-roth-ira-10657.html

As far as psychology - there's nothing stopping him from withdrawing straight from the Roth if he really wants to.

 

[pb4uski]

... As far as psychology - there's nothing stopping him from withdrawing straight from the Roth if he really wants to.

Yes, because Roth contributions can be withdrawn at any time... but presumably a 17 yo would not know that.

 

[KenZ71]

For anyone who tries to do this you can't.

Both Fido and Schwab online account opening forms slammed the door shut when I put in a Date of Birth less than 18 years.

Bummer.

Double bummer sold the index fund in the UTMA this afternoon

Triple bummer Schwab had a friend a and family referral link that would have given dear son a extra $100.

Three strikes, I'm out.

 

[pb4uski]

Have you tried calling them or going to your local office?

I doubt that Fidelity would have a full page on their website if it could not be done.

https://www.fidelity.com/retirement-ira/roth-ira-kids

Eligibility

Minors must be under the age of 18.

Minors must have employment compensation.2

Qualifying income can come from a job and/or self-employment such as babysitting, mowing lawns, or shoveling snow.​

 

[KenZ71]

Just got off the phone with Schwab - they suggested a Custodial Roth.

Downside - paper form fill in, sign & bring to office or fax.

Once Jr turns 18 OR 21 depending on laws in home state he gains control of account.

 

[pb4uski]

.... Once Jr turns 18 OR 21 depending on laws in home state he gains control of account.

Well, you knew that part to begin with, right?

 

[Draggon]

Once Jr turns 18 OR 21 depending on laws in home state he gains control of account.

Well, of course he does, but nothing says you have to TELL him until you're ready for him to know...