A custodial IRA is a type of retirement account that you can start for your children while they are still young. Here are some of the most frequently asked questions regarding custodial IRAs.

What Are the Contribution Rules?

With this type of account, they have the same contribution rules as a traditional IRA. You can put in as much is $5000 per year. The money that you contribute is going to be tax-deferred. 

When Does the Child Take Over?

The parent or guardian is going to be in charge of this account while the child is still young. Once the child reaches a certain age, they are going to be able to take over ownership of the account. Depending on which state you live in, this might happen whenever the child turns 18 or 21.

What about IRAs with Custodial Agreements?

You might also be able to utilize an IRA with a custodial agreement. This will allow you to name your child as a beneficiary for your IRA. If you were to pass away, the funds in the IRA would be transferred into an IRA for your child. They would then be able to start making contributions and continue the growth that you have started.

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