Kids 5th Birthday

[firehawkocean]

Hi all,

I searched for this subject buy couldnt find anything.

I want to introduce my kid to investing.

Should I do a direct stock purchase plan through Disney

or should I start a custodial account through a brokerage in her name.

or should I just buy them in my name. Any thoughts. I just want to do disney right now.

[Like2Plan]

firehawkocean,

Believe it or not--this is a very tricky question. There are a lot of nuances.
Would this just be a few shares? Or, a lot of shares up to the gift tax limit each year?
Is this money targeted for something specific (like college?) Are you planning making several different stock purchases? Would you want the dividends reinvested?

One of the concerns is the assets being in your child's name and getting access to the money at 18 (or whatever the age is in your state--some places it's 21, I believe). It's something the think about.
If college financial aid were a factor, it could make a difference in whose names the assets are in.

If you put your child's name on the account, it will have to be a custodial type account.

I always went with the direct purchase route with the dividend reinvestment option. But, I wished that I had all the stocks in one account (maybe you are eligible for a brokerage account offers free trades and reinvests the dividends?). Otherwise, you are going to have a lot of paperwork to manage over the next 13-17 years.

If the stocks are in a custodial account, you child will have a certain amount of income that is not taxed (or taxed at their rate), but once you get above that threshold (2,000 of unearned income--I believe), it is taxed at your highest rate. This "kiddie tax" is imposed through college and can be a real "gotcha" tax wise if planning to sell during that time frame.
The Kiddie Tax: Limits on Shifting Unearned Income to Children
IRS Announces 2014 Tax Brackets, Standard Deduction Amounts And More

Topic 553 - Tax on a Child's Investment Income

If you keep the shares in your name, you can always do a transfer but you will be limited by the gift tax limits in any given year. Also, the kiddie tax still comes into play if your child plans to sell the shares (up through attending college age).

[firehawkocean]

firehawkocean,

Believe it or not--this is a very tricky question. There are a lot of nuances.
Would this just be a few shares? Or, a lot of shares up to the gift tax limit each year?
Is this money targeted for something specific (like college?) Are you planning making several different stock purchases? Would you want the dividends reinvested?

One of the concerns is the assets being in your child's name and getting access to the money at 18 (or whatever the age is in your state--some places it's 21, I believe). It's something the think about.
If college financial aid were a factor, it could make a difference in whose names the assets are in.

If you put your child's name on the account, it will have to be a custodial type account.

I always went with the direct purchase route with the dividend reinvestment option. But, I wished that I had all the stocks in one account (maybe you are eligible for a brokerage account offers free trades and reinvests the dividends?). Otherwise, you are going to have a lot of paperwork to manage over the next 13-17 years.

If the stocks are in a custodial account, you child will have a certain amount of income that is not taxed (or taxed at their rate), but once you get above that threshold (2,000 of unearned income--I believe), it is taxed at your highest rate. This "kiddie tax" is imposed through college and can be a real "gotcha" tax wise if planning to sell during that time frame.
The Kiddie Tax: Limits on Shifting Unearned Income to Children
IRS Announces 2014 Tax Brackets, Standard Deduction Amounts And More

Topic 553 - Tax on a Child's Investment Income

If you keep the shares in your name, you can always do a transfer but you will be limited by the gift tax limits in any given year. Also, the kiddie tax still comes into play if your child plans to sell the shares (up through attending college age).

Can you tell me the best brokers with free reinvestment plans?

[Like2Plan]

Can you tell me the best brokers with free reinvestment plans?

firehawk,
Sorry, I don't have a recommendation as I have always invested in the direct.

[snafu]

Are you planning a one time stock purchase ticker DIS or will you add to the investment for Christmas, birthdays, special events, good grades and rewards for the child? I'd search for a discount brokerage that offers 'X' free trades and open a custodial account, buying DIS with dividends to be automatically reinvested. The two of you can check the value twice a year like June and early December when declaration date is announced. The payout date is always a lower value as they've just paid out a whooping amount of their profit. Last year it was about .086 a share...

http://www.nasdaq.com/symbol/dis/dividend-history