I’m on h1b and I may have to go back due to visa issues and aging parents in few years. Which is why I don’t want to get into 529. I do want to save up for my US born kid who most probably study here even if we move back. He’s 3. My question is- Can I open a brokerage account with fidelity or something and just put everything in some index funds to let it grow till he’s 18, however small/big it would still amount to something ? In case of return- can I keep on funding the brokerage account from India ? Any other complications? #stocks #investments
You or kid will have to file taxes in India on any such account. Best to use a Roth in that case, so at least the account is not subject to US taxes. Contribute both to Roth and to a non deductible IRA that can be converted to Roth if more contributions are needed.
Kids can only have IRA if they have proof of income.
IRA can be the parent’s account. The double taxation issue needs to be handled somehow. Another option is to buy prepaid tuition units, although that may be less flexible.
Do not do 529… jst put it in roth ira(backdoor). You can withdraw investment amount(not gains) after 5 years. It will be tax free if you withdraw after 59.5 age.
Can you do contributions from India to it if I move back ? I can probably look it up but wondering if you know that.
Tax free in the USA. India will tax the account when assets are sold.
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529 is a brokerage account with state tax benefits in many states. You can gift $ from anywhere. The 529 could be on your name and then you could transfer it to your kid. The only caveat is that the money is only for education purposes. Therefore, there was some planning to allow to transfer of remanents to IRA. Alternatively, you can open a custodial account for your kid. This means that you control the account until kid is 18, 21, or 25. (Depends on state law and your decision). On that moment, you stop accessing the account. You can continue to transfer $ over time if you want. You need SSNs (parent and kid) to open the account. I use Schwab but you can probably find custodial accounts in many other brokers.
Forgot to mention, that when you transfer money to kids, there is a limit as it is considered a “gift”. Beyond a number (think it is $17K/year) you will need to pay taxes. In a brokerage account, if your kids account receives dividends or you sell a stock gaining, kid will need to pay taxes. The limit is somewhat low for kids, something like (check!) up to $1500 no tax, up to $2500 kiddie tax, and beyond parents tax level.
Thanks for that info. So custodial account can be funded from overseas ?