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Quick takeaways
- When deciding between a 529 account and a brokerage account for a child's savings, it's important to consider the tax implications and the level of control desired over the funds.
- When comparing a 529 account and a UTMA/UGMA account for a child's savings, parents should consider the tax advantages and flexibility provided by each option.
Deep dives
529 Account vs Brokerage Account for Child's Savings
When deciding between a 529 account and a brokerage account for a child's savings, one option is to open a brokerage account in the parent's name with the child listed as a beneficiary. This provides flexibility and allows the parent to have control over the funds, especially if the child is not yet responsible with money. However, it's important to consider the tax implications of each option. In a brokerage account, the parent will pay taxes on any capital gains if they decide to give money to the child. On the other hand, a 529 account offers tax advantages, such as tax-free growth and withdrawals for qualified educational expenses. Ultimately, the choice depends on the parent's preferences and goals for their child's savings.
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