Are there any tax benefits for investing in DRIP as Custodian?

Question

I want to invest money in securities for my new born. Should I want to invest in Divident Re Investment Plan? I want to basically park some money every month so that it can benefit my son when he goes to college, etc. I could do that under my own name and SSN or set myself up as a Custodian for my son under Uniform Transfer to Minors Act. I am hoping tax will be paid on the gains by my son at a time when he will have little income (when is in 18). Is that right? Is there anything like I can get any tax benefit for money invested in DRIP now? Any other persectives are welcome.

Answer 1

You could establish an investment account for you children, as custodian.  Custodian accounts are opened in the name of the child with the parent being the custodian using the child's social security number.   This account, for the child, gives the tax liability to the child

A DRIP plan is not necessarily the best way to go, since DRIP investments are very restrictive.   You would be better off open a custodian account with a mutual fund company.

You might be better served if you open an educational IRA program for you child

Mutual Fund companies as well as ETFs have an entire array of products many will fit your needs. You can go to the MSN.Money website

http://moneycentral.msn.com/home.asp  it has an entire section on mutual funds and Exchange Traded Funds.  Read about the various products and in doing so you will be getting investment ideas and at the same time educating yourself about investing.

You could also contact the funds companies for more information.  I have found that Vanguard & Fidelity can meet your needs for mutual funds.  The service and information they provide is all free and you will find it helpful.