529 Plan

[RLymanC]

A six year old child was the benificiary of his fathers 401(k) in the amount of $70,000, it will be rolled into an "Inherited IRA" and withdrawn on his life expectancy.

First Question: Can more than the minumum distribution be taken out from an "Inherited IRA" account? The child will not be claimed as a dependent on anyones tax returns, in this case the child could receive $8,000 tax free dollars from the "IRA" per year

If necessary, the child would file a tax return reporting the distribution.

2nd Question:
Can the distributions be used for the child in a 529 education plan???

If yes, I assume it would be the childs money at age 18 if he does not attend college????

[veritas]

First yes they can take more than the minimum rmd.

Second- Why is no one claiming the child as a dependent?

The money in the 529 plan belongs to the owner not the designated beneficiary.

[Vgene]

Roth Conversion

If you want a 529 plan the child will have to first gift the withdrawn amount to a parent or someone who would be the owner. The recipient would then purchase the 529 plan making the child the beneficiary of the plan. Of course all gifting rules and reporting would have to be followed.
Hey, why not simply convert a portion of the IRA each year to a ROTH? If and when the child is going to need to withdraw the proceeds for whatever purpose, only the growth is subject to tax and penalty. And if it is withdrawn while at college, chances are he/she will not have enough income to be taxable anyway. That just leaves the penalty at 10%. Not bad and less restrictive than the 529. Just a thought.