Question on education investments

Okay, here the deal. I have a younger brother who took it upon himself to fall on top of this girl and get her pregnant. She decided to keep the baby, then decided after it was born that she couldn't take care of it.

Luckily, her older sister who was married and middle class, adopted the child and is raising her as her own. She is a wonderful woman and the little girl is getting a very nice upbringing. My brother, nor the child's mother are a part of her life. They also would never have the funds to contribute.

I send gifts and money on a regular basis, although it is really not needed for the day to day raising of the child. So I want to setup money to fund her education.

Does anyone have any recomendations on how best to do this? The child is not legally related to me since being adopted. I am on great terms with her mother and my mother visits them frequently. I just wasn't sure the limitations of setting up a fund for someone who is not a legl family member.

Any assistance woud be greatly appreciated.

If you really do trust the mom, you can send her the money and let her handle the investment. The problem there is that you have no control over the money once you send it.

To set up a trust fund, you'll need to consult a lawyer and/or accountant. I have a feeling that there are some low-cost/easy alternatives for this, but I'm not an expert.

You could set up a separate account and put money in and then send it when it is needed, but his has a lot of problems. You can only give gifts under a fixed amount per year without paying extra taxes and any interest you earn along the way is also taxable on your income tax.

Its very nice of you to help out and to plan ahead, especially at the rate that tuition is rising these days.

I just have to add this is the best start to a thread ever.. Especially when teamed with your sig..

Well the best method to plan for education is an Educational Roth IRA in most cases. I believe all you need to do is have parental consent to open the account in the minor's name, and you would be able to make deposits into it. No one but the child would be able to touch it (without major penalties) until the child is enrolled in a college, university or other post-secondary education program.

We have one for both our children, but since both my wife and I are the parents of our kids, the part about opening one for another child not our own never came up during the meeting.