Custodial IRA - how strictly enforced are contribution limits?

[TSMonk]

Hello,

First time poster, long time lurker.  The wife and I have a tiny bun in the oven and we are starting to thinking about saving for education.  We have looked at both 529 plans and Custodial IRAs.  While CIRAs are more flexible, the contribution limit is much smaller.  Supposedly it can be no larger than a child's taxable income, though you can contribute income that a child generates doing chores around the house.  So this leads me to my question: If my wife and I wanted to max the contribution, couldn't we just write an order entry to our child of $500 for say picking up his/her toys?  Sounds somewhat ridiculous but it seems like just as long as it is well documented, it is ok?  Or am I missing something here. Any other education savings vehicles I should be thinking of besides these?

Thank you!

[formerlydivorcedmom]

There are also Coverdell ESAs.  Like 529s, they allow you to take out earnings tax-free for educational costs. Like IRAs, you can invest in whatever you want.  There is a $2k per year contribution limit for that child.

For the custodial IRAs, you have to use normal valuation for tasks.  $500 for picking up toys, if found in an audit, will get you in trouble.