My father-in-law was diagnosed with stage 4 cancer last year. We don't know how long he has left, but the 1 year survival rate is 40% and the 5 year rate is in the single digits so in the grand scheme of things he won't be around all that long.
I've been going over a bunch of financial stuff with him to make sure all his stuff is in order for when the inevitable comes. When I noticed he didn't have a Roth IRA I had an idea. If we fully funded the IRA for 2014, and 2015, and put my 7 year old daughter as the beneficiary, she would inherit a Roth that could potentially grow forever. I ran some quick calculations and at a 6% return for between now and when she was 60. She would have to take out about $63000 in required distributions and would have a balance of over $90000 at that point. At 8% return those numbers are roughly doubled. If he makes it until next year, we could add another $6500 to the account, making it even better.
I am aware of the downsides that my daughter would have full control of the account when she is 18, and the fact that my FIL could change the beneficiary without me knowing about it. My FIL gets all his medical care from the VA, so there is little risk of medical expenses sucking up the account. Congress could change the rules on Roths as well. Is there anything else I am missing?
Assuming we move ahead with this, what would be the best investment options? I would probably want something that threw off some dividends to cover the RMDs each year. Vanguard Total Stock Market Index is always popular, but something like VIG or SDY might be appropriate as well. Any recommendations?