Yes, your thinking is correct. Distributions from the IRA are considered unearned income. The threshold is $1300 for 2024.
Consider the child's current age and what their income might be 8,9 and 10 years from now. The distributions from an IRA are taxed as ordinary income, while capital growth outside an IRA is taxed at long term capital gains rates and capital growth in a 529 plan may not get taxed at all.
