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Creating Estate Tax Savings For Your Child Using A Roth Ira By Richard A. Chapo, Fri Dec 9th Parents must give serious thought to protecting their familythrough estate tax planning. While life insurance and trustsshould be a part of every plan, Roth IRAs can be a simple toolfor passing money to your child on a tax-free basis. Roth IRA First, we need a quick summary of the Roth IRA. A Roth IRA is anafter-tax retirement vehicle that produces huge tax savingsbecause all tax distributions are tax-free. That statement can abit confusing, so lets break it down. The downside of a Roth IRAis the fact that contributions are not tax deductible as withtraditional IRAs or 401(k)s. The upside of a Roth IRA, however,is that all distributions are tax-free once the person reachesthe age of 59½. So how can you use a Roth IRA to pass money toyour child? Opening A Roth IRA For Your Child (Article continued below)
One of the biggest keys to retirement planning is “time”. Themore years you spend
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Fannie, Freddie enact mortgage moratoriumFannie Mae and Freddie Mac have told mortgage services to halt foreclosure sales on owner-occupied homes between Nov. 26 and July 9, 2009.
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saving money for retirement, the more youshould have when that blessed day arrives. Imagine if you hadstarted saving for retirement when you were 16. How much biggerwould your retirement nest egg be? What if you purchasedMicrosoft stock in 1990 and watched it split eight times? Okay,that was painful example if you missed that opportunity.Nonetheless, why not do for your child what you didn’t do foryourself? The fundamental goal of estate planning is to pass as much ofyour estate as possible to your family on a tax-free basis. Youcan transfer relatively small amounts of money to your childnow. If you have a 16 year-old child with a Roth IRA, you cancontribute $4,000 in 2005. That $4,000 is going to grow tax-freefor 43 years and be worth quite a bit. A ten percent returnwould result in the account growing to roughly $200,000 and thefull amount would be distributed tax-free. There are otherpractical advantages to opening a Roth IRA for your child. As a parent, it is vital that you teach your child the value ofmoney. Opening a Roth IRA gives you the opportunity to sit downand teach your child the value of saving and investing, insteadof yelling at them to clean their room. While a parental lectureon the need to save money would typically meet with glassy eyesand yawns, your child’s attitude will undoubtedly change whenyou are talking about their money. Work and Maturity Issues Before you rush out to open a Roth IRA for your child, you mustdetermine if your child is eligible to open an account. To openan account, your son or daughter must be working at least parttime for an employer that reports their wages to the IRS. Hiringyour child to take out the trash each week is not going to cutit, nor will this strategy work for your 5 year-old. Manyteenagers, however, have summer jobs that should suffice for IRSconsideration. To avoid any trouble, you should consult withyour tax advisor. A more sublime issue concerns the maturity level of your child.Keep in mind that the Roth IRA will be opened in their name.Your son or daughter will have the legal right to do what theywill with the account. It is strongly suggested that you clearlyexplain the consequences of taking money out of the account[taxes, penalties, being cut out of the will, forced to eathealthy food, grounded for life, etc.] but the decision lieswith them. As difficult as it is, try to be objective inevaluating how you child will react to having money sit in anaccount. If you have doubts, you should probably investigateother tax saving strategies. Opening a Roth IRA for your child can be a very effective meansof leveraging your estate. If your child exercises restraint,your relatively small contribution to their Roth IRA can growinto a sizeable tax-free nest egg. About the author:Richard Chapo is CEO of Business TaxRecovery - Obtaining tax refunds for smallbusinesses by finding overlooked tax deductions and creditsthrough a free tax return review. | Sign In |
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TD Bank Financial 4Q earnings to plummet
TD Bank Financial Group said Thursday it expects to report earnings per share of 96 cents in the fiscal fourth quarter, ended Oct. 31. The company earned $5.48 per diluted share in the year-earlier period. The lower earnings are the result of heavy losses in its wholesale banking and corporate segments, the bank said. (TD) Sallie Mae to employ 1,100 in Del.
Delaware Gov. Ruth Ann Minner said Thursday that Sallie Mae will open a new credit operations center in the state and hire 1,100 employees. (SLM) Boscov???s could benefit from federal funds
Boscov’s effort to get out of bankruptcy may get help from the federal government, Pennsylvania Gov. Ed Rendell said Thursday. Pa. committee not supporting Independence Blue Cross-Highmark merger
Pennsylvania’s Senate Banking and Insurance Committee voted 10-to-4 on Thursday to recommend against the merger of health insurers Highmark Inc. and Independence Blue Cross.
N.C. Music Factory teams with Live Nation
ARK Group has inked a deal for international concert promoter Live Nation Worldwide Inc. to book events at ARK’s $27 million N.C. Music Factory in Charlotte, N.C.
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</div>Report: Donovan to go on loan to Munich
Another star in the Los Angeles Galaxy is heading overseas during the Major League Soccer offseason, as Landon Donovan will be loaned to German club Bayern Munich, according to a report from ESPN Soccernet.
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