Law Articles And Legal Issues

Create Tax Savings And Transfer Wealth To Your Child With A Roth IRA

Parents must give serious thought to protecting their family through estate tax planning. While life insurance and trusts should be a part of every plan, Roth IRAs can be a simple tool for 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 an after-tax retirement vehicle that produces huge tax savings because all tax distributions are tax-free. That statement can a bit confusing, so lets break it down. The downside of a Roth IRA is the fact that contributions are not tax deductible as with traditional IRAs or 401(k)s. The upside of a Roth IRA, however, is that all distributions are tax-free once the person reaches the age of 59½. So how can you use a Roth IRA to pass money to your child?

Opening A Roth IRA For Your Child

One of the biggest keys to retirement planning is "time". The more years you spend saving money for retirement, the more you should have when that blessed day arrives. Imagine if you had started saving for retirement when you were 16. How much bigger would your retirement nest egg be? What if you purchased Microsoft 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 for yourself?

The fundamental goal of estate planning is to pass as much of your estate as possible to your family on a tax-free basis. You can transfer relatively small amounts of money to your child now. If you have a 16 year-old child with a Roth IRA, you can contribute $4,000 in 2005. That $4,000 is going to grow tax-free for 43 years and be worth quite a bit. A ten percent return would result in the account growing to roughly $200,000 and the full amount would be distributed tax-free. There are other practical advantages to opening a Roth IRA for your child.

As a parent, it is vital that you teach your child the value of money. Opening a Roth IRA gives you the opportunity to sit down and teach your child the value of saving and investing, instead of yelling at them to clean their room. While a parental lecture on the need to save money would typically meet with glassy eyes and yawns, your child's attitude will undoubtedly change when you are talking about their money.

Work and Maturity Issues

Before you rush out to open a Roth IRA for your child, you must determine if your child is eligible to open an account. To open an account, your son or daughter must be working at least part time for an employer that reports their wages to the IRS. Hiring your child to take out the trash each week is not going to cut it, nor will this strategy work for your 5 year-old. Many teenagers, however, have summer jobs that should suffice for IRS consideration. To avoid any trouble, you should consult with your 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 they will with the account. It is strongly suggested that you clearly explain the consequences of taking money out of the account [taxes, penalties, being cut out of the will, forced to eat healthy food, grounded for life, etc.] but the decision lies with them. As difficult as it is, try to be objective in evaluating how you child will react to knowing the money is sitting in an account. If you have doubts, you should probably investigate other tax saving strategies.

Opening a Roth IRA for your child can be a very effective means of transferring wealth to your child and teaching important life lessons. If your child exercises restraint, your relatively small contribution to their Roth IRA can grow into a sizeable tax-free nest egg.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review. He can be reached at richard@businesstaxrecovery.com.

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

Other Law Sites
Search The Internet For Other Law Sites

Law Books
Search For Law Books At FindaBook.com

Tax Attorney Roni Deutch Analyzes Proposed Tax Laws in New Featured Blog
After nearly seven months of blogging, tax attorney Roni Deutch has posted a new featured blog analyzing the causes and possible outcomes of a new proposal that is being backed by the Internal Revenue Service. The proposal is part of President Bush's 2008 budget, and attempts to lower the gap in what taxpayers pay and what they should pay in taxes, by requiring many Internet companies to collect personal data from their users.

New York City Construction Accident Lawyers Lobby for Safer New York State Labor Laws
Recent construction accident news supports David Perecman and Doug Fanning's stance that New York State labor laws need to be updated and strengthened to protect worker's rights.

Central Florida Family Law Lawyers Appel & Gaines Offers Creative and Collaborative Divorce Solutions
The lawyers at Appel & Gaines, LLP experience first hand their client's struggles with the emotionally challenging, destructive and costly process of divorce in Florida. Therefore, their attorneys frequently suggest to clients that they initiate a "collaborative" approach to resolving their family law issues.

Divorce Lawyer Says Families Do Not Belong In The Court Of Law
Fresno divorce attorney Erin Rhames-Childs says that the court of law is no place to divorce. The courts are overworked and understaffed - leading to poor legal decisions that are not in the best interests of those involved. Collaborative divorce is a way for couples to divorce while maintaining their dignity, making decisions that truly are in the best interests of their children and preserving their finances. Collaborative divorce is quicker, cheaper, and better for maintaining functional relationships for after the divorce is over.

Elizabeth A. Kreitzer, Certified Family Law Specialist, Joins Klinedinst Family Law Group
The California-based law firm of Klinedinst PC has added Elizabeth A. Kreitzer, Certified Family Law Specialist, to its expanding Family Law practice group. Ms. Kreitzer's addition, combined with the strength of the firm's existing litigation teams, will help ensure that every client receives sophisticated, professional and compassionate representation, Ms. Kreitzer is the recipient of the Michael C. Shea Chair in 2005, and adds a wealth of family law knowledge to the department. She is experienced in working with sophisticated clients handle complex family law issues, including divorce, paternity and custody disputes, prenuptial agreements, adoption proceedings, and other family law matters.

Kirsten Branigan Joins McDonald Law Group, LLC Adding Depth in Employment Law
Kirsten Branigan and Nancy McDonald join forces with a shared passion--advocating for advancement of women in the practice of law.

Lemon Law Attorney, Dana Lynn Tarquini, Featured at Lemon Law Administrators Conference
Ms. Tarquini, one of the country's most prominent lemon law attorneys, participated in panel discussion at the 10th anniversary lemon law administrators conference in Atlantic City.

Houston Bankruptcy and Family Law Practice Announces Affiliation with Houston Civil Litigation, Business Law and Immigration Law Firm
Houston bankruptcy attorney Michael Busby of Busby & Associates joins forces with Carlos Peniche & Michael Rojas of Peniche and Rojas to offer Texans comprehensive legal services - from divorce, personal injury and civil litigation to contract disputes, employment law and immigration services.

Los Angeles Divorce Attorneys, The Family Law Company, Opens a New Office in Beverly Hills
Los Angeles family law attorney and founder of The Family Law Company Pamela Wright opens a new office in Beverly Hills. The Family Law Company offers high-quality legal services at affordable rates for divorce, paternity, child custody and child support actions because justice doesn't have to cost a fortune.

Legal Resource Local-Attorneys Expands to Include Divorce Law
Local legal resource website Local-Attorneys has announced that it is expanding to cater to divorce law specialists and visitors in need of advice. Web users will be able to browse local law firms who specialize in every sort of legal vertical. Find the best advice and attorneys in the industry.

Pending Federal Law Threatens All Copyright Owners says the Hodgson Law Group
The Shawn Bentley Orphan Works Act of 2008 (S. 2913) "Orphan Works Act of 2008" (H.R. 5889) allows anyone to use a copyrighted work without first obtaining permission. The user can later claim that a diligent search was conducted but the owner could not be found in any later action for infringement. This new legislation will apply to all copyright owners whether or not the work was previously registered with the Copyright Office. The legislation threatens the rights of artists, photographers, composers, film makers, publishers, and visual artists says the Hodgson Law Group. The Copyright Office not only endorses this legislation, but also advocates further changes that go beyond the proposed statute in reducing copyright protection. T...

Tax Attorney Site Answering More Questions on New Tax Laws
TaxAttornyHelp.com, an online tax law attorney service provider, has answers to questions on new tax laws that affect filers in 2008.

Monroe, N.C. Family Law Attorneys Merge Practices to Form Stepp Lehnhardt Law Group
Donna Stepp and Dana Lehnhardt combine local practices and operations, creating 4-attorney general practice law firm with emphasis on family law

Understanding The Law...Criminal Law
The following Q&A's have been provided to help you better understand Criminal Law.