Hey Mark Kohler here want to talk about setting up a Roth for your children. Is that even possible?
Can you do a Roth for your children and save for the future and get a pretty cool tax strategy out of it? Absolutely
Let's run through the rules
Okay, I got my whiteboard here because this makes much more sense visually if we throw it on a whiteboard
Rule number one kids cannot have a Roth unless they have earned income
They have to have earned income. You can't give them money to open a Roth you can't
Have them invest in stock bonds or mutual funds and get passive income and open a Roth they have to have earned income
And and but that's okay
We can do that now any child under age five or six unless they're a superstar for some modeling scenario
Or an acting they're not going to have earned income
But I am a firm believer that kids under age 18 can start working in a business and if you're an entrepreneur
Even with rental property, let's get the kids involved in basic
Rental property maintenance or even bookkeeping shredding paper cleaning the home office. Let's get them involved. That's what's going to generate their own income
So watch my other youtube video on hiring your kids under age 18 for those of you with kids over age 18
I got a video for that too. So watch that but here's how the Roth works
This is I'm gonna try to keep this video short and to the point
is that ultimately you're gonna have a small business you got it and
so whether it's a sole proprietorship or an S Corp
You're gonna have this small business and it could even be an LLC taxed as a sole proprietor
So I'm just gonna kind of leave this but you know watch my other videos on all your options here
You could also have rental property here. You could have a rental property up here in a rental LLC
Maybe VRBO is Airbnb zoar long-term rentals, whatever
Whether you have an active
Operational business or a rental property you've now got the machine that can pay your kids
To be in the business now if you have an S Corp, I set up a little property
I'm sorry a family management company as sole proprietor here watch my other video on that but the point is we're gonna pay the kids
Right here
Now once your kids have earned income they can fund a Roth
So if I have a six-year-old and I'm gonna pay him a thousand dollars a year for cleaning the office 1200 a year
Maybe a hundred dollars a month. I could I could swallow that that could be realistic
So if I paid the kids $1,200 they can open a Roth and put $1,200 in up to their earned income. The max is
5500 this year so I could pay the kids
$5,500 maybe a teenager and they could put that 5500 right into a Roth
now when that happens if you're gonna fund a Roth I'd like to issue the kids at w-2
Now those that have worked with my office many times
we just call this outside labor and we never
issued the kids at w2 but if you're gonna go fund to Roth a lot of time a brokerage company is gonna be like, oh
This kids ten years old. How do they fund a Roth and you have to provide a w-2 just because they're freaking out but
That's it's not required because there's no withholding from the w-2
There's no penalty because there is the penalty is based on the withholding is there is none
So if you're paying your kids under the standard deduction you're fine. So anyway, the w2 is more of a kind of a
Funky thing to just help grease the wheels when you go through
To set up the account at the at the broker-dealer if you will so you get the kids paid and I'll pay the kids
Let's say we pay a child four thousand dollars out of one of these entities now, you can open the Roth now
We're still not done yet. This is where it gets good
Of course, we think direct self directing is critical and we love directed IRA
links down below directed IRA is a great place to open up a Roth for your kids and
You can come over here open up the Roth
Pay them drop the money into the Roth. They're not gonna pay any taxes because their standard deduction will zero out the 1040
Again, watch my other video on paying kids the beauty of this is once the Roth is opened at your broker-dealer directed IRA
Then the Roth can invest and this is where it gets fun
you could open another LLC of
Which you're a partner or your Roth or IRA as a partner?
and now you've got a an LLC that's going to go out and buy rentals by Super Bowl tickets by
Selena Gomez tickets and flip them by racehorses
Bitcoin
Cryptocurrency of any sort of gold silver is that cool you can take the Roth and create an LLC
Owned by your child's Roth and invest it and then any of those profits go back into the Roth tax-free now
Here's the last little twist. Why would we do this?
because not only can we start building a retirement account for our kids in a gross tax free and you can
Self-direct it in an LLC watch my other YouTube videos on self-directing and an LLC. Oh you'll love it
but what's cool here too is any
Contributions the kids put in they can pull out tax-free
for college
so
Contributions come out tax-free. No penalty any age pull them out for college. No problem the growth
Whatever this project of yours is created those have to stay in the Roth and they build a retirement for your child
so you're kind of knocking out a college savings plan and
at the same time
Building a retirement plan and you're getting a tax write-off to pay your kids in your business a tax write-off
to fund college tax-free
And then to build retirement tax-free, is that crazy?
I just got chills because there could be even more we could open up a Coverdale College IRA
You're for self-directed 401 K can get into the mix and now we're building multiple
Retirement accounts into one LLC and investing and what you know best now, I know these concepts are part of multiple
Trainings of minds my books my videos my classes, please look into it. We've got S Corp strategies
We've got paying your kids strategies. We've got college savings strategies
Retirement accounts strategies and self-directing strategies all here in one video. Oh
I love this stuff. So anyway, we're for real real law firm real accounting firm
And I love helping people live the American dream. Check this out keep studying
Subscribe all that good stuff. There's a little bit more to this video on how you can get involved. Thanks so much
Thanks so much for watching that video and I want to be your source for tax and legal strategies
It's hard enough to live the American dream without being out on the web on Google trying to find answers to complex
Questions and just click in a mouse open
you got it, right my team, and I want to be a huge resource treatment the law firm accounting firm my
Education resources on my site. Please continue to follow these strategies
I know the safety thousands now click here if you want to be a part of my newsletter
It's awesome weekly updates and deadlines and strategies and tips also subscribe to my youtube channel
You'll love it and make sure to click the bell icon
So you get a little ping whenever there's a new video and finally check out my site Marjory Kohler comm with all sorts of videos
Probably 70 plus videos 30 plus hours of content that'll save you thousands