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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 59. 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 didnt 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 childs 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.

For small companies, an office is an overhead that many feel they can do without, at least when starting up, but as a business grows and takes on staff, an office becomes an essential.



Even before that, there are many arguments in favour of a physical presence; an office can add credibility, and suggests permanence, that the company is going to be around in the future, perhaps particularly important for new companies.



But how much space should you rent or buy? Obviously this will depend on the employees that you expect to be working there, but you will need to factor in growth plans, whether you require an open plan working environment (allow 75-100 sq ft for each person) or individual offices (about 175 sq.ft) and meeting areas (215 sq.ft will accommodate a table and chairs for about six to eight people).



An alternative, particularly if your growth is uncertain is a serviced office, where you rent space by the number of workstations you require and by the month. This may not only help with cash flow, but also allows a company to grow or contract in a fairly flexible manner. There are no capital outlay costs for furniture or telephone equipment, all of which are provided and if you need meeting space, you pay for it by the hour.



Additional services, such as secretarial assistance are also available as required and the telephone is answered by a dedicated receptionist and in your companys name.



On a price per sq.ft basis, serviced offices are more expensive, but this additional cost is often outweighed by the fact you are paying for just the space your business needs.

Business Cost Savings Through Safety

Setting a health and safety program in place will reduce costs. Having a program will reduce accidents and will lead to lower company workers comp premiums; further business insurance companies prefer their customers to have health and safety programs. These insurance companies might even discount the premium if a program can be proved to exist. The average cost of an accident is 68,000. Direct costs in accidents such as workers comp and fines levied can close a business. Indirect costs such as low morale of employees, legal fees, and retraining can be as costly if not more.

A working program will:
1) Improve employee morale Shows care in their well being
2) Reduce revenue loses Fewer accidents keeps all employees at work
3) Give a boost to the customer Makes sure business is operating optimally

Small businesses that have a voluntary health and safety program in place have fifty percent less accidents and reported insurance claims than that of their counterparts according to OHSA stats. Most small businesses fall below the legal requirements for having a formal health and safety program in place due to number of employees on staff. Sixty eight percent of reported accidents are in the service industry which shows even businesses such as retail establishments are not free of accidents.

A health and safety program can be started by writing a health and safety policy; this is simply values that a company wishes to convey in its work processes. Secondly, is how communication between all employees and owners will function. And lastly, put procedures in place to ensure safe practices.

To find unseen hazards and unsafe practices, an audit needs to take place. Take a hard look at the workplace and record all factors that may lead to injury. These hazards might be dangerous chemicals or as simple as a letter opener. Identifying these hazards will lead to procedures to controlling them. Controls such as Dont run with scissors in your hands are effective. Write all procedures in a manual.

Implementing these health and safety procedures will be done with behavioral change. Some programs become weak and non effective because of:
1)No definition of safety practices No written processes
2)No teamwork Safety is communication from the top to bottom and vice versa. A well written plan will describe what roles everyone plays in safety policies.
3)No effective goals The accident free days poster will come as a result of sound safety processes.
4)Wrong incentives Money as a reward does not work well. Health and safety should be fun and worth employees effort. The right incentive plan can be cost effective and have obtainable goals. Incentive plans can include movie passes or simply free coffee on the boss. The insurance industry reports for a pound spent on health and safety yields four to six pounds in savings.

Once all of the hard work of developing and implementing the health and safety program is done, set aside some time each month to review the workplace. Record what is found; this is a good practice to see dangerous trends that might occur such as a fire exit constantly being blocked. On the quarters of the year post a meeting with employees. These meetings are a great way to get vital feed-back from employees and keep them involved. At least once a year, do an audit to make sure your health and safety program is current with present business operations.

Business Cost Savings Through Safety

Setting a health and safety program in place will reduce costs. Having a program will reduce accidents and will lead to lower company workers comp premiums; further business insurance companies prefer their customers to have health and safety programs. These insurance companies might even discount the premium if a program can be proved to exist. The average cost of an accident is 68,000. Direct costs in accidents such as workers comp and fines levied can close a business. Indirect costs such as low morale of employees, legal fees, and retraining can be as costly if not more.

A working program will:
1) Improve employee morale Shows care in their well being
2) Reduce revenue loses Fewer accidents keeps all employees at work
3) Give a boost to the customer Makes sure business is operating optimally

Small businesses that have a voluntary health and safety program in place have fifty percent less accidents and reported insurance claims than that of their counterparts according to OHSA stats. Most small businesses fall below the legal requirements for having a formal health and safety program in place due to number of employees on staff. Sixty eight percent of reported accidents are in the service industry which shows even businesses such as retail establishments are not free of accidents.

A health and safety program can be started by writing a health and safety policy; this is simply values that a company wishes to convey in its work processes. Secondly, is how communication between all employees and owners will function. And lastly, put procedures in place to ensure safe practices.

To find unseen hazards and unsafe practices, an audit needs to take place. Take a hard look at the workplace and record all factors that may lead to injury. These hazards might be dangerous chemicals or as simple as a letter opener. Identifying these hazards will lead to procedures to controlling them. Controls such as Dont run with scissors in your hands are effective. Write all procedures in a manual.

Implementing these health and safety procedures will be done with behavioral change. Some programs become weak and non effective because of:
1)No definition of safety practices No written processes
2)No teamwork Safety is communication from the top to bottom and vice versa. A well written plan will describe what roles everyone plays in safety policies.
3)No effective goals The accident free days poster will come as a result of sound safety processes.
4)Wrong incentives Money as a reward does not work well. Health and safety should be fun and worth employees effort. The right incentive plan can be cost effective and have obtainable goals. Incentive plans can include movie passes or simply free coffee on the boss. The insurance industry reports for a pound spent on health and safety yields four to six pounds in savings.

Once all of the hard work of developing and implementing the health and safety program is done, set aside some time each month to review the workplace. Record what is found; this is a good practice to see dangerous trends that might occur such as a fire exit constantly being blocked. On the quarters of the year post a meeting with employees. These meetings are a great way to get vital feed-back from employees and keep them involved. At least once a year, do an audit to make sure your health and safety program is current with present business operations.

While new homes are 100 percent more energy efficient today than those built three decades ago, most people are not familiar with how to actually design energy savings into the infrastructure of their home.

Here are a few ways to save energy in your home:

* Windows and doors: Today’s architecture takes advantage of increased window space and elaborate entry systems. This style enhancement certainly adds to the appeal of a home, but it increases the importance of having energy-efficient windows and doors.

On average, a household spends nearly 50 percent of its annual energy costs in heating and cooling. You can reduce this expense by up to 15 percent by using energy-efficient windows and doors, which help decrease the transfer of heat. Start by looking for products that have the Energy Star label. This label identifies products that meet the strict energy-efficiency guidelines set by the U.S. Environmental Protection Agency and the U.S. Department of Energy.

* Construction materials: Wood or vinyl (for windows) and steel (for doors) offer high energy efficiency. For windows, dual-pane insulating glass units and low-emissivity glass also increase the products’ energy efficiency. For steel doors, look for a polystyrene core, which helps the door retain its energy-saving properties longer than steel doors with a polyurethane core.

Rest assured, however, that you will not have to forgo style and beauty when seeking energy efficiency. Many manufacturers, such as Jeld-Wen Windows and Doors, offer a variety of Energy Star-qualified products that are attractive, durable and provide superior performance. In fact, upgrading windows and doors is a great way to build energy savings into your current home.

* Insulating your home: In addition to diminishing heat transfer through windows and doors, you can ensure even temperatures in the home by selecting proper insulation. Well-insulated homes can save up to 30 percent on heating and cooling costs. Pay attention to the R-values used to rate the energy efficiency of insulation – a higher R-value indicates a better ability to resist heat flow, meaning that it is more energy efficient.

* Heating and cooling engines: Installing oversized heating or cooling equipment is a common practice to provide customers with immediate results. However, oversized equipment is not necessary if your home is designed to conserve energy; it will only add to the growth of your energy bill.

Visit a local home improvement center to learn more about heating and cooling options.