[WSBAPT] SEP-IRA for kids? Pre-Tax?

[Paul H. Grant]

Just remember that when a minor has earned income they can only contribute to a Roth IRA up to the amount they have earned, or $5,500, whichever is less.  In other words if a teenager who is working a part-time job only makes $3000 in 2014 then they can only contribute $3000 to a Roth IRA.  Knowing the minor's "taxable" income is important to ensure that a contribution does not exceed the allowed limits.  It also depends on whether or not any traditional IRA contributions have been made.

You can read more about it at IRS Pub 590...

Sent from my iPhone ~ Paul H. Grant

> On Mar 26, 2015, at 4:31 PM, John Creahan <john at cairn-law.com> wrote:
> 
> Katherine – you are exactly right. Thanks for clarifying my less than clear explanation.
> Victor, could you explain the transaction you are considering? The short answer is a minor has the same right to fund a traditional IRA as anyone else (and has the same limitations). An employee cannot participate in a SEP plan prior to age 21.
>  
> John Creahan
> 206-621-5848
> www.cairn-law.com
> 
>  
>  
> From: Laird, Katherine [mailto:KatherineLaird at CenturyPacificLP.com] 
> Sent: Thursday, March 26, 2015 3:12 PM
> To: Victor R
> Cc: John Creahan
> Subject: FW: [WSBAPT] SEP-IRA for kids? Pre-Tax?
>  
> I think the point John was making is 1) you must have earned income to fund an IRA whether Roth or traditional and 2) if someone has earned income the IRA limits apply.  Most minor do not have earned income (as opposed to passive income) so the IRA is irrelevant. 
>  
> Katherine Kramer Laird 
> CenturyPacific, LP 
> Suite 1680 
> 1201 Third Avenue 
> Seattle, WA  98101 
> Ph. 206-757-8892 
> Fax 206-757-7890 
> katherinelaird at centurypacificlp.com 
>    
>  
> From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Victor R
> Sent: Thursday, March 26, 2015 3:04 PM
> To: WSBA Probate & Trust Listserv
> Subject: Re: [WSBAPT] SEP-IRA for kids? Pre-Tax?
>  
> what i was thinking is if it mattered whether they were a minor or not.
> 
> also, if the sep-ira limits would be the same for them, too?
>  
> On Thu, Mar 26, 2015 at 2:38 PM, John Creahan <john at cairn-law.com> wrote:
> If someone does not have any earned income, he or she cannot use pre-tax dollars to fund an IRA (except for certain non-working spouses), so I don’t see how a company cannot establish an IRA for an employee’s child. If the child is also an employee, she could, of course, participate if she met the eligibility requirements.
> 
> I suppose some business owners might “hire” their kids and fund the child’s IRA with salary, but the SEP rules limit the benefits of this approach.
> 
> A child who earns wages – even working part time – is eligible to set up a traditional or Roth IRA, which, in most cases, would be funded by parents.
> 
> I don’t know if this answers your question, but feel free to follow up.
> 
> John
> 
>  
>  
> John Creahan
> john at cairn-law.com
> 1325 4th Ave., Suite 940
> Seattle, WA 98101
> 206-621-5848
> www.cairn-law.com
> 
> <image001.png>
>  
> From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Victor R
> Sent: Thursday, March 26, 2015 2:09 PM
> To: wsbapt at lists.wsbarppt.com
> Subject: [WSBAPT] SEP-IRA for kids? Pre-Tax?
>  
> Members:
>  
> Any of you ever hear of this type of investment vehicles for employees for their kids?
>  
> ... or even something similar?
>  
>  
> 
>  
> --
>                                                     
> Victor Ro, Esq.
> THE RO FIRM, P.S.C.
> A Professional Services Corporation
> 5400 Carillon Point
> Bldg. 5000, 4th Floor
> Kirkland, WA 98033
> Tel:  (206) 319-7072
> Fax: (206) 319-4470
> 
> This communication is CONFIDENTIAL - ATTORNEY WORK PRODUCT - PRIVILEGED.  You are responsible for any damages arising in any way from its use.  Do not construe this correspondence or contents, thereof, as legal advice or as an engagement between an attorney and client.  If you received this communication in error, delete it immediately and permanently from all existing files.  NOTICE and PROHIBITION:  Do not copy, transmit, retransmit, distribute, or disclose this information contained, herein.
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> 
> 
> --
>                                                     
> Victor Ro, Esq.
> THE RO FIRM, P.S.C.
> A Professional Services Corporation
> 5400 Carillon Point
> Bldg. 5000, 4th Floor
> Kirkland, WA 98033
> Tel:  (206) 319-7072
> Fax: (206) 319-4470
> 
> This communication is CONFIDENTIAL - ATTORNEY WORK PRODUCT - PRIVILEGED.  You are responsible for any damages arising in any way from its use.  Do not construe this correspondence or contents, thereof, as legal advice or as an engagement between an attorney and client.  If you received this communication in error, delete it immediately and permanently from all existing files.  NOTICE and PROHIBITION:  Do not copy, transmit, retransmit, distribute, or disclose this information contained, herein.
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