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Question for Tax attorney and or Estate planning .... My son…

Question for Tax attorney and...
Question for Tax attorney and or Estate planning ....My son wants to invest some money that looks quite fruitful but he’s only 17.
I cant do it in my name since with my divorce I’m imputed income and if I go over the imputation then my spousal and child support would be reduced .How can my son invest and make money or how can I help him without me showing that it’s my income that would be made on speculative investments.Could we create an S Corp or a living trust ?
Please help .
Thanks
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Answered in 2 minutes by:
3/9/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,610
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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You wouldn't want to do a S Corp, because part of the requirements of an S Corp would be for him to pay himself a reasonable salary and may subject his earnings to employment tax.

___

My suggestion is to speak with your local bank or brokerage firm. They may open up an account for your son with you as a co applicant, or they may not need you as a co applicant.

___

He could create a living trust, but the issue may be with his ability to open a brokerage account with a bank or broker, assuming he will be investing in stocks, bonds or mutual funds.

He does have other options too, if the funds will be used for college.

Please let me know how I can answer your question further.

Thank you

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Customer reply replied 4 months ago
Hi Chad !!
Yes ..., his profits on the stocks will be used for college ( perhaps not all but most ).
What other options would he have ?
Customer reply replied 4 months ago
Can he be 17 and buy stocks ?

He is able to purchase stock, if a brokerage firm or bank will open an account for him. Some brokerage firms will open an account for him, some will require a parent to be a co applicant.

You could open him a 529 college savings plan and the funds would grow tax deferred, be for his benefit and if used for school, the earnings would not be taxable.

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Customer reply replied 4 months ago
If we created a irrevocable living trust ...,with myself and 3 minor sons included - is it public knowledge who is in this trust ?

No, an irrevocable trust is not public information and is not able to be changed. A living trust also is not public information and is able to be changed.

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Customer reply replied 4 months ago
The 529 college savings
Let’s say it had 50k in it
If he used 40k on school - would he have access to the remaining 10k for other expenses ?
Customer reply replied 4 months ago
What would be an advantage to an irrevocable trust vs a living trust ?And disadvantages too?

He would still have access. You are always able to access your initial contribution.

The advantage is, the profits would grow tax deferred and if the profits are used for college then they also wouldn't be taxable.

If you didn't use the funds for higher education the profits and profits only that he takes out may be subject to a 10% penalty

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There are books about advantages and disadvantages of irrevocable trust vs revocable living trust.

Essentially, an irrevocable trust is taxed as a separate taxing entity and no changes can be made.

You are able to make changes to revocable trust and generally you may pay taxes at your individual tax rate.

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,610
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Customer reply replied 4 months ago
Thank you Chad

Thank you for the rating.

Please do let me know if you have any additional questions.

Thank you.

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