 Bonds (in the child's name) scheduled to mature after your child reaches age 19.
- You can invest in equities that pay small dividends but have a lot of potential for appreciation. The income earned when your child is under the age of 19 will be minimal, and the growth in the stocks will occur over the long term.
- If you own a family business, you can employ your child in the business. Earned income is not subject to the "kiddie-tax," and is deductible by the business if the child is performing a legitimate function. Additionally, if your business is a sole proprietorship and your child is under the age of 19, then he or she will not pay social security taxes on the income.
Note: The Kiddie Tax does not apply if the earned income of a student over age 18 exceeds half of the child's living expenses. Living expenses include food, housing, clothing, medical, dental, education and other necessary costs of support. Students over 18 are considered independent from their parents if they provide more than 50% of their own support.
There are also a number of tax incentives that you might be able to take advantage of. Please see the Financial Guide: HIGHER EDUCATION COSTS: How To Get The Best Tax Treatment.
Tip: Reporting the kiddie tax on the child's return using the required Form 8615 calls for showing the parents' taxable income. A parent reluctant to show that item to a teenager may instead report the child's investment income of the parent's return, on Form 8814. But this is not allowed, and the Form 8615 route must be followed, where the child has taxable earned income, as many teenagers would.
- U.S. Department of Education (for information on financial aid): 1-800-USA-LEARN (1-800-872-5327)
Life Insurance: How Much and What Kind To Buy
How much life insurance do you need? What type is appropriate? You should review your life insurance needs each time you have a major life event. Here is what you need to know to properly plan for your life insurance needs-to buy enough and to get the most for your money.
The prospect of planning for your family's life insurance needs may seem daunting. The array of confusing products available, coupled with the calculations needed to find the right amount of insurance, would put anyone off.
Yet the hard fact is that life insurance is an essential part of your family's financial well-being. The more you know about it before you go to your agent, the better your coverage will be. If you don't plan for your life insurance needs, the result could be a waste of thousands of dollars on inappropriate or ineffective life insurance or, worse, financial hardship due to not having enough insurance.
We've tried to make the process of buying life insurance easier and more informed by providing you with objective, unbiased information and a plan of action. This Financial Guide gives you some basic guidelines about whether and when you should purchase life insurance, and provides you with a system for determining how much you need. It also discusses the types of insurance available, their suitability for various situations, and how to comparison shop for a policy.
The purpose of life insurance is to provide a source of income, in case of your death, for your children, dependents, or other beneficiaries. Life insurance can also serve other estate planning purposes, such as giving money to charity on your death, paying for estate taxes, or providing for a buy-out of a business interest. However we won't go into these other purposes in this guide.
Related Guide: Please see the Financial Guide: ESTATE PLANNING: How To Get Started.
Whether you need to buy life insurance depends on whether anyone is depending on your income. If you have a spouse, child, parent, or some other individual who depends on your income, you probably need life insurance. (You might also need life insurance for estate planning or business succession planning purposes.) Here are some typical insurance situations along with typical insurance needs:
Situation 1. Families or single parents with young children or other dependents. The youn