Hiring son to pay for education leads to bigger financial issues

What is the best way to do this? Should I keep the money close at hand for him, and not get socked with the self-employment taxes? Someone mentioned that I could employ my son in my business, as he would be at a lower tax bracket. I don’t want to raise any red flags to the Internal Revenue Service. Once he is finished, I plan to resume putting all the money I earn back into my retirement. Any ideas would be greatly appreciated. – L.T., via e-mail

Dear L.T.: Reading between the lines, I gather that because this is your part-time endeavor, your accountant is putting most of the money into a sheltered account. If you don’t take advantage of this shelter, you will have to pay the ordinary taxes of self-employment.

Yes, you could put your son on the payroll, but then you will open yourself up to having to carry worker’s compensation. You will have to make Social Security and Medicare contributions, as will your son. I don’t think that’s the way to go.

The fact is, there are times when you simply have to pay some taxes in order to accomplish your goals, and this seems to be one of those times. You could borrow the money needed for school and continue your shelter, which may not be a bad way to go, since it would force you into a savings program.

From family farm to feud?

Dear Bruce: I am 83 years old, and I would like to do what is best for my children. I have a farm I would like to give them. Should I give it to them now, or let my estate do it after I pass away? – Reader, Nebraska

Dear Reader: Your question is not one that can be answered without a great deal of information about you. The value of the farm is an important part of this recipe. I would suggest you talk to someone knowledgeable about estate planning and IRS regulations with regard to estate taxes. Properly done, you can avoid having your children be impoverished by the IRS. Further, let me suggest you not leave the farm to a “group” of children as an undivided interest. The problem with this scenario is, oftentimes, one needs money and another does not. One feels a relationship with the property, another does not, and family feuds can develop. It is far better to direct your executor to keep the property in the estate’s name until it’s time to dispose of it and distribute the proceeds among the children.

Give each of them the right of first refusal; that is, if they want to buy it for themselves, fine. But to leave undivided property to a bunch is one certain way to divide a family. Let’s hope the property remains in your name for a good many years.

Bruce Williams is a national radio talk show host and syndicated columnist. He can be reached at bruce@brucewilliams.com.[[In-content Ad]]