The trust is just a variable annuity wrapped in an irrevocable trust. I'm in the insurance business, and for your 13 and 10 year olds don't do it. Its only a decent option for kids under the age of 10. But even then, a correctly written indexed universal life policy(**max non-mec funded**) is vastly better than a variable annuity. For many reasons, principal among them the disbursements are tax free through a process called wash loaning. Which essentially converts it into a Roth IRA type vehicle with no contribution limit. The variable annuity is taxable at retirement, and on the website the person said that the Roth is better, but that a kid at 1 years old isn't going to be earning an income for them to be allowed to put money in one.
Instead just employ the two of them and give them a generous income(under your control). This is a very effective tax arbitrage strategy that a lot of people do. You have a business subject to higher taxes your kids are subject to lower tax rates. So, if you pay the kids out of your business you can take a deduction against your high tax rates and the kids pay a lower one creating tax arbitrage. Then since the kids are under 18 you can take control of the excessive amount(I would let them keep a reasonable amount of it for doing work) and just spend it on normal things that you would otherwise have paid for the child--clothes, food, etc. Since the children now have significant income, open a Roth IRA and contribute the max on their behalf every year. This is the most effective strategy for children over 10. If you were planning on doing this with fathers-in-laws money just have him gift the 10K(5K each) to you every year and you will just use the business as the effective conduit. The more you pay them and commit tax arbitrage the more taxes you'll save, but keep it within reason because you don't want the IRS questioning you. Traditionally you are fine if you pay them no more than 150% of what an average person would make doing the work. Feel free to inflate the hours they work significantly.
I see now that both of them are already employees, good.
I think that if he is going to set up massive funds for your kids education, I wouldn't be to pushy on the rent. But thats just my opinion.
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