That was a bit of a misleading title, huh? Any chance I had at being a baby model went by the boards around 36 years ago. However, 7-month old Little Man is just the right age.
The idea to get Little Man into baby modeling occurred to me after watching this commercial for Kay Jewelers:
I’m going to put this as nice as I can as it is a delicate subject, but I don’t think Vivian Brady is threaten by the competition from this baby.
I think Little Man could compete with that baby model. Not only that, but he can model for the 4-5 months as he’s a little tiny and still hasn’t gotten any teeth yet.
This Jezebel says the life of a baby model isn’t that great. I’ve also read that there are a lot of scams… companies claiming to get your baby in the industry for a fee.
The one thing that struck me as odd is that parents are interested in having their baby be a model for the status. I wouldn’t be interested in that at all. I would want Little Man to be a model because it would mean he could earn income. Why is that important? Two words: Roth IRA.
Contributing to a Roth IRA requires that you have earned income. Since Little Man’s current skill set consists of dirtying diapers (which isn’t in demand) and looking cute, his avenues for earning income are limited. With him only 72 or 73 years away from retirement, the clock is ticking… best to get started on that Roth IRA now.
I find the whole earned income requirement for the Roth IRA to be so annoying that I started to think of a way around it. For example, imagine a pseudo-money laundering scheme were parents pay a company for placement of the baby pictures on a website… and then the company pays the baby for modeling on the website. The company and the website itself exists only to convert the parent’s earned income to earned income for the baby. That earned income can be contributed to a Roth IRA. Sneaky? Cool? Shady? What do you think?
How do I get Little Man started in baby modeling, I haven’t a clue. I did find that Parenting Magazine had these tips for getting the best pictures. This CBS News article also gives some baby modeling tips.
My sister-in-law just started this with her baby and you’re exactly right, the reason is the Roth IRA.
I like your plan, but I’ve got another idea: If you’ve got a business, why not pay the baby to model for your site? Change your lazy man and money logo to a picture of your baby sleeping and voila, you’ve got a business expense for you and Roth IRA money for your baby. If every post has a different picture, is $50/picture too much to pay a baby? I don’t think so.
It’s even better this way because you can count it as a business expense, so you effectively pay $4,000 (depending on your tax bracket) and your baby gets to put $5,500 into his Roth IRA.
Lazy Man says
That’s not a bad idea, but if I was ever audited, could I explain to the IRS that paying my soon $4000 for modeling was a reasonable business expense for Lazy Man and Money?
The other thought is that with all the MLM nuts who have threatened me with violence makes me want to keep family separate from this website. That’s really only a minor concern though.
The other option is doing it through grandparents/family who have businesses.
Or, you can partner up with me on seriousbabies.com, I want to have pictures of babies doing serious things. Baby drinking apple juice and ice while reading a newspaper, maybe some courtroom scenes, lifting weights in cutoffs. Then you could consider it a real business expense, audit-proof!
Lazy Man says
Hmmm, I had an idea or two for a niche website involving babies too. I’m not sure if I can make it that profitable. I do think the serious babies website is kind of interesting.
It has been almost 20 years since my college income tax classes, but I seem to remember that if a transaction does not have a valid business purpose, the IRS can opt to ignore the transaction. A transaction designed solely as a means to provide tax benefits would not have a valid business purpose (this was specifically mentioned; I’m not applying an interpretation).
As far as actual legit opportunities, I think supply and demand come into play. There are an awful lot of cute babies out there, and a relatively small number of gigs.
Lazy Man says
This kind of piggybacks on some of my discussion with MLM and pyramid schemes. It’s become a very blurry line, where it’s almost impossible to say what is legal and what is illegal. I can use the FTC guidelines to make a case that they could consider every MLM in existence an illegal pyramid scheme (there are always people at the top whose earnings come more from recruiting than from sales to the public).
Along the same lines, if I created a website as described, registered it as a business, and put some advertising on it, it would be hard for IRS to say it “solely” is a means to provide tax benefits. I could take the site a step further and make a baby stock photography site where people can buy digital images of the babies. That would be very legit business, right?
You are definitely correct about the supply and demand there. As the Jezebel article mentioned, in this economy people are thinking of getting income any way they can, I would expect there to be a lot of parents looking into it.
i looked into this with each of my kids and contacted agencies friends worked with [one kid was making 45G/year, another 25G/year] it is WORK. dragging, going, interfering with play, going to the park, reading, my work, all hours of the day and night. maybe .001% make anything, most of the agencies are scams wanting you to buy photo packages, takes lessons in poise and acting [little guy is too young for that at least] don’t waste your time. enjoy every inute of him being a baby.
“Along the same lines, if I created a website as described, registered it as a business, and put some advertising on it, it would be hard for IRS to say it “solely” is a means to provide tax benefits.”
Sole might not be the precise word – it may have been “primary”, which is a different barrier.
If the vast majority of your payments are to immediate family members, odds are pretty good that the IRS will call shenanigans.
Having said that, I’m definitely aware of business owners that have (older) children on payroll for this exact reason – they pay them the max Roth amount and receive absolutely no work in return.
Lazy Man says
Damn, I had all my eggs on that “solely” wording, primary is bit tougher
As for the vast majority of payments made to immediate family members, I’d say that this is similar to the pyramid scheme vs. legit MLM test that never gets investigated. If more of the money comes from recruiting vs. selling to those outside the scheme.
In certain states, like California, parents must open a Coogan Account for the child where a certain amount of money must be put away for them. I’m not sure how much money you’d have left over to start a Roth IRA as well.
I thought about doing the same thing with my little one, but got a quick education from a work friend who had their twins in a major TV sitcom. The big caveat, you have to be on call almost every day and be available to drive down to the studios the next morning. If you don’t go to few casting calls, they will stop calling you. The schedule can be tough for working parents.
In general, the main test the IRS uses is whether the transaction makes sense as an arms-length transaction. Would a random person find that the value is reasonable for the price being charged.
I was looking for a way to give my two kids a head start on retirement investing. Being a financial planner, I loved the idea of a Roth. That being said, starting out at six months old, which is what I did, I figured a guaranteed rate of return over the next sixty five years might not give a huge figure, it would be adequately doing my job as a parent.
We set up a whole life policy for each of them and put away $2,000 a year for each. If we could do more, we would. The policy is paid up in 18 years, with.the ability to purchase more over the next 20 after that. Not only will they have a pretty nice nest egg, we protected their insurability should something happen in he future.
Being frugal as you are, the one big downside is that a portion of the investment goes towards the cost of the insurance. While this is true, insurance costs for infants, toddlers, teenagers and young adults even is very low. Probably less than even most mutual fund expense ratios.
Someone better at math than me can do an apples to apples comparison, but. $36,000 investment will yield a 65 year guaranteed return of a figure north of $650,000. Life insurance also has non-guaranteed returns if you use a strong company and that number was somewhere in the 800,000 range.
For us, we felt giving our kids a head start of mid to high six figures wasn’t too shabby. The are also the benefits of the money being 100% tax free and owned by the parent to protect the kids. You could even use the cash value for down payment of kids first house, college spending money and tuition or a wedding. The cash value is the parents to spend as they see fit, although the spirit of the policy is that it be used for the kids.
I know most of the trendy tv planners like Suzie and others will tell you never to buy whole life. What they don’t tell you is that they don’t thnk it’s for YOU. Almost all of them own huge amounts of it. What we in the industry call human life value. The other reason most planners advise against it is because they can’t be fee based and collect commissions. I they can’t collect a fee on it, why would they sell it. It’s just ,only they can’t collect on.
Lazy Man says
The $36,000 investment at 4.6% over 65 years yields $650,000. That’s not a bad return in today’s market, and the tax-free is a definitely a plus.
I think Suze Orman has said that she mostly has treasure bonds and other guaranteed (or near guaranteed) forms of investments, since she more money than she’ll need, she just want to protect it and it throws off enough income for her.
Many advisors recommend products that they don’t collect a fee on. If they do, it’s time to see a new advisor in my opinion. I test to see if they recommend Vanguard or similarly low-expense ratio ETFs. If they push something with higher fees and suggest higher returns, I move on.
The confusing thing about using life insurance as an investment is that it wasn’t designed for that purpose. It’s like using an apple wedge for a door stop, I guess it could work, but apples were designed for eating and door stop wedges were designed for stopping doors. Combine it with the complexity of life insurance (What is the NAV value of my life insurance policy on any given day? How do I transfer it to another broker or cash it out?), and it’s really difficult to recommend. They also seem to be sold by those who are exclusively paid commissions for setting up the policy… so who knows if you are getting a quality product?
Not that it is the point of the post at all but Nav would be sort of equivalent of Cash Surrender Value / and transferring it would likely be a 1035 exchange. Cashing out could be done either but taking the cash or taking out up to basis and then loaning from the policy leading to a tax free cash flow.