Do any of you SAHM or SAHD do this??

[mom-from-missouri]

I had a SAHM who also homeschools tell me that her husband pays her weekly so she has social security.
Evidently, his first wife died, and he hired her to be his house manager and watch his 5 children. After 3 years, they married. Now they have I think 11 kids?? and one on the way--(his, hers and theirs combo).
She said he never quit giving her paychecks-but she has not gotten a raise either.
The reasoning is that if she ever needs to, she is qualified for ss disability and retirement.
Every heard of this? What is your opinion?
I ask because I have MS and am a sahm. I do sub teach, but last year barely made enough to vest for the year as far as SS is concerned.

My ex never paid into SS (he was self employed--the tax man recommended it but the ex thought he knew more...) Now he is disabled, and doesn't qualify for benifites and neither do our children. And now, he was told even after he dies, our children won't get any benifits even if they are under 18 because he did not pay into it the last 7 years. He is terminally ill and gets $800 a month for low income and free housing in a self assist living home and food stamps. He does not pay child support as his $800 barely covers his medical copays and fuel to and from the dr and vehicle insurance.

Any sugguestions here??

PS I have retirement from Sprint, but due to the market my 401K is now less than 1/4 of what it used to be.

[jIM_Ohio]

Makes sense. That is not to say I would or would not do the same thing.

I have worked enough quarters to qualify for benefits already, and I think wife has or is close.

If we were not close, I might consider something like for SAHM parent. I would look at what an annuity would provide for same 15% they are paying uncle sam first.

For example pays SAHM 10k per year. Is it better to put $1500/year into annuity or $1500/year into SS?

My guess is the annuity would have twice the return (SS generally provides around 3% return and annuities usually look like 6-7%).

[pearlieq]

My guess is the annuity would have twice the return (SS generally provides around 3% return and annuities usually look like 6-7%).

That's my thinking as well. I think they could provide a much better future for her by investing the money themselves. That way she'd be able to keep all of it and the earnings, not take a gamble on the mess of SS.

[jIM_Ohio]

That's my thinking as well. I think they could provide a much better future for her by investing the money themselves. That way she'd be able to keep all of it and the earnings, not take a gamble on the mess of SS.

the issue with investing is "what happens now"- meaning if SAHM died or was disabled now, what would the risks be.

[mom-from-missouri]

I thought of that too, but she said that in the early years it was more of a guarentee.

I thought I had worked enough quarters also--but the SS office told me that only was for retirement---not for disablitlty. I have worked full time paying into SS since I was 18. I am now close to 50 and worked full time until 2.5 years ago. They told me on the phone that for disablitity it goes by the last number of quarters you worked. She said based on my history, I am good for another 4 years, then I run out of my vested time.

My ex worked for others full time and paid into it for 30 years. But the last 10 years he was self employeed, so he gets no disability. They said his vestment had run out.

That was not how I had understood the SS to work. Evidently, according to our office, there is 3 times: ss retirement, ss disability and ss low income. Each works differently with different rules.

[jIM_Ohio]

I thought of that too, but she said that in the early years it was more of a guarentee.

I thought I had worked enough quarters also--but the SS office told me that only was for retirement---not for disablitlty. I have worked full time paying into SS since I was 18. I am now close to 50 and worked full time until 2.5 years ago. They told me on the phone that for disablitity it goes by the last number of quarters you worked. She said based on my history, I am good for another 4 years, then I run out of my vested time.

My ex worked for others full time and paid into it for 30 years. But the last 10 years he was self employeed, so he gets no disability. They said his vestment had run out.

That was not how I had understood the SS to work. Evidently, according to our office, there is 3 times: ss retirement, ss disability and ss low income. Each works differently with different rules.

My guess is you get disability ONLY if you paid in recently, meaning you need recent credits for disability. I would clarify the disability requirements.
This would be one more reason to consider the annuity maybe. You can get disability clauses built in (for a fee). My term insurance has a similar rider (if I become disabled or undergo a life threatening treatment, I can access up to HALF of my policy for cash now).

[mom-from-missouri]

My guess is you get disability ONLY if you paid in recently, meaning you need recent credits for disability. I would clarify the disability requirements.
This would be one more reason to consider the annuity maybe. You can get disability clauses built in (for a fee). My term insurance has a similar rider (if I become disabled or undergo a life threatening treatment, I can access up to HALF of my policy for cash now).

Which I also pointed out her her-then she pointed out to me, that SSD also pays her children as well, and with almost 11 children....each child can get between $800 a month to $1200 a month. Take that x 11 and add in what she would get, and for her, they feel they would come out ahead with the SSD.

But, if someone had no (or less children), it would be different.

[jIM_Ohio]

There is a max benefit of dependants+spouse and I doubt $8800 would be paid out per month.

[MonkeyMama]

WEalthy people put their family on the payroll for large retirement benefits (privately funded) and disability benefits, etc., etc. In general you need a business to do this (legally). I am not sure if many people do it for disability, but I have a CPA friend who hired her SAHM daughter for minimal work so she could qualify for disability insurance. You have to be working to apply for disability. I found that interesting since I think it sucks my SAH Spouse can not apply for disability though it's a much more common scenario than death.

I have to agree that you would probably be better off investing than doing it for social security, which has a max in something like the $4k/month range for benefits. Most our tax clients hire spouses because they can put away $50k/year into their retirement plans (per person) tax free. But you know, you need a lot of income to take advantage.

I'd be curious about the legality of hiring a family member as a household employee for social security. Off the top of my head, sounds fishy. But nothing I have seen before. You can hire your children and get them on social security - but the audit rate (social security audit) is about 100% for minors. So it better be pretty legit. Though you can actually pay minors for like chores, if you structure it right. (Usually done so they can fund IRAs).

[Like2Plan]

mom-from-missouri
I am wondering about how efficient this would be looking at the mechanics.
They would have to pay 12.4% SS tax on any income. (6.2 for the worker and 6.2 match for the employer). The money would then be considered income and income taxes would be due. So, in the case of a husband and wife--the husband gets taxed on wages used to pay the wife's wages which would be taxed again. On top of that, there is medicare tax. 1.45% each. I wonder if they looked at taking all the money and put it into some sort of retirement fund for her?

Then, there is the actual survivor benefit question:
How much can a family get?
Within a family, a child may receive up to one-half of the parent’s full retirement or disability benefit, or 75 percent of the deceased parent’s basic Social Security benefit. However, there is a limit to the amount of money that can be paid to a family. The family maximum payment is determined as part of every Social Security benefit computation and can be from 150 to 180 percent of the parent’s full benefit amount. If the total amount payable to all family members exceeds this limit, each person’s benefit is reduced proportionately (except the parent’s) until the total equals the maximum allowable amount.
link to SSA

link to SSA benefit calculator
The benfits are linked to the income (high 35 years for retirement), so I'm not sure how much your friends's family is putting into the system. I'm not sure how much income she is getting, but I wonder if her stand alone benefits would be anywhere near what she could collect based on her husbands salary?

Your children should receive a survivor's benefit based on your ex paying into ss for 30 years (provided they meet the age requirements.)

[cptacek]

I have heard of hiring your children to do things for your business, but you have to pay them age/wage appropriately. As in, would you pay $50 an hour for someone else to sweep the floors? If not, don't pay your kids that.

It makes sense if you are self employed. You can pay the kids, take it off as a business expense (so you don't pay any taxes on it) and then they pay income tax at their lower income tax rate. I don't think it makes sense if you are not self employed.

I've also read that you have to keep accurate records of when they worked and for how long.

I don't have any more specifics, but yes, I've heard of businesses being able to do this.

[zetta]

I doubt that it's legal for him to pay his wife to be the "house manager" or "child-care provider", even if she was paid for that job before they married. It's somehow assumed by our society and the legal system that wives should do that job for free. (Don't get me started...) Whereas it would be legal to pay his wife to be an accountant (for example) for a business he owns.

[mom-from-missouri]

Her husband is self employeed. He is a truck driver, owns his own rig and 4 others and has 4 other drivers. I do know she also does part of his office work--when he takes an out of town haul and is gone. (he tries to stay local). His office is located in a seperate building behind their home and when he is gone the calls are transferred into the house. If he is gone she may pay his bills or book a delivery. But, when he is local (90%) of the time, he does all this himself.

MY DH sometimes pays a farm hand (during hay season and when cows are calving...), and does all the taxes for that. We thought a few times of him hiring me/the oldest kid at home for part of it, instead but never talked to anyone about it.

"Your children should receive a survivor's benefit based on your ex paying into ss for 30 years (provided they meet the age requirements.)" Like2Plan, that is what I thought too. But I have had the 800 number AND our local office both look him up and tell me my children will NOT qualify for death benifits and I don't understand why. He did pay into it until he became self employeed. Does anyone have an idea why he would not?? They tell me they can not tell me anymore due to it being "confidential" information.... He is now 68, and on a waiting list for both a liver and kidney and lives in self assisted living. He is in and out of hospitals, yet refuses to stop drinking....
Would the kids not be eligable because I remarried?? He and I were married 20+ years, and the kids are his.
When I go to the benefit estimater, put in his DOB and the last year he worked for someone else and paid into it (1996) and the amount he earned that year $12,000 (he became self employed in April that year) it says his credits are 0.

[Like2Plan]

"Your children should receive a survivor's benefit based on your ex paying into ss for 30 years (provided they meet the age requirements.)" Like2Plan, that is what I thought too. But I have had the 800 number AND our local office both look him up and tell me my children will NOT qualify for death benifits and I don't understand why. He did pay into it until he became self employeed. Does anyone have an idea why he would not?? They tell me they can not tell me anymore due to it being "confidential" information.... He is now 68, and on a waiting list for both a liver and kidney and lives in self assisted living. He is in and out of hospitals, yet refuses to stop drinking....
Would the kids not be eligable because I remarried?? He and I were married 20+ years, and the kids are his.
When I go to the benefit estimater, put in his DOB and the last year he worked for someone else and paid into it (1996) and the amount he earned that year $12,000 (he became self employed in April that year) it says his credits are 0.

Hmmm.... It is surprising the info you are getting from SSA. Were your children legally adopted by your current DH? Or, are they over age 18?

The number of credits needed to provide benefits for your survivors depends on your age when you die. The younger a person is, the fewer credits he or she must have for family members to receive survivors benefits. But no one needs more than 40 credits (10 years of work) to be eligible for any Social Security benefit.

However, benefits can be paid to your children and your spouse who is caring for the children even if you don't have the required number of credits. They can get benefits if you have credit for one and one-half years of work (6 credits) in the three years just before your death.

link to How You Earn Social Security Survivors Benefits

If your former spouse is caring for your child who is under age 16 or disabled who gets benefits on your record, he or she will not have to meet the length-of-marriage rule. (The child must be your natural or legally adopted child.) However, if he or she qualifies for benefits as a surviving divorced mother or father who is caring for your child, his or her benefits may affect the amount of benefits your other survivors will receive based on your earnings record.

Benefits For Your Surviving Divorced Spouse

Link to booklet Survivor's Benefits

Is there any way you can get your ex to order a copy of his SS statement to see exactly what he paid in? (It is supposed to be sent out 3 months prior to his birthday, but he can order another one). It will also tell what the estimated survivor benefits are.
Request a Social Security Statement

[Joan.of.the.Arch]

As a self -employed person he should have been paying his social security taxes, so I don't think that should affect the kid's eligibility for survivor's benefits. If you find out that he did not pay them while self-employed, perhaps he (using your money?) could pay them now in order to make the kids eligible. I suppose it is possible you would come out ahead. I might try going into a different SS office than the one you visited. Even if the worker could not give you specific information about your ex-husband/children's case, they should be able to explain the rules so that you can figure out for yourself why the kids are being considered ineligible.