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Discussing Finances And Wills With Young Adult Children

Discussion in 'Miscellaneous in Parenting' started by Laks09, Jan 20, 2021.

  1. Laks09

    Laks09 Moderator Staff Member IL Hall of Fame

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    Your checklist looks good. The most important aspects are your kids guardians, trust fund trustees, executor of the will. For all other aspects, the lawyer gives a list that you can fill up.

    The information required differs from state to state. I didn't have to provide birth certs, marriage certs etc. Just the asset details, loans and insurance details in the form. It was a fairly straightforward process. The first meeting, they understood our situation. They gave us all the forms and details they required. We emailed them the details. We scheduled a call for followup questions. We had a million so we had a couple of follow up meetings as well. The lawyer was patient because of our situation and explained everything to us.
    Then they drew up the docs and went over it all before we signed it. They keep one at their place and give us one. It's advisable to keep it in a fire safe box at home and let the trusted adult know where to find it. Since my DD is an adult now, we were debating telling her and also giving her some inputs, hence the whole thread!
     
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  2. Hopikrishnan

    Hopikrishnan Platinum IL'ite

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    Earlier I wrote "[Insurance policy payouts, car, home, life, etc etc.. are NOT income-tax'able for the beneficiary in USA and several other countries, btw]"

    A quick life insurance payout is one way to get money in the hands of an adultish child or surviving spouse. Quick is rather relative. Imagine the time-frame for getting a death certificate of the insured, calling the insurance company to ascertain that the policy is in effect, sending them (fax, pdf-in -email or snail mail) the documents for them to examine and approve a payout. Even for an accident-totalled automobile the payout from a very efficient insurance would take about four weeks. Allocate a 3 month delay for an actual person who gets totalled.

    If some of you come across a sales-pitch about a life insurance policy, you will hear these two phrases, "term-life" and "whole life". When you are alive, & got all your faculties intact, learn about these two terms.

    Term-life is a simple bet. You bet that you are going to die within the next month, and put down (or send in the mail) a certain sum of money, and an insurance company bets that you won't, and takes the money on certain conditions and odds. At the end of the month if you are still alive (no need to be kicking at all), the insurance company eats the money, and you start all over again with the betting.

    That is the kind of insurance policy we buy at the airport before a flight, that is only valid for the duration of the flight. You place a bet (may be less than $10) that you will die before reaching your destination, and the insurance company will take that bet for a million dollars of potential payout. When you arrive, your legs swollen, and eyes red, and have to answer weird questions from the passport-control guy, you wouldn't even know that you had lost that $10 bet. Swiping a credit card at that insurance machine in the departure lounge never feels like spending money.

    Why that story about flight insurance? Here is where it might apply to Americans. These people have retirement accounts called IRA, 403 or 401 accounts. During their working years, they are allowed to save/invest tax-deferred (deferred=postponed) money. After they reach an old age, and retired, they are required to withdraw the money and pay taxes on those and enjoy their retirement spending that money. Quite a nice scheme, this is. Not really designed to pass on wealth to their kids, but for them to spend it in their old age (and pay tax they should have paid earlier). However, it is a very rare person who can actually manage spend all their money before they die. They will have money left-over to pass on to the children/heirs. When this is more certain than otherwise, how could the decedent make it FASTER, easier/cheaper for the heir? -- has been our question (quest?) on this thread.

    The insurance industry offers a simple scheme. Term-life insurance policy. Imagine that you are on a flight each month. Easy for traveling retirees to imagine this. Place a recurring bet each month, and make that part of your monthly retired life budget. If you happen to die one month, the outfit that took your bet will make a payout to your beneficiary... income-tax free. If your beneficiary were to get hold of the remaining benefit of your IRA or 40N it is time consuming, and still income-taxable.
     
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  3. Hopikrishnan

    Hopikrishnan Platinum IL'ite

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    Winnings in races or las vegas gaming are not tax exempt in USA.
    upload_2021-1-30_21-33-10.png
     
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  4. Hopikrishnan

    Hopikrishnan Platinum IL'ite

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    You/he may benefit from reading this thread from the beginning.
    LINK<==one IL member's comment on how children in the family can spur parents into taking action on a financial plan.
    When wealth is in two different countries, it is best to have two different local financial plans... wills, trusts, joint ownerships, authorised local agents to act on your behalf etc. etc. Once that is done, make a decision on where the majority of the remainder of your life will be, and move the wealth to that location.

    This site gives a crisp summary of how to use various ways to avoid probate (i.e., delays in wealth transference to beneficiaries)
    11 Ways to Avoid Probate
     
    Last edited: Jan 31, 2021
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  5. nuss

    nuss Platinum IL'ite

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    @Hopikrishnan thank you for bringing up the life insurance. When we were pregnant with our first child, I asked my mother-in-law (she is my unofficial financial advisor) about the life insurance. She suggested that we take term insurance with the reasoning that life insurance shouldn't be treated as an investment account if you have good investments elsewhere. Her reasoning (and what I read on the subject) was that life insurance is needed until you have dependents after that you should have an estate enough to support you.
    We opted for a 30-year term (although my MIL suggested 20) which was fairly inexpensive for both of us in our early 30s and no pre-existing condition. I felt more comfortable with the 30-year term because both kids will be in their mid-late 20s.

    Do you suggest the same? Thank you in advance and also thanks for all the advice you have given here!
     
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  6. Laks09

    Laks09 Moderator Staff Member IL Hall of Fame

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    Most people I know have done this. As always the reasoning behind it is that insurance isn’t an investment and there are better earning vehicles available in the market. I looked into converting my term life to a full life policy and the delta is huge. I did the math and it didn’t seem lucrative.
     
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  7. KayKuyil

    KayKuyil Silver IL'ite

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    We are just finishing up our work with a Wills and Trust attorney to draw up a living trust. We are living in US and had our baby last year. With no family here, it was important for us to ensure our kiddo is handed over to our families in case something happens. It also includes when little one can access his financial assets, who will be the local guardians, what are the expenses that the financial guardian can release money for the little one if in case he grows up here etc. Also signed up for life insurance for 25 yrs(with option to extend). If you are in a similar situation like us with no family nearby and living in US, it will help to take the assistance of a professional service. Because there is overhead in executing a will VS trust for the beneficiary in US.
     
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  8. Laks09

    Laks09 Moderator Staff Member IL Hall of Fame

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    Thanks for stepping in KK. The discussion started because I have an adult on hand and the knowledge transfer needs to start.
    I still remember those first years, the first wills, the question as to who will become the guardian etc. I thought when she was here, I wouldn't have such stresses. How naive I was!
     
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  9. KayKuyil

    KayKuyil Silver IL'ite

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    Haha. Good to know for our future. But in all fairness, even my spouse and I, in our late 30s and working for more than a decade were a bit lost around managing financial assets and we have an advisor now. It helps to write goals down and mainly pull expenses from bank a/c. It’s a painful job and my sympathies with your child. :D
     
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  10. Thoughtful

    Thoughtful Gold IL'ite

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    Thanks for the call out @Laks09. I got a no for answer on this last time I asked. I probably didn't ask the right question as I was asking for Lawyer references to draw up the Will and Trust. Didn't think employers could pay for something like this. I will check on this, will be great if they have even partial coverage.
     
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