More Estate Planning

Last month, I wrote about how my husband and I are starting the process of estate planning.  There were some great comments on that post – thanks for all your thoughts!  Although I must say, I was surprised at how unanimous the opinions were in terms of hiring a lawyer instead of using software to do it ourselves – usually my readers tend to be pretty split on issues like this.

We haven’t decided what we will ultimately do, but for now, we’re working through the process ourselves.  Just as with our taxes, we want to really understand the whole plan, rather than just hand it over to a lawyer.  The first step we took was to pay $14 for the Suze Orman protection package, which is teaching us a lot.  We’ve already used it to do my healthcare power of attorney and advance directive (still need to get it witnessed and notarized), and will do my husband’s this weekend.  That alone is worth more than the $14 we paid for the program.  We’ll go through the whole program, paying attention to the details and figuring out what questions we need to ask ourselves, and what the answers will be.  We may end up using a lawyer for the will and/or trust paperwork, but I want to understand all of the details before we show up in the law office – if we do at all.

One of the issues to which we hadn’t ever given much thought was inheritance in general.  I guess we had both just assumed we’d leave our estate to our son, but we hadn’t thought about it beyond that.  Once we started to consider it, we decided that we don’t like that idea at all.  In general, we’re both relatively opposed to the idea of people inheriting large sums of money.  Right now, our net worth isn’t much.  But it’s growing at a fairly good pace, and ten or fifteen years from now (to say nothing of fifty), it could be a considerable sum.  We have known several people who are aware that they stand to inherit large estates, and to be perfectly honest, we feel that the knowledge of the future inheritance has had a negative impact on those people.  Some even get irritated when their parents spend money, as they feel entitled to the money (?!?!)  Some don’t put much effort into saving or planning for the future, as they are simply counting on the inheritance to fund their retirements.  To each their own, but our opinion is that large inheritances are often more of a curse than a blessing.

We want to give our son the tools he’ll need to be successful in life.  We’re saving to help pay for his college education, but only $100/month, and we have no plans to fully fund his education – we want him to take an active part in that process too.   In general, we want to give our son the things that money can’t buy.  We want to teach him the value of money, and how to manage it responsibly, but we want him to earn his own money and make his own way in the world.  As soon as we had a conversation about this, it was an a-ha moment for both of us.  We didn’t want a will or trust that simply left everything to our son.

For now, our son is not even two yet.  If we both die, he’ll need a guardian, and he’s also the contingent beneficiary on our life insurance policies.  The guardian we’ve picked is just as frugal as we are, and the life insurance money would be more than enough to raise our son to adulthood and pay for college.  But what about the rest of our estate?  These are the questions we’re looking at now, and there are no easy answers.

We did take a first step earlier this week when we opened our SEP IRA accounts.  We each listed each other an our primary beneficiaries, but rather than listing our son as the secondary beneficiary, we each picked a favorite charity.  The nice thing about retirement accounts is that beneficiary designations make it very simple to transfer assets without a will.  The Vanguard forms we filled out just required us to check a box and list the charity of our choice – couldn’t have been easier.

Hopefully we’ll both live to be 110 and spend our last dime the day before we die.  But just in case, we’re working our way through this process.  I gotta say, I’ll be glad when we’re no longer pondering our mortality!

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  1. says

    Can you structure a trust so that your son will get 1/2 the money when he’s 25 and 1/2 when he’s 35? That way he will be older and more mature when he receives the money, which could be a real boon to him for his future (real estate investments, jump-start on retirement, travel, etc.). You can also have stipulations such as – he must graduate college before he gets the money. If you don’t tell him about the trust, he won’t know about it… maybe that’s a conversation that can come at 20 or 25, after you have taught him about the value of working hard and saving money for his childhood and young adulthood.

    My parents have said that everything they have will go to me if they don’t suffer from long illnesses that deplete their savings & investments. But I definitely DON’T see their money as “money” – it’s their money. Period. But I also appreciate the fact that they *want* to leave something to me. I think as long as you raise your son right, he will be appreciative of the opportunities that money can buy, but he won’t be mesmerized by the prospect of inheritance.

  2. says

    I’m glad you followed up on this because I, too, was surprised by how many people in your last post told you to see a lawyer.

    About a year ago, my husband and I bought the suze orman kit for each of us and worked through it. although I’m ashamed to say that we still need to get it notarized…must get on that…anyway, the kit seems pretty straight forward and thorough, so I will be interested to hear if you decide to also go to a lawyer.

  3. Random Thoughts of a Jersey Mom says

    My husband and I plan on paying for our kids’ college tuition (public or private depending on what they decide). We were both fortunate enough to have parents who paid for our education and feel we should do the same for our kids. But tuition, room, and meal plan is as far as we’ll go. If they want money for entertainment, clothes, phone, etc, they’ll have to get a part-time job or summer job.

  4. Zella says

    I disagree with you on the college bit. An inheritance paid for my (public) college education, and eventually, a down payment on our house. That made a huge difference to me. At the same time though, I was working part time (and had been, since I was 14) and paid for my own living expenses (not on campus). Not having student debt (or panic about scholarships) allowed me a huge amount of emotional and financial breathing room that my friends didn’t have (and some still don’t, due to student loans).

  5. FrugalBabe says

    Hi Zella,
    It sounds like you made great use of your inheritance – nicely done!
    When I was five, my parents took me to open a bank account with the money I had saved from birthdays and chores. They told me that the money was for college, and that I couldn’t withdraw money before that. But, I was under no obligation to deposit money if I didn’t want to. As an incentive, they doubled any money I chose to deposit (same deal for my siblings) until I was about 12 and started earning money babysitting. Throughout high school, I babysat and tutored, and most of those earnings went into my bank account too. By the time I graduated from high school, I had about $3000.

    But while I was in high school, my parents encouraged me to apply for any and all scholarships that we could find. When all was said and done, I had enough scholarships to more than pay for my tuition for all four years of college (once I moved out of the dorms, the university gave me a check each semester for the overage, which I was able to use for rent).

    While I lived in the dorms, my parents paid for the rest of my room and board, and made it very clear that if I chose to pursue grad school, they would help me pay for it. I always knew that I had their support – including financial support – but I also had a good feeling of making it on my own. When my husband and I eventually bought our first house years later, that $3000 that I had saved when I was a kid became part of our down payment – that was a great feeling.

    We’re picturing something similar for our son. We’re saving in a 529, and we’ll encourage him to start saving as soon as he’s able. We’ll also encourage him to have summer jobs in high school, with the understanding that he’s saving for college. And we’ll help him apply for as many scholarships as possible. We’ll definitely be there for him financially when college rolls around, but we’re hoping to teach him to be partially responsible for it himself – and we’ve got another 16 years to teach him that :)

  6. says

    I just want to give you and your hubby props for getting your financial house in order. There are soo many people who haven’t done it and I don’t understand why not. I love that you guys are trying to understand the process, but I also highly recommend having a lawyer do your will and/or trust. That’s stuff that if you do wrong, you won’t know until you’re dead and can’t do anything about it.

  7. Sam says

    I second what “me in a million” said.

    My son’s savings account is his “car account”. Where we live there’s no public transportation and I’m hoping he’lll take better care of his first clunker if he has money he earned invested in it?

    If I expire before he’s 25, I have my trust setup to pay college tuition as long as he has a C average with a small lump sum if he graduates by 24 and the rest is when he’s 30 – i think (I’d have to double check the paperwork).
    If he doesn’t go to college then it’s delayed into payments as he gets older starting at 25 so that he hopefully doesn’t blow it.

    if I’m still around I’ve told him I’ll pay half the tuition if he goes to the state college my & brother graduated from. My brother got a fully paid ride from my parents and spent 2yrs of college boozing it up. So I’m hoping his investment will help keep him from partying too hard.

    I admit all of this is theory on my part…. it’s hard to raise a kid to be responsible & hard working now a days. So many of his friends are spoiled regardless of income bracket. And no one in my family gives him birthday or holiday money. He gets showered in an over whelming volume of toys to the point we donate about half of them. Not getting money makes it hard for him to build an egg – I’m hoping he can mow lawns this summer.

    I’m contemplating telling my Mom & brother no more presents because it’s just too much and they won’t respect requests to give just one or two gifts.

  8. says

    My husband and I are in the exact same boat regarding needing to set up a will. We have two small boys, and are relatively young, so we hadn’t put much thought into it. But lately both my mother-in-law and several coworkers have chastised me for not having one in place already. We don’t have many assets, but it’s important for us to make the decision as to who would raise the boys if we were gone, as much as we hate to have to think about it! We had contemplated using a kit, too, just because our financial situation is pretty “simple” right now. It’s hard to justify forking over hundreds of dollars for a will when we could use that money for diapers!

  9. says

    Hats off to you for trying the do it yourself as much as possible. It’s great to see someone making plans on this early in life. In our will we give a percentage to our children at different ages…25 some….35 some…just food for thought. Good post.

  10. says

    I think you both have a great attitude. It’s a fine line, I guess. Some people stand to receive nothing, not land, not furniture, definitely not money, not even clutter, no legacy at all. And when you compare that with having a whole lot, I don’t know which is worse.

  11. says

    I like your organization with regards to estate, inheritance etc. DH and I don’t have kids yet and had never given it much thought–then DH had a bad car accident this year (luckily ok) but while he was in critical condition, there were some things I really wish we’d discussed and some papers I wished we’d taken care of! A living will, for example–or its equivalent in France.

    I hear you on wanting to understand the whole process. . .in a similar situation, I think I would go through the Orzman program in detail and then take my paperwork to an attorney (that comes with recommendation!) to look over and double-check. . .I’ve done that in the past–you can’t just trust an attorney with things that are your responsibility, right?

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