Personal Finance Advice and Education! (5 Viewers)

[Andrew74]

Question, a friend of mine inherited a good amount of money and has asked me for advice. I happen to know a decent amount about finance but don't want to have responsibility for telling her what to do with her money. If she didn't want to get a financial advisor, what would be her best option for getting assistance?

A financial advisor is the only licensed person to go to for real advice. She can go to a bank or credit union but that won't be advice as much as selling them on wealth management. Anyone who knows enough to give real actual advice and guidance would know that if they aren't licensed they can't give the advice and guidance. For those who think they know enough but don't.... they will be the ones to give the advice and guidance.

Also, "a good amount" can mean very different things to different people as it is very subjective. If we are talking $50K that is one thing.... and $1MM is another. On one end, common sense and maybe picking up a decent personal finance book would be enough and on the other end they would be foolish to not get professional help.

thanks, i guess my question was more along the lines of if there's another option that is less active and lower fee than financial advisor, i thought maybe Vanguard or Fidelity offered something along those lines, I guess I can call them directly just wondering if there were other options I wasn't aware of.

Something like this could be reasonably priced. Really though, most people can do this stuff themselves.

Thanks that's helpful, my friend can definitely not do this herself.

Yeah, Vanguard will do a 0.35% financial advisor. That's pretty reasonable.

I think the biggest thing to tell your friend is that they don't have to rush to do something with this money. Really, taking 6 months to figure it out is OK. Having said that Vanguard is safe and can help her set something up.

Good points and with cash earning 5% in 6 month T-bills, there’s not the pressure of losing out.

 

[-OZ-]

Question, a friend of mine inherited a good amount of money and has asked me for advice. I happen to know a decent amount about finance but don't want to have responsibility for telling her what to do with her money. If she didn't want to get a financial advisor, what would be her best option for getting assistance?

A financial advisor is the only licensed person to go to for real advice. She can go to a bank or credit union but that won't be advice as much as selling them on wealth management. Anyone who knows enough to give real actual advice and guidance would know that if they aren't licensed they can't give the advice and guidance. For those who think they know enough but don't.... they will be the ones to give the advice and guidance.

Also, "a good amount" can mean very different things to different people as it is very subjective. If we are talking $50K that is one thing.... and $1MM is another. On one end, common sense and maybe picking up a decent personal finance book would be enough and on the other end they would be foolish to not get professional help.

thanks, i guess my question was more along the lines of if there's another option that is less active and lower fee than financial advisor, i thought maybe Vanguard or Fidelity offered something along those lines, I guess I can call them directly just wondering if there were other options I wasn't aware of.

Something like this could be reasonably priced. Really though, most people can do this stuff themselves.

My mindset is basically the same except I think there’s a huge difference between a person (couple) who accumulates over $1M over time and a person who inherits a million with no experience. The couple who accumulates has developed habits and probably has learned to not overreact to trends or bad news. But the person who suddenly has over a million without developing those muscles is ripe to hurt themselves.
I view it similarly to a person running a half marathon or even a full marathon. If you’ve trained and learned, you could probably go finish without following a tailor made plan or getting expert advice. Someone who hasn’t developed the experience will benefit immensely by the advice of a coach or experienced advisor. A coach may benefit either, but the risk of going without is much greater for the newbie.

 

[massraider]

Yeah, Vanguard will do a 0.35% financial advisor. That's pretty reasonable.

Having zero experience with managing serious money, and looking around to avoid paying someone to help you is, to me, penny wise and pound foolish.

A good fiduciary pays for themselves, and then some.

 

[Chadstroma]

Question, a friend of mine inherited a good amount of money and has asked me for advice. I happen to know a decent amount about finance but don't want to have responsibility for telling her what to do with her money. If she didn't want to get a financial advisor, what would be her best option for getting assistance?

A financial advisor is the only licensed person to go to for real advice. She can go to a bank or credit union but that won't be advice as much as selling them on wealth management. Anyone who knows enough to give real actual advice and guidance would know that if they aren't licensed they can't give the advice and guidance. For those who think they know enough but don't.... they will be the ones to give the advice and guidance.

Also, "a good amount" can mean very different things to different people as it is very subjective. If we are talking $50K that is one thing.... and $1MM is another. On one end, common sense and maybe picking up a decent personal finance book would be enough and on the other end they would be foolish to not get professional help.

thanks, i guess my question was more along the lines of if there's another option that is less active and lower fee than financial advisor, i thought maybe Vanguard or Fidelity offered something along those lines, I guess I can call them directly just wondering if there were other options I wasn't aware of.

Something like this could be reasonably priced. Really though, most people can do this stuff themselves.

My mindset is basically the same except I think there’s a huge difference between a person (couple) who accumulates over $1M over time and a person who inherits a million with no experience. The couple who accumulates has developed habits and probably has learned to not overreact to trends or bad news. But the person who suddenly has over a million without developing those muscles is ripe to hurt themselves.
I view it similarly to a person running a half marathon or even a full marathon. If you’ve trained and learned, you could probably go finish without following a tailor made plan or getting expert advice. Someone who hasn’t developed the experience will benefit immensely by the advice of a coach or experienced advisor. A coach may benefit either, but the risk of going without is much greater for the newbie.

Agreed and on top of that the chances of someone who is asking a friend of what to do is likely not use to managing/investing this kind of money at all. Having dealt with people and their finances for over 20 years- I can tell you many people are not equipped or prepared or ready to handle a large sum of money or even what is a large sum of money to them (as that is a highly subjective term). They are also very likely not comfortable with going a tech route and that is the reason they are asking a friend in the first place. There are people who specialize in this type of stuff for a reason and much like how I can change my own oil, it makes so much more sense for me to spend a few more bucks to have someone good at it do it for me so I am not wasting time, energy and potentially breaking something (yea, I wouldn't put it past me). It comes down to this... sure, most people can do this stuff themselves but is this sum of money the money they want to start learning on? Likely not. Get professional help and then down the line as they learn, if they want to take it over then they can. That is a much better route to go for most people (where most Americans have very little savings, very little retirement accounts, and usually no investment accounts (though maybe Robinhood and similar apps have changed that for some..... and then here is a 'large sum' of money... get a subscrition to Kiplingers, read Investing for Dummies and good luck!

 

[Desert_Power]

Question, a friend of mine inherited a good amount of money and has asked me for advice. I happen to know a decent amount about finance but don't want to have responsibility for telling her what to do with her money. If she didn't want to get a financial advisor, what would be her best option for getting assistance?

A financial advisor is the only licensed person to go to for real advice. She can go to a bank or credit union but that won't be advice as much as selling them on wealth management. Anyone who knows enough to give real actual advice and guidance would know that if they aren't licensed they can't give the advice and guidance. For those who think they know enough but don't.... they will be the ones to give the advice and guidance.

Also, "a good amount" can mean very different things to different people as it is very subjective. If we are talking $50K that is one thing.... and $1MM is another. On one end, common sense and maybe picking up a decent personal finance book would be enough and on the other end they would be foolish to not get professional help.

thanks, i guess my question was more along the lines of if there's another option that is less active and lower fee than financial advisor, i thought maybe Vanguard or Fidelity offered something along those lines, I guess I can call them directly just wondering if there were other options I wasn't aware of.

Something like this could be reasonably priced. Really though, most people can do this stuff themselves.

My mindset is basically the same except I think there’s a huge difference between a person (couple) who accumulates over $1M over time and a person who inherits a million with no experience. The couple who accumulates has developed habits and probably has learned to not overreact to trends or bad news. But the person who suddenly has over a million without developing those muscles is ripe to hurt themselves.
I view it similarly to a person running a half marathon or even a full marathon. If you’ve trained and learned, you could probably go finish without following a tailor made plan or getting expert advice. Someone who hasn’t developed the experience will benefit immensely by the advice of a coach or experienced advisor. A coach may benefit either, but the risk of going without is much greater for the newbie.

I get your point. I just also think the risk of being bilked by the money management industries are also pretty high and even the 1% management fee can become quite costly over time. Unless someone is looking to setup trusts or something like that, the advice is going to be pretty standard.

Invest what you can in tax-advantaged accounts you are eligible for and open a 529 if you have kids. Put that money in in diverse, low cost index funds. Mix those more towards bonds the older you get or get a target date fund to do it for you.

The good part about that Vanguard program is that you know this is the advice they will be giving as it is their product. I would be pretty distrustful of most other financial institutions.

 

[-OZ-]

Question, a friend of mine inherited a good amount of money and has asked me for advice. I happen to know a decent amount about finance but don't want to have responsibility for telling her what to do with her money. If she didn't want to get a financial advisor, what would be her best option for getting assistance?

A financial advisor is the only licensed person to go to for real advice. She can go to a bank or credit union but that won't be advice as much as selling them on wealth management. Anyone who knows enough to give real actual advice and guidance would know that if they aren't licensed they can't give the advice and guidance. For those who think they know enough but don't.... they will be the ones to give the advice and guidance.

Also, "a good amount" can mean very different things to different people as it is very subjective. If we are talking $50K that is one thing.... and $1MM is another. On one end, common sense and maybe picking up a decent personal finance book would be enough and on the other end they would be foolish to not get professional help.

thanks, i guess my question was more along the lines of if there's another option that is less active and lower fee than financial advisor, i thought maybe Vanguard or Fidelity offered something along those lines, I guess I can call them directly just wondering if there were other options I wasn't aware of.

Something like this could be reasonably priced. Really though, most people can do this stuff themselves.

My mindset is basically the same except I think there’s a huge difference between a person (couple) who accumulates over $1M over time and a person who inherits a million with no experience. The couple who accumulates has developed habits and probably has learned to not overreact to trends or bad news. But the person who suddenly has over a million without developing those muscles is ripe to hurt themselves.
I view it similarly to a person running a half marathon or even a full marathon. If you’ve trained and learned, you could probably go finish without following a tailor made plan or getting expert advice. Someone who hasn’t developed the experience will benefit immensely by the advice of a coach or experienced advisor. A coach may benefit either, but the risk of going without is much greater for the newbie.

I get your point. I just also think the risk of being bilked by the money management industries are also pretty high and even the 1% management fee can become quite costly over time. Unless someone is looking to setup trusts or something like that, the advice is going to be pretty standard.

Invest what you can in tax-advantaged accounts you are eligible for and open a 529 if you have kids. Put that money in in diverse, low cost index funds. Mix those more towards bonds the older you get or get a target date fund to do it for you.

The good part about that Vanguard program is that you know this is the advice they will be giving as it is their product. I would be pretty distrustful of most other financial institutions.

Agreed. Like health, it’s fairly simple in concept. The hard part is actually sticking with the plan.

 

[Buck Bradcanon]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

 

[Plaid Boxer]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

Do you travel together alone? Drive to dinner together? If so would your work policy cover those kids to move forward while knowing the next years/decade could be very hard on them.

 

[thecatch]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

That’s a pretty personal decision based on what you’re comfortable with. We took out term policies that will cover through getting our kids through college and the mortgage on the house paid off. The kids/surviving spouse will hopefully be fine beyond that point without the insurance money.

 

[Buck Bradcanon]

Kids would also have access to our 401k $$ at that point right?

 

[Plaid Boxer]

Kids would also have access to our 401k $$ at that point right?

Do you have a will? You should to outline how you want them to have access to your money and someone to control money for the 16 year old.

 

[Buck Bradcanon]

Kids would also have access to our 401k $$ at that point right?

Do you have a will? You should to outline how you want them to have access to your money and someone to control money for the 16 year old.

We do yes thank you for asking. Its been several years could use a refresh but we have one.

 

[The Z Machine]

Take whichever of you or your wife makes more money and think about what would happen long term if that income went away. Would the surving spouse be able to retire at the same age? Any trouble putting the kids through college?

Personally, i think I'll keep the life insurance policy until the kids are at least halfway through college. I'll be 55 at that time, so it feels about right.

 

[stbugs]

Kids would also have access to our 401k $$ at that point right?

Do you have a will? You should to outline how you want them to have access to your money and someone to control money for the 16 year old.

While a will is good in general, for accounts like a 401k and IRA, you can setup the dependents right in the account. I can’t recall the term for it but I believe that doesn’t go through probate/will like other assets. When my FIL passed (MIL already passed), my wife and her sisters split some accounts directly like checks cut/rollover type accounts because of that.

Not a replacement for a will but it should be done to make it easier.

 

[Judge Smails]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

That’s a pretty personal decision based on what you’re comfortable with. We took out term policies that will cover through getting our kids through college and the mortgage on the house paid off. The kids/surviving spouse will hopefully be fine beyond that point without the insurance money.

This was my philosophy. Just bought term through the years I needed it. Staggered terms. But when they were expiring I let them lapse without buying others. Just too expensive. And with no debt and all obligations paid off like house, college, marriages we have enough for survivors to be fine. Rates go through the roof as you age, especially if you start getting some chronic conditions

 

[growlers]

Kids would also have access to our 401k $$ at that point right?

Do you have a will? You should to outline how you want them to have access to your money and someone to control money for the 16 year old.

While a will is good in general, for accounts like a 401k and IRA, you can setup the dependents right in the account. I can’t recall the term for it but I believe that doesn’t go through probate/will like other assets. When my FIL passed (MIL already passed), my wife and her sisters split some accounts directly like checks cut/rollover type accounts because of that.

Not a replacement for a will but it should be done to make it easier.

"transfer on death"

I am in the process of being an executor for my dad, I am an insanely organized person with financial stuff, expedited everything in every possible way, was able to access the account numbers and amounts because I had his computer and passwords, and it still took 6 months for the transfer on death funds to be distributed. But the one account at the same bank that he forgot to designate as transfer on death took 3 more months and many many phone calls. This is with a will and no family drama.

 

[Senor Schmutzig]

Alright, because I haven’t done any research on a will but I need one and I frequently go to FFA before I put in any real effort, I am asking the question, what should my first step be in getting something setup? Is Legal Zoom a viable option? If not, how much is it going to cost me to get something setup? IS it relatively quick and painless if I set it up for everything to go to my wife and son when I expire? Can I include my wife in mine in case we both expire at the same time or does she need to have a separate will?

 

[gianmarco]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

 

[Chadstroma]

Alright, because I haven’t done any research on a will but I need one and I frequently go to FFA before I put in any real effort, I am asking the question, what should my first step be in getting something setup? Is Legal Zoom a viable option? If not, how much is it going to cost me to get something setup? IS it relatively quick and painless if I set it up for everything to go to my wife and son when I expire? Can I include my wife in mine in case we both expire at the same time or does she need to have a separate will?

I would say it really all depends on the complexity of your situation and assets. The more assets you have and the more involved you want to be on your wishes the more it is better to have a lawyer that specializes in estate planning.

The higher your assets the more you really want to get professional help as the chances of survivors challenging it increases and the more complex the tax implications are.

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

 

[Orange&Blue]

How much should a will cost?

 

[stbugs]

Kids would also have access to our 401k $$ at that point right?

Do you have a will? You should to outline how you want them to have access to your money and someone to control money for the 16 year old.

While a will is good in general, for accounts like a 401k and IRA, you can setup the dependents right in the account. I can’t recall the term for it but I believe that doesn’t go through probate/will like other assets. When my FIL passed (MIL already passed), my wife and her sisters split some accounts directly like checks cut/rollover type accounts because of that.

Not a replacement for a will but it should be done to make it easier.

"transfer on death"

I am in the process of being an executor for my dad, I am an insanely organized person with financial stuff, expedited everything in every possible way, was able to access the account numbers and amounts because I had his computer and passwords, and it still took 6 months for the transfer on death funds to be distributed. But the one account at the same bank that he forgot to designate as transfer on death took 3 more months and many many phone calls. This is with a will and no family drama.

It was way faster for my wife and her sisters. Not talking huge amounts, but I feel like the broker accounts were a month or so.

 

[pollardsvision]

How much should a will cost?

I re-did mine about a year ago, and it was $700. Not super complicated, but I had it set up a special needs trust for my wife when I croak. I'd guess $300-500 with a human lawyer would be typical for a really basic will.

I did one about 5 years ago on Legal Zoom, and I think it was only about $150.

 

[matttyl]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

 

[Chadstroma]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

When it comes to anything personal finance... when in doubt, find out what Dave Ramsey says and then do the opposite.

 

[matttyl]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

When it comes to anything personal finance... when in doubt, find out what Dave Ramsey says and then do the opposite.

While he’s obviously very preachy, and lets his religious feelings bleed through, I do overall like his “steps”, and the order they are in. He has a thing against debt that I don’t agree with (specifically a mortgage).

 

[shuke]

Have a free consult with a fiduciary today. Any questions I should be asking that I may not be thinking of?

 

[BeTheMatch]

Have a free consult with a fiduciary today. Any questions I should be asking that I may not be thinking of?

Ask if he knows when @cheese is going to roll.

 

[Tom Hagen]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

 

[NutterButter]

Have a free consult with a fiduciary today. Any questions I should be asking that I may not be thinking of?

Favorite phish song

 

[BigJim®]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

Agree with this. I was executor for my father's trust and all non-real estate was gouged at the 37% Tom mentions. I was told the key reason for the trust was to avoid the time/expense of probate. That was great, until we determined my dad had not put a couple assets > $75K into the trust.

 

[Chadstroma]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

When it comes to anything personal finance... when in doubt, find out what Dave Ramsey says and then do the opposite.

While he’s obviously very preachy, and lets his religious feelings bleed through, I do overall like his “steps”, and the order they are in. He has a thing against debt that I don’t agree with (specifically a mortgage).

I can go on and on and on about how he gives HORRIBLE advice in pretty much every area of personal finance.

Pretty much experts in various areas of personal finance tend to fall into these categories when it comes to DR.

A majority despise him or despise his poor advice to put it better and will be happy to explain why.

A smaller group will not like specific advice he gives but also say that they like his advice in general of avoiding debt but really don't because they differ with him on specifics. (somewhat like you have said here.)

Then a small group that are his devotees. Almost always Christian and blend conflate their faith with his personal finance teaching. They are usually either very young and trying to figure things out or older blue collar/hands on type of backgrounds (police, fire, military, contractor/construction trade, truck driver, etc) that got in a hole financially and spent the couple hundred at their churches DR thingee and not follow him blindly. They will live off of Top Ramen but happily spend thousands on his seminars and whatever other crap he slings. Some become DR Financial Coaches and regurgitate his crap to others- which is hilarious that they spend thousands to tell other people not to spend money. They will follow him regardless of what math, logic, facts, truth etc is presented to them. I have taken two seperate DR Financial Coaches and used their own mortgage situations to show them how DR has or is costing them tens of thousands of dollars with his poor advice in just ONE area. Once I do, which there was no way for them to argue otherwise, they both said some form of "Well, it is worth it to me for the peace of mind of following his advice"

The fastest way to find out someone really doesn't know what the heck they are talking about when it comes to personal finance is how much "one size fits all" advice they give and that fool is nothing but a cheap plastic adjustable one size fits all ballcap pushing his crap that he makes ridiculous money with while running his business exactly like a cult is run.

You can say I am not a fan.

 

[Chadstroma]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

Hence talking to professionals on this stuff than going to legalzoom and DIY it when you actually have assets to worry about that exceed that of the minimum to avoid probate court. If your assets are over the minimum for your state, spend the money to get specific legal, tax and estate planning for your state as other than Fed tax implications, the specifics of all of this varies greatly from state to state. My comment was meant as a general push to look at a trust along with a will.

 

[Chadstroma]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

Agree with this. I was executor for my father's trust and all non-real estate was gouged at the 37% Tom mentions. I was told the key reason for the trust was to avoid the time/expense of probate. That was great, until we determined my dad had not put a couple assets > $75K into the trust.

Well... yea.... that isn't the trust fault though.

That is like buying a box of condoms that you never open and then wondering why you have kids.

 

[-OZ-]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

When it comes to anything personal finance... when in doubt, find out what Dave Ramsey says and then do the opposite.

While he’s obviously very preachy, and lets his religious feelings bleed through, I do overall like his “steps”, and the order they are in. He has a thing against debt that I don’t agree with (specifically a mortgage).

I can go on and on and on about how he gives HORRIBLE advice in pretty much every area of personal finance.

Pretty much experts in various areas of personal finance tend to fall into these categories when it comes to DR.

A majority despise him or despise his poor advice to put it better and will be happy to explain why.

A smaller group will not like specific advice he gives but also say that they like his advice in general of avoiding debt but really don't because they differ with him on specifics. (somewhat like you have said here.)

Then a small group that are his devotees. Almost always Christian and blend conflate their faith with his personal finance teaching. They are usually either very young and trying to figure things out or older blue collar/hands on type of backgrounds (police, fire, military, contractor/construction trade, truck driver, etc) that got in a hole financially and spent the couple hundred at their churches DR thingee and not follow him blindly. They will live off of Top Ramen but happily spend thousands on his seminars and whatever other crap he slings. Some become DR Financial Coaches and regurgitate his crap to others- which is hilarious that they spend thousands to tell other people not to spend money. They will follow him regardless of what math, logic, facts, truth etc is presented to them. I have taken two seperate DR Financial Coaches and used their own mortgage situations to show them how DR has or is costing them tens of thousands of dollars with his poor advice in just ONE area. Once I do, which there was no way for them to argue otherwise, they both said some form of "Well, it is worth it to me for the peace of mind of following his advice"

The fastest way to find out someone really doesn't know what the heck they are talking about when it comes to personal finance is how much "one size fits all" advice they give and that fool is nothing but a cheap plastic adjustable one size fits all ballcap pushing his crap that he makes ridiculous money with while running his business exactly like a cult is run.

You can say I am not a fan.

But how do you really feel?

I led his class a couple times because it did provide a service and I was interested in becoming a FA at one point but interjected my own thoughts quite often. I’d say “you’re paying for Dave’s class and he says ——— but here’s why I did X and Z instead”.
The person who organized the class didn’t ask me to do it again (I wasn’t going to after the third time)

 

[Chadstroma]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

When it comes to anything personal finance... when in doubt, find out what Dave Ramsey says and then do the opposite.

While he’s obviously very preachy, and lets his religious feelings bleed through, I do overall like his “steps”, and the order they are in. He has a thing against debt that I don’t agree with (specifically a mortgage).

I can go on and on and on about how he gives HORRIBLE advice in pretty much every area of personal finance.

Pretty much experts in various areas of personal finance tend to fall into these categories when it comes to DR.

A majority despise him or despise his poor advice to put it better and will be happy to explain why.

A smaller group will not like specific advice he gives but also say that they like his advice in general of avoiding debt but really don't because they differ with him on specifics. (somewhat like you have said here.)

Then a small group that are his devotees. Almost always Christian and blend conflate their faith with his personal finance teaching. They are usually either very young and trying to figure things out or older blue collar/hands on type of backgrounds (police, fire, military, contractor/construction trade, truck driver, etc) that got in a hole financially and spent the couple hundred at their churches DR thingee and not follow him blindly. They will live off of Top Ramen but happily spend thousands on his seminars and whatever other crap he slings. Some become DR Financial Coaches and regurgitate his crap to others- which is hilarious that they spend thousands to tell other people not to spend money. They will follow him regardless of what math, logic, facts, truth etc is presented to them. I have taken two seperate DR Financial Coaches and used their own mortgage situations to show them how DR has or is costing them tens of thousands of dollars with his poor advice in just ONE area. Once I do, which there was no way for them to argue otherwise, they both said some form of "Well, it is worth it to me for the peace of mind of following his advice"

The fastest way to find out someone really doesn't know what the heck they are talking about when it comes to personal finance is how much "one size fits all" advice they give and that fool is nothing but a cheap plastic adjustable one size fits all ballcap pushing his crap that he makes ridiculous money with while running his business exactly like a cult is run.

You can say I am not a fan.

But how do you really feel?

I led his class a couple times because it did provide a service and I was interested in becoming a FA at one point but interjected my own thoughts quite often. I’d say “you’re paying for Dave’s class and he says ——— but here’s why I did X and Z instead”.
The person who organized the class didn’t ask me to do it again (I wasn’t going to after the third time)

Heresey of the highest order to not preach the good words of DR!

 

[BigJim®]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

Agree with this. I was executor for my father's trust and all non-real estate was gouged at the 37% Tom mentions. I was told the key reason for the trust was to avoid the time/expense of probate. That was great, until we determined my dad had not put a couple assets > $75K into the trust.

Well... yea.... that isn't the trust fault though.

That is like buying a box of condoms that you never open and then wondering why you have kids.

Yeah, that comment was more a 'learn from my pain' alert to anyone wanting to use a trust for the intended efficiency. Get those assets into it.... all of them.

 

[jm192]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

When it comes to anything personal finance... when in doubt, find out what Dave Ramsey says and then do the opposite.

While he’s obviously very preachy, and lets his religious feelings bleed through, I do overall like his “steps”, and the order they are in. He has a thing against debt that I don’t agree with (specifically a mortgage).

I think he's found a niche, and the name has just become bigger than the niche.

He's probably a really good teacher for beginners and/or people that have no idea what they're doing.

I think once you've got the basics, he's really not helpful. And as others have said--there are times he's not going to give you the best advice in your specific situation. It can't all be one size fits all.

ALL of that being said, I do think personal finance is much simpler than the world would have you believe. It's intimidating and even overwhelming thinking about what happens if you screw up. But you can also learn enough to know what is and isn't a huge risk--and then avoid those huge risks.

If you're not comfortable learning it--a financial planner can be a great resource. But for saving that 1%, I'd sure rather put in the time to understand how to manage it on my own.

 

[growlers]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

Agree with this. I was executor for my father's trust and all non-real estate was gouged at the 37% Tom mentions. I was told the key reason for the trust was to avoid the time/expense of probate. That was great, until we determined my dad had not put a couple assets > $75K into the trust.

I am ignorant on this tax discussion - unless you hit some crazy estate tax, why is either trust or will proceeds taxed? I am inheriting four different accounts, proceeds from a house, etc. Not a ton of money - 300K or so - but not a penny of tax. What am I missing in this discussion?

 

[ConstruxBoy]

Not sure how to phrase this but basically wondering if life insurance is worth it later in life.

We took out 20 year policies for my wife and I when my oldest was born. Policies expire later this year. My kids are now 19 and 16. I also have a policy through work. I realize that goes away if I leave the company but don't have plans to do that anytime soon.

Idk I guess my overall feeling is my kids and both my wife and I would be ok if something were to happen to one or both of us at this stage of life, but I would like to hear from you guys.

Thanks in advance.

The way it's been explained to us in the past is that life insurance should be there to cover lost income. If you are retired or close to retiring and not bringing in further income, then there's really no need for it because you basically aren't losing anything financially in the event of a death. Similarly, if someone is not employed or bringing in income, then there's less need to be insured unless they are providing something that you would then have to pay for if they are no longer around (i.e. childcare).

However, if either of you plan to continue working, then yeah, you should probably have a policy in place to replace that lost income if one were to pass away prior to retiring. It may just need to be a shorter term policy.

My $.02 from my understanding of the value of life insurance.

While I totally understand this line of thinking, especially from a financial standpoint (also for reference I am a life and health insurance agent), my philosophy has been that I’d like to have life insurance in place when I die. The only way to guarantee that is with a permanent policy (only about 2-3% of term life policies end up in a claim).

While I know it’s not the popular approach from the Dave Ramseys and others, I purchased a permanent policy (while life). I’ve since purchased another. I ran the numbers and the extra premium required over what term policies (plural, I’ve had coverage for 20 years already, will have a dependent child for at least another 12 and income to replace for around another 20) would have cost gets me around 5% net after tax (as there is no tax on that cash value of life insurance) in terms of the cash value of the policy. I use it as an emergency fun. It allowed me to buy a used car in cash 2 years ago rather than have a pretty high interest auto loan.

When I “retire”, plan is to really go through qualified money pretty quickly from age 65 (or whenever I retire) to age 85. Those are the years when I’m hopefully still young and healthy enough to enjoy retirement. After that, if I’m still around, the expected cash value in those life policies on my wife and I will be in the hundreds of thousands - and that’s if we’re both still alive. If either of us don’t make it to 85, the other receives the life insurance death benefit tax free which should be large enough to replenish the spent down “traditional” retirement assets we’ve enjoyed our retirement with.

For clarity, I’m not saying to take this approach instead of traditional retirement vehicles, I’m doing this as a small piece to do in addition to those.

When it comes to anything personal finance... when in doubt, find out what Dave Ramsey says and then do the opposite.

While he’s obviously very preachy, and lets his religious feelings bleed through, I do overall like his “steps”, and the order they are in. He has a thing against debt that I don’t agree with (specifically a mortgage).

I can go on and on and on about how he gives HORRIBLE advice in pretty much every area of personal finance.

Pretty much experts in various areas of personal finance tend to fall into these categories when it comes to DR.

A majority despise him or despise his poor advice to put it better and will be happy to explain why.

A smaller group will not like specific advice he gives but also say that they like his advice in general of avoiding debt but really don't because they differ with him on specifics. (somewhat like you have said here.)

Then a small group that are his devotees. Almost always Christian and blend conflate their faith with his personal finance teaching. They are usually either very young and trying to figure things out or older blue collar/hands on type of backgrounds (police, fire, military, contractor/construction trade, truck driver, etc) that got in a hole financially and spent the couple hundred at their churches DR thingee and not follow him blindly. They will live off of Top Ramen but happily spend thousands on his seminars and whatever other crap he slings. Some become DR Financial Coaches and regurgitate his crap to others- which is hilarious that they spend thousands to tell other people not to spend money. They will follow him regardless of what math, logic, facts, truth etc is presented to them. I have taken two seperate DR Financial Coaches and used their own mortgage situations to show them how DR has or is costing them tens of thousands of dollars with his poor advice in just ONE area. Once I do, which there was no way for them to argue otherwise, they both said some form of "Well, it is worth it to me for the peace of mind of following his advice"

The fastest way to find out someone really doesn't know what the heck they are talking about when it comes to personal finance is how much "one size fits all" advice they give and that fool is nothing but a cheap plastic adjustable one size fits all ballcap pushing his crap that he makes ridiculous money with while running his business exactly like a cult is run.

You can say I am not a fan.

Other than that, how was the play Mrs. Lincoln?

 

[Chadstroma]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

Agree with this. I was executor for my father's trust and all non-real estate was gouged at the 37% Tom mentions. I was told the key reason for the trust was to avoid the time/expense of probate. That was great, until we determined my dad had not put a couple assets > $75K into the trust.

I am ignorant on this tax discussion - unless you hit some crazy estate tax, why is either trust or will proceeds taxed? I am inheriting four different accounts, proceeds from a house, etc. Not a ton of money - 300K or so - but not a penny of tax. What am I missing in this discussion?

Inheritance and estate taxes for Fed and state depending on specifics and variables and I am not where near being close to being an expert to touch on it more than that. There are different kinds of trusts as well. Honestly, because of dealing with both Fed and state along with tax and law implications that estate planning is the one area I really hate to see people try to go cheap and DIY if they have more than two pennies to rub together. People spend their whole lives accumulating hundreds of thousands in assets and then opt to spend $30 on some internet website instead of a few hundred for a professional and end up costing their beneficiaries ridiculous amounts of money paid in taxes.

One thing about taxes is that just because they were not paid doesn't mean they were not owed. Intentionally or not.... I have seen that more than a couple of times.

 

[growlers]

Let's say you are in a no tax state, just looking at federal taxes:
I don't see how proceeds on a primary residence (below the 250/500K caps), checking and savings accounts, traditional IRA contributions, or post-tax brokerage accounts that are transferred in-kind with stepped up capital gains are EVER taxed outside of some crazy estate tax scenario. I am not an expert, but I am dealing with this right now and have an accountant and lawyer helping me, and read a couple books to learn more, I can't be missing anything super obvious. This was with a will, not a trust.

 

[BigJim®]

In the most basic sense, the more important part of estate planning over a will is a trust. Also, while doing this might as well think through the entire gambit of legal instruments. My wife and I set up our wills, trusts, POA's, medical POA's and living wills all at the same time with an estate lawyer.

Wills are individual. If you basically all you want to do is transfer everything you have to your son then a trust is likely the better way to go about it though (tax wise) and a will is supportive of that then you put all the assets in the trust or have the trust as beneficiary of assets, etc.

I'm not sure I agree that a trust is better for tax purposes. If you are referring to an irrevocable trust, the trust needs to file a separate fiduciary tax return and the top tax rate of 37% starts at income in excess of $14,451. The income can often be passed out to the beneficiary avoiding the higher trust rates, but if the income in the trust exceeds the amount required to be distributed to the beneficiary it can get very expensive.

Agree with this. I was executor for my father's trust and all non-real estate was gouged at the 37% Tom mentions. I was told the key reason for the trust was to avoid the time/expense of probate. That was great, until we determined my dad had not put a couple assets > $75K into the trust.

I am ignorant on this tax discussion - unless you hit some crazy estate tax, why is either trust or will proceeds taxed? I am inheriting four different accounts, proceeds from a house, etc. Not a ton of money - 300K or so - but not a penny of tax. What am I missing in this discussion?

I think it does depend on the size of the estate. In my case, taxable assets were allocated from the trust as ordinary income. This pushed all into higher tax bracket at least as to part of the inheritance. I don’t know it was 37%, but it was a high %.

ETA: it also depends on what the asset is. In our case it was largely 401k/pension balances which had not yet been taxed. Other funds, like Roth, would not be taxable to the beneficiary if it would not be taxable to the original owner. Real estate had stepped up basis and was untaxed. I think the assumption was cash had already been taxed in some way/shape/form to result in cash (e.g. as income, gift). So, it does depend. It is pretty confusing though to read that there is no ‘inheritance tax’ until an estate is of obscene size. That may be true for an incremental taxation but the assets themselves might be taxable as income.

 

[Sand]

Well... yea.... that isn't the trust fault though.

That is like buying a box of condoms that you never open and then wondering why you have kids.

There is a a good dollop of irony and a lot of that Oz is the only one who liked this post.

 

[Tom Hagen]

Let's say you are in a no tax state, just looking at federal taxes:
I don't see how proceeds on a primary residence (below the 250/500K caps), checking and savings accounts, traditional IRA contributions, or post-tax brokerage accounts that are transferred in-kind with stepped up capital gains are EVER taxed outside of some crazy estate tax scenario. I am not an expert, but I am dealing with this right now and have an accountant and lawyer helping me, and read a couple books to learn more, I can't be missing anything super obvious. This was with a will, not a trust.

Limiting this discussion to income tax only, the assets conveyed via a will are generally only taxable if they are distributions from pre-tax accounts such as an IRA, 401)k) or annuity, Since the decedent never paid tax on those funds, there is no step up in basis and distributions to a direct beneficiary or heir are taxable when received.

 

[growlers]

Let's say you are in a no tax state, just looking at federal taxes:
I don't see how proceeds on a primary residence (below the 250/500K caps), checking and savings accounts, traditional IRA contributions, or post-tax brokerage accounts that are transferred in-kind with stepped up capital gains are EVER taxed outside of some crazy estate tax scenario. I am not an expert, but I am dealing with this right now and have an accountant and lawyer helping me, and read a couple books to learn more, I can't be missing anything super obvious. This was with a will, not a trust.

Limiting this discussion to income tax only, the assets conveyed via a will are generally only taxable if they are distributions from pre-tax accounts such as an IRA, 401)k) or annuity, Since the decedent never paid tax on those funds, there is no step up in basis and distributions to a direct beneficiary or heir are taxable when received.

Yes, I made a mistake there, meant no tax from an inherited roth IRA.
Another advantageous wrinkle is that you have 10 years to liquidate an inherited IRA, so you can control when you pay the taxes. Have to make RMDs if the person you inherited from was required.
I still have no idea under what circumstance someone would have to pay "37%" of inherited assets outside of some weird scenario. Obviously there is always nuances and 1% exceptions.
I waded into this because there were several posts mentioning trusts and wills and taxes, and my understanding is that while a trust makes the distribution of assets easier, quicker, and maybe save some lawyer and court fees vs a will - the tax situations are similar. Someone please tell me if I am wrong- I am not an expert.

 

[Tom Hagen]

Yes, I made a mistake there, meant no tax from an inherited roth IRA.
Another advantageous wrinkle is that you have 10 years to liquidate an inherited IRA, so you can control when you pay the taxes. Have to make RMDs if the person you inherited from was required.
I still have no idea under what circumstance someone would have to pay "37%" of inherited assets outside of some weird scenario. Obviously there is always nuances and 1% exceptions.
I waded into this because there were several posts mentioning trusts and wills and taxes, and my understanding is that while a trust makes the distribution of assets easier, quicker, and maybe save some lawyer and court fees vs a will - the tax situations are similar. Someone please tell me if I am wrong- I am not an expert.

Its not placing the assets into the trust, it's income subsequently earned inside the trust. Trusts often retain assets for years and must pay tax on income generated by those assets unless is it passed out to the beneficiary. For example, Dad is remarried when he dies and leaves his assets in a trust specifying that his 2nd wife receives interest and dividend income generated from the trust assets for the remainder of her life but when she dies the trust assets pass to his children from a prior marriage. Any interest and dividends get passed through to the 2nd wife and she pays the tax on her return. However, if the trustee makes a killing buying and selling wheat pennies held for less than 1 year those short term capital gains are not distributable to the wife and the trust needs to pay the income tax at ordinary income rates which max out at 37% once the trust income exceeds $14,451.

This can also happen when trusts are set up for minor children or adult children with special needs.

 

[growlers]

Yes, I made a mistake there, meant no tax from an inherited roth IRA.
Another advantageous wrinkle is that you have 10 years to liquidate an inherited IRA, so you can control when you pay the taxes. Have to make RMDs if the person you inherited from was required.
I still have no idea under what circumstance someone would have to pay "37%" of inherited assets outside of some weird scenario. Obviously there is always nuances and 1% exceptions.
I waded into this because there were several posts mentioning trusts and wills and taxes, and my understanding is that while a trust makes the distribution of assets easier, quicker, and maybe save some lawyer and court fees vs a will - the tax situations are similar. Someone please tell me if I am wrong- I am not an expert.

Its not placing the assets into the trust, it's income subsequently earned inside the trust. Trusts often retain assets for years and must pay tax on income generated by those assets unless is it passed out to the beneficiary. For example, Dad is remarried when he dies and leaves his assets in a trust specifying that his 2nd wife receives interest and dividend income generated from the trust assets for the remainder of her life but when she dies the trust assets pass to his children from a prior marriage. Any interest and dividends get passed through to the 2nd wife and she pays the tax on her return. However, if the trustee makes a killing buying and selling wheat pennies held for less than 1 year those short term capital gains are not distributable to the wife and the trust needs to pay the income tax at ordinary income rates which max out at 37% once the trust income exceeds $14,451.

This can also happen when trusts are set up for minor children or adult children with special needs.

Thank you very much.

I was only picturing the "typical" scenario where person dies, will in place, everything is liquidated all at once per the will. I am the executor in this scenario now, there has been delays mostly because the court is still backed up from covid to have the hearings, but nothing is being taxed at all. A trust would have sped it up as we wouldn't need all the hearings, but the tax ramifications would be the same in my case.

I am a bit fixated on trusts as I have several friends who have told me "gotta get a trust, not just a will" and I just don't get it. They get talked into it touting the liability reasons (doctors are sued frequently) but I just don't see the advantages in my case (retired, married, no kids). The will already gives it all to the surviving spouse, when they die the will splits up what is left to those in the will. I don't see what a trust does in my particular case, but realize there are desires for ongoing generational wealth and payments that a trust provides in a more complicated scenario. Although I would still argue the majority of people are in the same circumstances as myself after retirement, kids or not.

 

[SofaKings]

My wife and I had an attorney put together a trust for us last year. If either of us dies, deceased interest move into a trust fob surviving spouse. If both of us kick the bucket, a trust is set up with our adult children as beneficiaries.
I need to review and make sure everything has correct beneficiaries! #unopenedcondomboxkid

 

[Chadstroma]

Yes, I made a mistake there, meant no tax from an inherited roth IRA.
Another advantageous wrinkle is that you have 10 years to liquidate an inherited IRA, so you can control when you pay the taxes. Have to make RMDs if the person you inherited from was required.
I still have no idea under what circumstance someone would have to pay "37%" of inherited assets outside of some weird scenario. Obviously there is always nuances and 1% exceptions.
I waded into this because there were several posts mentioning trusts and wills and taxes, and my understanding is that while a trust makes the distribution of assets easier, quicker, and maybe save some lawyer and court fees vs a will - the tax situations are similar. Someone please tell me if I am wrong- I am not an expert.

Its not placing the assets into the trust, it's income subsequently earned inside the trust. Trusts often retain assets for years and must pay tax on income generated by those assets unless is it passed out to the beneficiary. For example, Dad is remarried when he dies and leaves his assets in a trust specifying that his 2nd wife receives interest and dividend income generated from the trust assets for the remainder of her life but when she dies the trust assets pass to his children from a prior marriage. Any interest and dividends get passed through to the 2nd wife and she pays the tax on her return. However, if the trustee makes a killing buying and selling wheat pennies held for less than 1 year those short term capital gains are not distributable to the wife and the trust needs to pay the income tax at ordinary income rates which max out at 37% once the trust income exceeds $14,451.

This can also happen when trusts are set up for minor children or adult children with special needs.

Thank you very much.

I was only picturing the "typical" scenario where person dies, will in place, everything is liquidated all at once per the will. I am the executor in this scenario now, there has been delays mostly because the court is still backed up from covid to have the hearings, but nothing is being taxed at all. A trust would have sped it up as we wouldn't need all the hearings, but the tax ramifications would be the same in my case.

I am a bit fixated on trusts as I have several friends who have told me "gotta get a trust, not just a will" and I just don't get it. They get talked into it touting the liability reasons (doctors are sued frequently) but I just don't see the advantages in my case (retired, married, no kids). The will already gives it all to the surviving spouse, when they die the will splits up what is left to those in the will. I don't see what a trust does in my particular case, but realize there are desires for ongoing generational wealth and payments that a trust provides in a more complicated scenario. Although I would still argue the majority of people are in the same circumstances as myself after retirement, kids or not.

I don't think there is a "typical" scenario which is why I am not a fan of DIY estate planning.

Starting with 50 sets of different laws and tax implications and then only getting more complicated from there based on what assets there are, how they are vested, how they are set up as beneficiaries or not at all, etc etc etc...

I am expert level in a couple of areas of personal finance. I know a lot about several others and know more than most in most of the rest. No way in hell am I going to do my own DIY estate planning. And I didn't. I got a professional.

 

[Sand]

So, word to the wise - be very careful of whom you pick as business partners. SCOTUS just ruled 9-0 that debts incurred by a business partner's fraud are not dischargeable in bankruptcy.