How To Talk To Your Parents About Money

How To Talk To Your Parents About Money

Blog Post Originally From DaveRamsey.com It’s perhaps the only topic that will cause more awkwardness than Miley Cyrus at the Video Music Awards: talking to your parents about money. Parents are our leaders in life—our teachers. The older generations teach the younger ones. They are the ones who are “supposed” to know about money and life. By approaching an elderly parent regarding the taboo subject of moolah, they may think we are trying to subtly tell them we don’t believe they are doing a good job. So the conversation is uncomfortable before it really even begins. Here are some examples of important affairs Mom and Dad need to have in order and how their grown children can get the ball rolling: The Subject: Parents making their will and estate plan No one wants to talk about death—especially the people who are closest to it. And as if the estate conversation isn’t awkward enough, a mother or father might think their kids are trying to figure out how much they will get as an inheritance. To the parent, it sounds like the child values the “stuff” more than the person who raised them. How to address it: Keep the focus of the conversation on getting an estate plan done, not on what is being left to whom. Tell Mom and Dad you are not concerned about that; they can leave what they want to whomever they want, and you don’t care how that shakes out. Also, you can talk to each parent about how doing the will can ensure that the second parent is taken care of in case something...
The Basics: What is a Trust and Why Do You Need One?

The Basics: What is a Trust and Why Do You Need One?

Whether you’re seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility–many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn’t hard. What is a trust? A trust is a legal entity that holds assets for the benefit of another. Basically, it’s like a container that holds money or property for somebody else. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust depend largely on your goals. For example, if you want the trust to generate income, you may want to put income-producing securities, such as bonds, in your trust. Or, if you want your trust to create a pool of cash that may be accessible to pay any estate taxes due at your death or to provide for your family, you might want to fund your trust with a life insurance policy. When you create and fund a trust, you are known as the grantor (or sometimes, the settlor or trustor). The grantor names people, known as beneficiaries, who will benefit from the trust. Beneficiaries are usually your family and loved ones but can be anyone, even a charity. Beneficiaries may receive income from the trust or may have access to the principal of the trust either during your lifetime or after...
Choosing a Beneficiary for Your IRA or 401(k)

Choosing a Beneficiary for Your IRA or 401(k)

Selecting beneficiaries for retirement benefits is different from choosing beneficiaries for other assets such as life insurance. With retirement benefits, you need to know the impact of income tax and estate tax laws in order to select the right beneficiaries. Although taxes shouldn’t be the sole determining factor in naming your beneficiaries, ignoring the impact of taxes could lead you to make an incorrect choice. In addition, if you’re married, beneficiary designations may affect the size of minimum required distributions to you from your IRAs and retirement plans while you’re alive. Paying income tax on most retirement distributions Most inherited assets such as bank accounts, stocks, and real estate pass to your beneficiaries without income tax being due. However, that’s not usually the case with 401(k) plans and IRAs. Beneficiaries pay ordinary income tax on distributions from pretax 401(k) accounts and traditional IRAs. With Roth IRAs and Roth 401(k) accounts, however, your beneficiaries can receive the benefits free from income tax if all of the tax requirements are met. That means you need to consider the impact of income taxes when designating beneficiaries for your 401(k) and IRA assets. For example, if one of your children inherits $100,000 cash from you and another child receives your pretax 401(k) account worth $100,000, they aren’t receiving the same amount. The reason is that all distributions from the 401(k) plan will be subject to income tax at ordinary income tax rates, while the cash isn’t subject to income tax when it passes to your child upon your death. Similarly, if one of your children inherits your taxable traditional IRA and another child...
Estate Planning At Any Age

Estate Planning At Any Age

By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs. For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple will is probably all you’ll need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you’ll need to use more sophisticated techniques in your estate plan, such as a trust. To help you understand what estate planning means to you, the following sections address some estate planning needs that are common among some very broad groups of individuals. Think of these suggestions as simply a point in the right direction, and then seek professional advice to implement the right plan for you. Over 18 Since incapacity can strike anyone at anytime, all adults over 18 should consider having: A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so. An advanced medical directive: The three main types of advanced medical directives are (1) a living will, (2) a durable power of attorney for health care (also known as a health-care proxy), and (3) a Do Not Resuscitate order. Be aware that not all states allow each...