How To Save Your Heirs From Your Debt

We will die, our debts will not. Many people falsely believe that any debts they have incurred will dissolve when they die. Unfortunately, this is not the case. A new article discusses steps you can take to ensure that your debts do not eat away at the assets you had intended would go to your heirs.

Wipe our Debt (Photo credit: Images_of_Money)

One important move you can take now to protect your heirs later is to do what you can to pay down your debt. Speak with a financial advisor about how much debt you have, and how you can responsibly continue to pay it down while you are still alive. If you have a large amount of debt, consider cutting your spending now so you have more money to put towards your debts.

You may also want to consider loan protection insurance. This type of insurance is offered in a declining-term policy that will pay off specific loans if you die or become otherwise unable to pay through disability. Whether you need insurance for your home loan, credit card balances, or car loan, loan protection insurance may be a good option for you. These types of loans are often offered from lenders who provide mortgages, and may be a sensible solution for some individuals and couples.

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Family Wealth Can Be – Surprise! – A Curse

What some people would think of only as a blessing can also be a curse.

Family wealth is, at times, a double-edged sword, as Thayer Willis, author of “Navigating the Dark Side of Wealth: A Life Guide for Inheritors” and “Beyond Gold: True Wealth for Inheritors,” wrote in a recent article for Forbes magazine.

“But what many people don’t realize is that family wealth can be a curse. It was for me as a member of the family that founded Georgia-Pacific Corp.,” Thayer stated. “And that has given me an inside perspective on the privileges and tragedies that wealthy families encounter.

The biggest curse of intergenerational wealth for me and many other people is the illusion that you don’t have to do much with your life. You might want to and you might make the effort, but you don’t have the same pressure to earn enough to live on. And that takes away a lot of the incentive to find meaningful work.

Though many wealthy families attend to tax, financial and legal planning, with expert advice and well-developed strategies, they often neglect psychological planning. The consequences can be dire.”

Thayer offered three ways in which, without the proper psychological preparation, inherited wealth can amount to a curse, rather than a blessing.

They are:

  • Too much too soon
  • Too much financial focus
  • Ingratitude

“This results in the familiar demotivation that wealthy parents worry about,” she said of the first issue. “A form of laziness, it involves remittance addiction, being dependent on the money source. Kids aren’t required to support themselves. Parents have low expectations of the next generation.”

“This focus can be so big that families neglect human, intellectual and social capital in the family,” Thayer indicated regarding a laser attention on money matters. “As a result, there’s no balance. Instead, the emphasis is on the dollars, the assets, the strategies and the money managers. Family meetings only cover financial concerns.”

“Ingratitude is insidious, based on fear and anger. It leads to low self-esteem, insecurity and the self-doubt that comes from never having become good at anything.”

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Selecting Your Personal Representative

When creating an estate plan, one of the most important decisions to make is selecting a personal representative. A recent article discusses some of the different options individuals have when making this important decision.

Most people will select a close friend or family member to serve as their personal representative. If you choose this type of person, be sure that you select somebody you can trust to follow your final wishes. This person does not necessarily have to live close to you, or even in the same state as you. However, proximity to your estate does ease the process of estate administration.

If you would like to select a professional to serve as your personal representative, consider an estate planning attorney. Attorneys are beneficial because they are knowledgeable as to the law, and have a wealth of experience in estate administration. Speak with your estate planning attorney to determine whether they offer such services. If they do not, they may be able to recommend another professional who can assist you.

Another professional option is the trust department of a bank. As with estate planning attorneys, banks are a good option because they are knowledgeable professionals with a wealth of experience.

Why Everyone Needs An Estate Plan

With the current estate tax exemption over $5 million – $5.25 million to be exact – many people wonder if estate planning is necessary for them. As a recent article points out, the answer is yes.

Estate taxes are only one of a myriad of reasons why a person should put together an estate plan. The main reason for which people create estate plans is so that they can be sure that their assets will be distributed according to their wishes. No matter if you are very wealthy, or have a modest estate, an estate plan is vital if you wish to direct the distribution of your assets. Moreover, by providing instructions for an orderly distribution of your assets, you can save your heirs from the infighting that often results.

It is also important to draft a valid will if you wish to avoid probate. Many people falsely believe that if their estate is not subject to estate taxes, it is not subject to probate. This, however, is not the case. If you would not like your estate to go through the process of probate, you must put together an estate plan that utilizes various estate planning tools that will transfer the bulk of your estate outside of probate.

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