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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Equalizing Inheritance for Your Children

When one estate planner hears his business-owning clients say, “I love my kids equally, so I want to share my assets equally,” what he actually hears is, “I don’t know how to handle this, so when I’m gone, I’ll leave the business to the kids and let them sort it all out.”

The article in Forbes goes on to state that clients who truly want their business to continue to grow and thrive after their death, but also want their children to succeed in whatever career path they have chosen, should speak with an estate planning attorney about logically equalizing their children’s inheritance.

One potential method of inheritance equalization is through life insurance. Using this strategy, one can set up their estate plan so that, upon their death the children who would like to take an active role in the family business inherit your stock in the business, while those children who have chosen another career path receive monetary inheritance equivalent to the value of the stock through life insurance death benefits and other non-business assets you hold at the time of death.

Through inheritance equalization, parents can create equal and equitable transfers to the next generation.


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