All about wills & college savings

kns1988

The search feature on the bump sucks, so again, I can't tell if a thread already exists on this. Let's lump two big adult topics together... tell me about your wills and college savings plans for baby. 

kns1988

We have a 529 for DS that we opened when he was born and contribute $100 monthly to. We'll do the same for baby #2. We went with the Utah plan even though we live in PA because they had a good return rate, and we're in a state where you can claim it on your taxes even if you don't use the state plan.

I have a life insurance policy on both me and DH, but I don't have a will yet. I'm thinking of using Legal Zoom to make one. My sister in law would take the kids of something happened to both DH and I, and she would get our house because she doesn't have a big enough place to live. She's not particularly good with money, though, so I'm not sure how to go about setting up a fund that would allow her to use our life insurance money to care for the kids, but also make sure it doesn't get blown. It's terrible to think that - she's a kind person, but she's a bad money manager. Any ideas on how to handle it?

kmos816

@kns1988 we plan on having one person getting the kids and another manage the funds. We still haven’t chosen who will get the children, but know my mom and dad will manage the money. I started on my will and there are different sections with who gets the children and manages assets. I’m curious about other opinions on this! This is a great reminder to get our wills put together!!!

We have a 529 plan for DD starterd
but haven’t contributed much yet, and stopped monthly contributions. I want to make sure I’m putting enough in my 401k until I put more contributions into the 529- we plan on increasing contributions after daycare payments stop! We also have rental properties we plan on using for college tuition.

kns1988

@kmos816 that set up might work well for us because my FIL is a very good money manager. He used to be an accountant. I would feel way more comfortable having him manage the money for my SIL. 

kaf1788

Great topic! For college savings, we plan on setting up a 529 in MA.  We'll probably start with small monthly contributions (~100 each per month) while we get comfortable with all the other baby related expenses we're incurring and then plan to increase it as we get our budget sorted out.  My brother's already asked about doing automatic contributions from his paycheck (He is a very loving and generous uncle with no plans of having children of his own. Great combo! haha) and my very practical mother has been making contributions to my niece's college savings in lieu of a million presents at holidays which I love. I'm hoping we can push for that on my husband's side as well as they usually go WAY overboard with gifts and since little guy's birthday will be so close to Christmas. 

I don't even know where to get started with a will. A friend's husband is a criminal defense lawyer but also does some estate planning work on the side for friends and family so I might look into hiring him.  I haven't actually run it by anybody but I would like the baby to go to my sister and her husband if anything happened to us.  She lives a few miles away from us and has a daughter who will be ~18 months older than my son so it just seems like the logical decision. I'm just hoping it doesn't cause any hurt feelings to anyone else in the family.

leighbrek

My hubby and I asked the one sister-in-law if she and her hubby would take care of our baby if something happened to us, and she jumped on it immediately, lol. It was an absolute yes, no conversation with hubby. I laughed, but it's nice to know there is someone who is enthusiastically invested instead of feeling obligated.
We're going to do a standard criss-cross will, and then have the addition of taking care of baby.

For school savings, I think we'll likely go with a critical illness fund that returns the premium in so many years if it's not used, which would then be invested into education. We'll probably also do a separate education fund. 

tosh24

For our kids we set up a registered education savings plan as soon as each of them were born and contribute the monthly amount required to get the full yearly government contribution to the plan (if you contribute at least $2400 a year for each kid, the government will contribute $480 each per year). It's a family plan so if one kid doesn't use their full amount it can be transferred to other children in the family in case their schooling is more expensive. If there is any leftover money in the plan after all kids have finished school, the money can be withdrawn (with repayment of taxes on investment interest earned and repayment of any government contributions) or it can be rolled into our retirement savings (no tax repayment upon transfer but still have to give back government contributions). 

alexandraseattle

Luckily my FIL is an attorney that does a lot of estate work, so this fall we are hoping to get our will hammered out. When my sister and BIL come for a visit next month, we plan to ask if they will be the guardians. 

Anyone else going to do a UTMA accounts instead of a 529? I went to college on a merit scholarship and my employer paid for my masters. I’m hoping our little one is like me. My parents used a UTMA account for my “college fund” and since I didn’t need it for tuition, really helped start me off with a little nest egg when I graduated. 

KLS123

Estate Planning: DH and I both got term life insurance policies in excess of our life insurance that our employer provides to make sure the rest of the family it taken care of in case something happens to us during our working years. Something to note (and admittedly I don't know all the details on this since DH did all the research and setup) in the state we live in (TX) if we were to both pass and the baby was named the beneficiary but is not yet 18, then the money would not be able to be accessed until the baby turned 18. If that were to happen, we would want to money to be able to be used for the baby's upbringing so we had to make the beneficiary of the life insurance a trust which the caretaker of our child (my parents) would have limited accesses to (which we outlined) to use on behalf of the child until the child reaches 18 so that the funds wouldn't be locked up and my parents would be burdened with raising our child on their dime. Hopefully that made sense and I think this differs by state estate laws so certainly look into that regarding naming the child directly as the beneficiary to any life insurance or will.
We have not yet done a will, but that's next on the "to-do" list with above noted consideration for beneficiary/trusts

College Savings: We bought a rental house when we conceived that is a "college investment" for the baby. It is cashflowing positively and the excess income that it throws off will be put into a 529 account and the house will be paid off in full by the time the baby is 18 so we can sell it and use the proceeds for college if needed. We opted to go this route to diversify from just a 529 and hopefully jump start it with an investment that has a higher return than the state managed 529s out there. 
We also will be opening a 529 account to re-invest the rental income from the house into and offer as a gift option to friends or family who are wanting to contribute. 

As an aside, it's pretty overwhelming to look at the raising cost of college compared to the returns the 529 plans get. You practically have to have an entire college tuition on hand today to invest in a 529 for it to grow at the rate that college prices are inflating. Here's to hoping there is some sort of market correction in that regard between now and 2036!

bradleysmommy28

We are lucky with college - my in-laws have a trust that they contribute to frequently for DS.  He was the first grandchild and this baby will only be the 3rd so they are reaping benefits of FIL setting himself up well in his younger years (wish we could get in on it too!!).  We both have life insurance but we don't have wills.  I honestly have been at a loss for the past 5 years on what to do in this scenario because I don't know who I'd want to raise my kids.  We've tossed around all our siblings, best friends, other family etc and can't decide.  I think I might ask my cousin when this baby is born because she is definitely all around great - with money, kids, has the means to raise 2 more, etc.  I just hate thinking of this stuff...