Life ins/Will questions on where to start

karatechrissy

The post below got me thinking of unexpected things happening. I have a few questions on where to start. I've been thinking about this since we got married, but I've sort of just put it on the back burner because of all the legal stuff we had going on, and because I just didn't want to think about it. Now that I have bio children to think of (not that I didn't think of this before when we jsut had SS, but I sort of figured that if anything happened to DH that he would have his mom still, and I knew I wouldn't have any legal rights to SS anyway so I didn't worry too much) I really want to get wills/life ins/savings accounts figured out.

First question is, where do I start? I want to start savings accounts,and was wondering what a good amount to $ to put in per month is? I would want it so that ALL the children wouldn't get any $ from it until they are 25, unless it was to pay for school, or a business venture before that. Does that sound fair? Is there even a way to put stipulations like that on a savings account? I know what I wanted at 18, and those 'things' are drastically different then what I want now in my post 25 age (even if I didn't have a family, I have a better sense of how to spend $). I'll be darned if my kids turn 18 and spend $ that I've saved all their life on clothes/shoes/girlfriends/boyfriends/whatever. This money would be for them to get them started in life, or as I said earlier, in school or a business.

Second, my H and I do not have life ins. currently, and I know little to nothing about it. If anything were to happen to either of us, I want them (children, surviving spouse) to be taken care of financially. What are some things to look for in a policy, or things to avoid in the fine print that may hurt us?

Thirdly, should we have a will drawn up? We don't have much; the house, H's business, the stuff in our home... no savings really to speak of (yet). No one in my fmily has ever made a will, what besides 'things' would we put in the will? Legally, if anything happened to either of us, can we 'leave' the house to someone and the loan would go in their name automatically? Or would they have to re-fi in their name? What if they couldn't qualify? Does life ins. help cover mortgage payments?

Lastly, am I a total biotch for wanting to make %'s for each kid different? Like, any money I have I don't think I would leave to ss (except any $ in a savings for SS, that would be his, obviously). My resoning would be that I have 2 bio children of my own, and SS has 2 parents, and grandparents to take care of him. If I were gone, my children would be out a mom. If SS's mom wants to leave him anything that's up to her and her planning. Does that make me horrible?? My H of course would have anything equally split between the 3 kids. And that wouldn't even come into play unless the kids were grown and adults. Prior to that both DH and I would leave any $ (hypothetical money at this point, lol) to each other and we would spend/save/divide as we see fit. I'm not looking to leave SS out if anything happened to DH and I was left with (hypothetical) $. I'm just wondering how to go about that? I know everyone has different opinions on the whole SP leaving money to the SK's, and I've made up my mind on that point. You can think it's side eye worthy, that's fine. However, I'm firm in my decision.

Before I had my children, I always thought I would leave everything equal to all the children. That SS was 'one of mine' and that I needed to be equal and fair. Now that I've actually HAD my own children, my feelings have changed. Not that I love SS less, but that I've realized that life isn't fair, and there are many other factors going into it and that I need to ensure that my bio-children are taken care of if I am not here. If I'm not here, yes I know SS would hurt, but he still has his two parents to love and take care of him. My children... wouldn't. It breaks my heart to even type that, and reading it, it sounds a bit heartless... but it's how I feel. I can't try to make it out to be anything different than what it is. Am I terrible?

Any direction on where to start would be great... No one in my family has ever owned a house or a business or had any money to speak of to have these things to take care of. My grandparents owned a home and had no will, they said they 'didn't want to think about that', but it made things REALLY hard for my mom and subsequently, me because I was the only one to hellp my mom when my grandmother passed, to get things legally settled. It was really hard to sort out, and my aunt basically thought it was a free for all to take whatever she wanted. That's a different story, but I want to make things as easy as possible if anything unfortunate happened to either of us.

One more thing, I'm a SAHM, (sort of. I do stuff for our business but it's a family oriented thing and I don't collect  paycheck at all) and I worry about being left alone how I woul pay for all of our bills. Is that what life ins. is for? Would I automatically get his portion of the business? (It's in H's name legally and we have a business partner who owns 50%)

If you got this far thank you for reading!

 

ksmakal

Short answer?  Go see a financial planner.  One that makes money off the money you save.  It's what I did, and they can help you navigate your situation better than any message board.  I can tell you there are lots of opens, trusts for your bio kids seperate from your step kids.  You really need to get into all of this with your husband and lay out a plan that suits all of your concerns.  I'm certain that he would want to provide for all of his kids should something happen to him.

CFjo2010

Every State handles Estate Planning a little bit differently, so please check with an attorney first.  I'll give you the run down on how it generally works in CA...

First thing you do is establish a Trust.  In your Will, you leave everything to the Trust, and the Trust is responsible for dividing the assets as you set forth.  After the Trust is established, you open an account in the Trust's name and you can start building the funds.  Also, the Title to any property you own would be transfered to the Trust.  When you obtain Life Insurance policies, the Trust will need to be listed as the beneficiary.  Generally, the surviving spouse becomes the first Executor of the Trust, but you need to appoint someone else to be the Executor for when both spouses pass away.  Make sure it's someone you trust completely and who will have the children's best interests at heart.

In the Trust, you can specify (at least in CA) pretty much anything you want.  For example, my husband and I have ours set up so that the kids don't receive any distribution until they turn 25.  Education expenses before the age of 25 will be paid by the Trust however, education payments are made directly to the school.  If the kids have to pay for anything out of pocket upfront (school books, lab fees, testing fees, etc.) then the Trust will reimburse them.  Once they turn 25, they will receive monthly distributions (like an allowance) until they turn 30 and then the remainder of their portion of the Estate will distributed to them.  Also, we have it in our Trust that BM will continue to receive the current CS amount monthly from the Trust, however this will be deducted from K's total distribution amount.  So basically BM has a choice:  collect a check each month or suck it up and get a job and let K have her full distribution later.  Also, we have it set up so that the Trust will maintain health insurance for the children until they are 19 (that'a the legal age in CA and then they have to maintain their own).

Regarding the % of distribution... that's entirely up to you and you can set it up however you see fit.  My husband and I have it set up so that the first survivng spouse receives 50% of the Life Insurance policy, and then the remaining 50% goes into the Trust.  The second spouse's Life Insurance policy obviously goes 100% to the Trust.  The entirety of the Trust after both of us pass away is divided equally among all 3 (soon to be 4) kids.  I think for us we wanted the kids to all receive a fair amount because in our situation, we know that BD won't have anything to leave to my kids and BM will have nothing to leave to K later on.  Which is also why we have set up such strict limitations to distributions.

I hope my incredibly long-winded reply helps a little!

fellesferie

I'll try to answer your questions the  best I can. I'm no financial expert, but we've done some of what you're asking about.

So where do you start? I would start by visiting some websites for well-known financial guru types--think Clark Howard, Dave Ramsey, Suze Orman, and then see if any of them resonate with the way you think about money & saving. You could try watching their shows and see if you connect with any of them. DH & I have, at one time or another, watched all three. But Clark Howard is the only one we currently listen to, and do take a lot of his advice.

You need to think about what kind of savings accounts you want to start, and how much you want to deposit. Pretty much every single person will tell you that you need to worry about your retirement before you save a penny of money for your kids. There are calculators out there that can help you determine how much you need to save there, but I've heard a lot of figures in the 10% range.

AFAIK, you cannot put stipulations on a straight up savings account. You can have accounts in your name that you control until the child turns 25. You can also put the money into a trust, and put stipulations into your will. 

There are types of accounts (like 529s) that can only be used for college, but you get some tax breaks there that you wouldn't in a normal savings account. 

For life insurance, you guys need to research what's available to you both personally and as business owners. I've only ever just subscribed to the policy through my workplace (or DH's), so I know almost nothing there. But when you do sign up, you can dictate what % goes where.

You should absolutely have a will. You have assets and children, and you'll want to minimally say where the kids should go if something happens to you and YH, and make sure that person will have access to your assets. You didn't mention this, but you should also have a living will & make sure that your family knows your wishes if you were incapacitated in some accident or illness. You can draw up a will on your own. There are lots of websites that will help you do it. 

As far as how you want to split things up between the kids, that's personal and it's just something you and YH will need to work out. DH and I have split things 50/50 between our children. It's true that DS has another parent, but I know XH and he's not saving any money. My xILs have also told me that he's pretty much paycheck to paycheck, so there just isn't going to be anything there. If XH was a planner with a savings account, maybe we'd feel differently.. I don't know. 

If something were to happen to YH, life insurance would be your best bet. What would happen to the business might depend on your state laws, and the contract that was drawn up with his partner.  

karatechrissy

Thank you SO much for these explanations!! Truly helped me a lot as far as knowing what things are and where to get started. I will look at those websites and get more comfortable w/ what reasonable amounts are and what not. I knew that I would probably need an attorney, I just wanted to at least have an idea of what I was talking about going into it. Thank you guys for your detailed responses and taking the time to go into all of that. I really do appreciate it. I going to do some number crunching and then talk to DH about it. I really do wantto get things all spelled out for ours and the kids' future. 

dawnm975

I agree with the post - get a finanical planner.  You need someone who knows about all of this and can help you sort through everything.  I'm lucky in that my brother is a financial planner and pretty much the day we were married he asked if our will was made - maybe not quite that bad - but is SO VERY important to have details done up and also includes who would have custody of the kids in case something would happen to you both.  It does put us at ease knowing we have a will/insurance to spell out our wishes.  Good Luck.