Women and Money: How Much is Enough?

When the children are young, you may want to create wealth through life insurance to make sure that there will be enough, if you die, to clothe, feed, and house them, and assure they will have the educational opportunities you want them to have. In determining the amount of life insurance to put in place many people calculate the cash needs by first estimating any funeral expenses, debts, and unpaid mort­gages. Then estimate what would have to be put aside to pay for college. The next step is to calculate how much would be required on an annual basis to cover living expenses for the children, and then to estimate how many years that annual expense would be needed.

If you estimate that the children (and guardian) would need $60,000 per year to maintain their present lifestyle (assuming any mortgage has been paid off and assuming that the college tuition has already been set aside), and that that money would be needed for 20 years, then you would need to have wealth or life insurance in the approximate amount of $1,200,000 to cover those expenses. If you wanted to buffer this by making sure the guardian had an additional sum to do what he or she pleases, then that also should be factored in.

As the children grow past college age, the need to make sure they have enough di­minishes, and the question then becomes how much should they have? The issue of needs versus wants becomes more important. How easy do you want to make it for them? How much of a safety net should be provided? What will a significant inheritance do to their lifestyles? Will they buy a bigger car, a second home, quit jobs? What values do you intend to foster with your inheritance? Is your goal to make them richer?

An alternative answer I pose to families who ask that question is, if not your children, then who will receive your assets? The Internal Revenue Service? Charities? These are tough questions to deal with and they are questions on which husband and wife do not always agree.

It is interesting to note that the federal estate tax was not put in place to raise revenue. It was created by President Theodore Roosevelt who felt that if wealth was not diminished from generation to generation, we would end up with an unproductive country. Many of my high net worth clients are coming to that conclusion and making it clear to their children that they will receive a significant amount of wealth but not everything. One wealthy couple I sat down with recently decided to cap the amount each child would receive at $3,000,000 and leave the remaining $30,000,000 of their wealth to a charitable family foundation, which would continue to promote and institute social change in the areas that were important to them. They want all their children (at the death of both parents) to be in charge of that foundation and to make ongoing decisions as to how the funds will be spent.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit:  http://amzn.to/hOHuEV or for more about Annino, visit: www.patriciaannino.com

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