Will we? Well, with will and a will, we will.
July 16, 2018 6:47 PM Subscribe
We need to make a will. We live in Ontario, Canada. What do we need to consider and who do we need to hire?
We're not sure what to think about. Some details:
Our assets right now are a house, a used car, and some savings.
We have a mortgage and some student loan and home improvement debt that we're aggressively paying down. We should be debt-free in a few years (well, besides the mortgage).
At some point, there may also be an inheritance: a small sum of money, and possibly a share in a property (shared with 1-2 other relatives).
We're common-law (we'll get married eventually).
One of us has a regular job with decent benefits; the other is self-employed with not-great benefits.
We have a young child and hope to have another in the next 2 years.
We agree on a first/second/third choice of who we'd like to have raise the kid(s) if we couldn't do it. Our top two choices are Ontario residents; third choice lives in the USA. We haven't explicitly asked any of these people (or their spouses and children) if they'd like to fulfill this role, but it's very likely they would.
I guess it makes sense that whoever takes our kids would also get our house, which they could either sell, or manage as an income property, to support the kids? Is that logical?
What do we need to do in order to think this through clearly and make it happen?
Do we also need to think about life insurance (the traditionally-employed partner has a policy; the self-employed partner probably doesn't), and if so.... what's important to consider?
We honestly have no idea, so please explain like we're new.
Thank you!
We're not sure what to think about. Some details:
Our assets right now are a house, a used car, and some savings.
We have a mortgage and some student loan and home improvement debt that we're aggressively paying down. We should be debt-free in a few years (well, besides the mortgage).
At some point, there may also be an inheritance: a small sum of money, and possibly a share in a property (shared with 1-2 other relatives).
We're common-law (we'll get married eventually).
One of us has a regular job with decent benefits; the other is self-employed with not-great benefits.
We have a young child and hope to have another in the next 2 years.
We agree on a first/second/third choice of who we'd like to have raise the kid(s) if we couldn't do it. Our top two choices are Ontario residents; third choice lives in the USA. We haven't explicitly asked any of these people (or their spouses and children) if they'd like to fulfill this role, but it's very likely they would.
I guess it makes sense that whoever takes our kids would also get our house, which they could either sell, or manage as an income property, to support the kids? Is that logical?
What do we need to do in order to think this through clearly and make it happen?
Do we also need to think about life insurance (the traditionally-employed partner has a policy; the self-employed partner probably doesn't), and if so.... what's important to consider?
We honestly have no idea, so please explain like we're new.
Thank you!
Examples of things a lawyer can help you think about -
If just one partner dies, do you want the other partner to get 100% and trust them to support the kids appropriately? Even if they remarry and have more children with a new partner? Or you could set up a trust, which would give you control from beyond the grave but would also cost money and be less flexible.
INAL but I don't think you want to give anything to the executor/guardian - you want to put it in a trust for the kids that the guardian can spend to on their care until they are old enough to over for themselves (assume it hasn't been spent long before then). There are some choices you can make about how much control you want over what happens to the money but more control means less flexibility.
posted by metahawk at 7:55 PM on July 16, 2018
If just one partner dies, do you want the other partner to get 100% and trust them to support the kids appropriately? Even if they remarry and have more children with a new partner? Or you could set up a trust, which would give you control from beyond the grave but would also cost money and be less flexible.
INAL but I don't think you want to give anything to the executor/guardian - you want to put it in a trust for the kids that the guardian can spend to on their care until they are old enough to over for themselves (assume it hasn't been spent long before then). There are some choices you can make about how much control you want over what happens to the money but more control means less flexibility.
posted by metahawk at 7:55 PM on July 16, 2018
The basic calculation behind life insurance is so that (1) if one partner dies, the other partner can manage to make ends meet while raising the kids on a single income and (2) if both partners dies, there is enough money (including value of house, savings etc) to pay for the kids' expenses so the guardian can afford to take them in.
In our family, we figured if the high wage earner died, having enough in life insurance to pay off the mortgage will allow the lower earning partner the breathing room to cover everything else and if the lower earning (higher child care duties) partner died, there was a lower amount which be enough to pay for full-time child care and housekeeping. As the kids got older, we dropped the life insurance on the lower earning partner first.
posted by metahawk at 8:00 PM on July 16, 2018
In our family, we figured if the high wage earner died, having enough in life insurance to pay off the mortgage will allow the lower earning partner the breathing room to cover everything else and if the lower earning (higher child care duties) partner died, there was a lower amount which be enough to pay for full-time child care and housekeeping. As the kids got older, we dropped the life insurance on the lower earning partner first.
posted by metahawk at 8:00 PM on July 16, 2018
A good lawyer can help you sort everything through.
But you should probably ask the people that you are considering for childcare if you both pass.
And thing about who would be your executor, probably not the same person you have caring for the children.
posted by csmithrim at 9:19 AM on July 17, 2018
But you should probably ask the people that you are considering for childcare if you both pass.
And thing about who would be your executor, probably not the same person you have caring for the children.
posted by csmithrim at 9:19 AM on July 17, 2018
A decent estate lawyer will have a conversation where they will identify the issues that you want to focus on. The Lawyer isn't just there as an order taker once you have made the decisions. They're there to find the red flags. They will also lay out the pros and cons of creating trusts, etc. It's an estate plan.
Your job is to collect the relevant information to give the lawyer an accurate picture of your situation. So, a list of your assets and debts, and information about your child, other family members, and friends who might be involved as executor, trustee, or caregiver for your child.
You'll be asked to come up with people who will fill a number of roles should one or both of you die:
- Executor: The person who will have the legal obligation to follow the instructions contained in your will. On other mefi questions, I've seen some anxiety about this person also being a beneficiary of the will, but I (as a Financial Planner) see no issues with it in most situations. If you trust your kids to someone, that person can also typically be trusted to be the executor. Your lawyer will also likely tell you that they can be the executor, for a fee.
- Trustee: If both of you die, you will need a person who will be responsible for your assets until your minor children are old enough to receive them. You can specify the age, so that your kid doesn't get a big check at age 18.
- Custodian for minor children: The person(s) who will care for your minor children if both of you die.
-Beneficiary: people who will receive something of yours as laid out in the will.
The above can all be different people! You can give your kid to person A, and have person B be the trustee for your house and assets. (Or some portion thereof - new parents of your kids get some $$, and the rest is set aside for the kids in a trust.)That way the most suitable parent can care for the kid, but the most suitable financial manager can look after the money. The tradeoff is that these parties may not agree on what is best for your kid, and after a family tragedy, everyone is emotional. I've seen conflict over these arrangements both ways. (Financial manager refuses to fund things new parent finds necessary. Or, outside family member has concerns that new parent of kid is spending kid's money on things that mostly benefit them.) The lawyer should discuss the pros and cons of these arrangements.
Your will can instruct the executor to sell the house, or place it in a trust to be run as a rental property. Be mindful that running a rental property is a part time job. It's a bit rough to ask a trustee to look after a rental property for many years and then hand the asset over to kids without some kind of payment. The mortgage will likely need someone to personally guarantee it, but such a thing places risk on them and makes it harder for them to obtain their own mortgage. Your lawyer may suggest it be sold.
Based on your description above, you want life insurance. You have a smaller net worth, debt, and dependents with maybe more on the way. It's likely that something called term life insurance is best for you. It's lower cost, and more flexible. You'll want to speak to someone who has some expertise in this are, but who is not paid to sell insurance. (The commissions are higher on other forms of insurance, like whole life, or universal life, and these agents will want to direct you to those.) The knock on term life insurance is that you may get to a point where you don't need insurance anymore, when your kids are grown and out of the house, and you have no debt and lots of savings. If you cancel your term insurance then, you get nothing. Some people don't like the idea of that. But fire insurance on your home, or collision insurance on your car work the same way. No one feels jilted by their home insurance because their house didn't burn down while they owned it. You are paying a small amount monthly to have coverage for a big risk in your life.
Find a Certified Financial Planner.
posted by thenormshow at 11:46 AM on July 17, 2018 [1 favorite]
Your job is to collect the relevant information to give the lawyer an accurate picture of your situation. So, a list of your assets and debts, and information about your child, other family members, and friends who might be involved as executor, trustee, or caregiver for your child.
You'll be asked to come up with people who will fill a number of roles should one or both of you die:
- Executor: The person who will have the legal obligation to follow the instructions contained in your will. On other mefi questions, I've seen some anxiety about this person also being a beneficiary of the will, but I (as a Financial Planner) see no issues with it in most situations. If you trust your kids to someone, that person can also typically be trusted to be the executor. Your lawyer will also likely tell you that they can be the executor, for a fee.
- Trustee: If both of you die, you will need a person who will be responsible for your assets until your minor children are old enough to receive them. You can specify the age, so that your kid doesn't get a big check at age 18.
- Custodian for minor children: The person(s) who will care for your minor children if both of you die.
-Beneficiary: people who will receive something of yours as laid out in the will.
The above can all be different people! You can give your kid to person A, and have person B be the trustee for your house and assets. (Or some portion thereof - new parents of your kids get some $$, and the rest is set aside for the kids in a trust.)That way the most suitable parent can care for the kid, but the most suitable financial manager can look after the money. The tradeoff is that these parties may not agree on what is best for your kid, and after a family tragedy, everyone is emotional. I've seen conflict over these arrangements both ways. (Financial manager refuses to fund things new parent finds necessary. Or, outside family member has concerns that new parent of kid is spending kid's money on things that mostly benefit them.) The lawyer should discuss the pros and cons of these arrangements.
Your will can instruct the executor to sell the house, or place it in a trust to be run as a rental property. Be mindful that running a rental property is a part time job. It's a bit rough to ask a trustee to look after a rental property for many years and then hand the asset over to kids without some kind of payment. The mortgage will likely need someone to personally guarantee it, but such a thing places risk on them and makes it harder for them to obtain their own mortgage. Your lawyer may suggest it be sold.
Based on your description above, you want life insurance. You have a smaller net worth, debt, and dependents with maybe more on the way. It's likely that something called term life insurance is best for you. It's lower cost, and more flexible. You'll want to speak to someone who has some expertise in this are, but who is not paid to sell insurance. (The commissions are higher on other forms of insurance, like whole life, or universal life, and these agents will want to direct you to those.) The knock on term life insurance is that you may get to a point where you don't need insurance anymore, when your kids are grown and out of the house, and you have no debt and lots of savings. If you cancel your term insurance then, you get nothing. Some people don't like the idea of that. But fire insurance on your home, or collision insurance on your car work the same way. No one feels jilted by their home insurance because their house didn't burn down while they owned it. You are paying a small amount monthly to have coverage for a big risk in your life.
Find a Certified Financial Planner.
posted by thenormshow at 11:46 AM on July 17, 2018 [1 favorite]
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Even though I have a pretty good understanding of the law and of what needed to go into my will, I still benefitted by talking to a lawyer and having him make some recommendations, based on his own experience. This was especially true with regards to the medical decision authorization.
A general practice lawyer, or a wills and estate specialist (or one that combines these two types of practice) is what you want. It will cost you money (it's perfectly fine to phone around and get some basic quotes for what you want), but it's an investment that is worth it in the long run.
posted by sardonyx at 7:10 PM on July 16, 2018