Jewish World Review April 7, 2000 / 2 Nissan, 5760
How not to blow an inheritance
DEAR BRUCE: I love my son, my daughter and my son-in-law dearly, and of course, it goes without saying, my grandchildren. But although they earn good salaries, to say that they are irresponsible when it comes to finance is a gross understatement. My daughter and/or the grandchildren will get all of my estate when I pass away, which is worth in excess of $1 million, plus a home that is worth $450,000.
I am confident that if I leave the money entirely to my daughter, it will dissipate in a very short time. That would seem like a formidable task to many, but I am sure she could accomplish this. Is there any way that I can slow this process down? -- W.B., Oxnard, Calif.
DEAR W.B.: The most logical way to control the dissipation of assets, at least for some of the time, is through a trust.
The trustees would allocate a certain amount of money every year for your daughter to spend at her own discretion. Any monies that the trust earns would be taxable.
You could also factor in your grandchildren and perhaps even your great-grandchildren. A good trust attorney would be the person to consult.
DEAR BRUCE: Fifteen months ago my wife and I bought $500,000 house on a valuable piece of lake property. Six months later she lost her job, and our income has been halved. She has a new job, but we are struggling to get by and keep up with the bills.
I want to sell the house and move to something smaller. She says that we have to stay here at least two years to avoid paying capital gains. Since we have already put over $10,000 worth of improvements into the house, I don't think that it has gained in value enough to be sold at a profit.
She says we should retire in this home because the lake property will only go up in value. At 50, I don't want to work another 14 years to pay off a mortgage, leaving no money for emergencies, investments or new vehicles. -- T.R., Richland, Mich.
DEAR T.R.: I am on your side. Your wife loves the house, and that is understandable, and she will do almost anything to keep it. If that "most anything" means getting two jobs to get her income up somewhere where it was before, so be it.
In the absence of that, you are going to be spending the next 14 years struggling, and that is no way to ease into retirement.
DEAR BRUCE: I have been approached by a large competitor to sell my business to them. They want to pay me over 20 years, which makes me a little nervous. Is there such a thing as insurance or a bond that they could supply that will insure that I receive all of the payments? -- B.S., Idaho Falls, Idaho
DEAR B.S.: I know of no way to guarantee the money for that long of a period of time.
Unless the numbers are absolutely huge, assuming your competitor is a public company, tell them you will take a portion of the money in company stock. This somewhat diminishes the value of your business, but the more paper you carry for the longer term, the higher the number that you can receive. However, as you already recognize, if something happens in that period, you could lose whatever is outstanding.
Unless it is a very, very large business, in my view it should be cash up
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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03/01/00: Is time-sharing a scam?
02/29/00: Paying for nursing-home care
02/28/00: Rely on a real-estate lawyer
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02/16/00: Just how important is a 401(k)?
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01/26/00: Everyone needs a will
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01/19/00: Selling a second home
01/18/00: Running from a time-share
01/14/00: Don't be a spendthrift!
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12/01/99: Long-distance rentals a bad idea
11/29/99: Mortgage strategy A-OK
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08/16/99: Thinking about PMI
08/13/99: Short-term mutual funds a-OK
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