Take the Sting Out of Estate Planning

Senior woman gardeningRecently rock legend Sting made headlines when he declared that his six children would be receiving little to none of his estimated $300 million fortune. He joked that he intended to spend all of his money before he died. But on a more serious note, he explained that he wanted his kids to develop a work ethic, and not let the wealth become “albatrosses around their necks.”

Sting’s motive may be very admirable, and he can do as he pleases with his money; however, a recent article argues that there can be a big gap between over-indulgence and complete denial. Used the right way, your wealth can help you teach your child about using money wisely.

A recent Time article, titled This is What Sting Should Have Done for His Kids, Instead of Disinheriting Them,lays out three ways you can use a small amount of your own money (during your lifetime) to motivate your children to be more productive and self-reliant without spoiling them rotten.

1. Save something for his college. You need not drop every dollar you have into a college savings account. Instead, set a little aside to show your commitment to your child’s education. It also ensures that he or she does not have to choose between assuming a huge student loan and not going to college at all.

2. Jumpstart retirement savings. When your child earns his or her first paycheck, you can again use a little money to teach a valuable lesson: open a Roth IRA on the child’s behalf by April 15th of the year after they get their first job. They will be able to deposit the lesser of their earnings, or $5,500. The article explains that a $5,000 deposit today into a 16 year-old’s Roth IRA earning 6% annually would be worth almost $100,000 by the time he turns 66, but if he deposits $5,000 into the Roth IRA every year for 50 years, the account could be worth roughly $1.5 million by the time he reaches 66.

3. Help with the house. The Time article quotes the National Association of Realtors, which says the median home price in the U.S. as of May of 2014 is $214,000. If your child’s (and/or their spouse’s) annual income is about $60,000, they should be able to qualify for a 30-year mortgage at about 4.0% to purchase a home in that price range. The monthly mortgage payment would be about $1,300. However, the biggest obstacle to the purchase of a first home may be the down payment of $42,000 (to make a 20% down payment). Consider helping your child meet that down payment requirement so they will not only enjoy the satisfaction of home ownership, but will also build equity in something with their own money.

It might also mean you have a place to stay if you emulate Sting and spend all of your money now.

We invite you to explore our website for additional information about our firm and any particular topics that may be of interest to you.

Reference: Time (June 25, 2014) This is What Sting Should Have Done for His Kids, Instead of Disinheriting Them

Subscribe to our newsletter

Act now.

Provide protection for yourself and the people you care for.

Take action before it becomes a race against time.

Rely on the Barbara M. Pizzolato, P.A. skilled estate team to shield your work and guide your loved ones.

We specialize in estate planning, incapacity planning, business planning, trust administration, and probate.

Take your first step by contacting us or attending a free estate planning event today.

Time waits for no one.

Skip to content