If you're someone who's fortunate to have enough assets to pass on to your children, your family should be in a pretty good position for the future. However, you probably know that having money doesn't exempt you from worrying about your household budget. If your kids are still young and far away from having their own earning potential, here are two things to consider:
1. Life Insurance
Life insurance can be a great way to give your family an extra buffer from financial problems in the case of your passing. Sure, you have the funds in your bank account waiting for them, but when someone passes away, financial matters can sometimes take some time to settle. If you'd like for your kids to receive money without having to deal with anything related to probate court, it may be a good idea to purchase a life insurance policy.
Having this access to funds can mean that school tuitions can continue to be paid, that your children can go on living in a comfortable home, and that they (and their guardian) can have money to pay for any estate taxes or other associated costs. As of 2016, there is a federal tax on estates over $5.45 million; states set their own rules. Some states have no estate tax, while others, like DC and Massachusetts, levy taxes on estates over $1 million.
It can be a complex process to figure out how much life insurance you should buy, especially if you have significant living expenses and assets. That's why it's always a good idea to seek out a financial professional who can perform the necessary calculations for you.
2. College funds
The average cost of college tuition and fees for a private institution is over $31,000, with many schools well over the $40,000 mark. Those costs are rising faster than inflation, which means that parents have a lot to think about. Fast forward to the year when your kids are in school, throw in the cost of private high school and graduate school if you have high aspirations for your children, and the projected totals are astronomical.
That's why you need to be strategic about planning your kids' college funds. If you have a high income, you can start putting away a substantial amount of money each year and use the long-term growth in the market to help those assets grow. A wealth manager can sit down with you to determine how much is the right amount, and he or she can provide guidance on whether you should also set up a custodial account or a trust for educational purposes.
With a nice nest egg already, you should be confident that your kids will be well-off in case anything happens to you. To take it a step further, you can consult with a private wealth manager to make sure you're doing everything you can to look out for your family.