Family Money Using Wills, Trusts, Life Insurance and Other Financial Planning Tools to Leave the Things You Own to the People You Love SILVER LAKE PUBLISHING LOS ANGELES, CA ABERDEEN, WA Family Money Using Wills, Trusts and Other Financial Planning Tools to Leave the Things You Own to the People You Love First edition, second printing 2004 Copyright © 2004 by Silver Lake Publishing Silver Lake Publishing 101 West Tenth Street Aberdeen, WA 98520 For a list of other publications or for more information from Silver Lake Publishing, please call 1.360.532.5758. Find our Web site at www.silverlakepub.com. All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transcribed in any form or by any means (electronic, mechanical, photocopy, recording or otherwise) without the prior written permission of Silver Lake Publishing. The Silver Lake Editors Family Money Includes index. Pages: 308 ISBN: 1-56343-744-9 Printed in the United States of America. ACKNOWLEDGMENTS The Silver Lake Editors who have contributed to this book are Kristin Loberg, Christina Schlank, Megan Thorpe and James Walsh. This is the ninth title in Silver Lake Publishing’s series of books dealing with risk and insurance issues that face people living in the United States and other developed countries. Throughout this book, we refer to insurance policy forms and legal decisions from the United States—but the spirit of the discussion about risk and insurance can apply beyond the jurisdiction of the courts cited. Some of the insurance policy language referenced in this book has been developed by the New Yorkbased Insurance Services Office (ISO). ISO policy terms are updated and modified regularly. Our references to the terms are intended solely to illustrate common issues and disputes. You may need to consult with a professional advisor before making decisions or investments related to a particular estate. This book is intended to make the concepts and theories of estate planning understandable to consumers. The Silver Lake Editors welcome any feedback. Please call us at 1.360.532.5758 during regular business hours, Pacific time. Or, if you prefer, you can fax us at 1.360.532.5728. Finally, you can e-mail us at
[email protected] James Walsh, Publisher Los Angeles, California CONTENTS CHAPTER 1 Who Is Family? And What Does That Mean? 1 CHAPTER 2 Attitudes and Aptitudes 37 CHAPTER 3 The Vehicles for Transferring Family Money 73 CHAPTER 4 Types of Investments 117 CHAPTER 5 Legal and Administrative Fees 149 CHAPTER 6 What Happens When Somebody Dies 177 CHAPTER 7 Taxes 211 CHAPTER 8 Problems and Problem People 251 TABLE OF CONTENTS CHAPTER 9 277 Inheriting Money INDEX 303 CHAPTER CHAPTER 1 1 WHO IS FAMILY? AND WHAT DOES THAT MEAN? This book is about accumulating and protecting intergenerational wealth. Family money. The means of comfort, education and freedom—not just for yourself, but for numerous people who’ll come after you. You may think only rich people—the Kennedys and the Rockefellers—need to think about family money. That’s not so. Middle-class people can and sometimes do leave enough money to children and grandchildren to make their lives better. The trick is to start thinking strategically early. In North America, at the beginning of the 21st Century, we live in a consumer culture that argues against building family money. Media and marketers encourage you to spend what money you have— and some that you don’