Folds of Honor Radiothon – September 9th
On September 9th we open our More than Money World Headquarters to all who wish to remember the events of 9/11 and make a positive difference in the lives of our military veterans and their families. Folds of Honor provides scholarships to the families of military members lost or disabled in the service of our country.
I ask each of you to be generous in your donations to Folds. We need sponsors who can provide funds to match the donations of our listeners. We welcome any and all support for our efforts to care for the lives of real American heroes.
Please contact us ([email protected] or 610-746-7007) for details on Folds of Honor and how you can make a positive difference.
“Real Life Questions – Real World Answers”
“In this current housing market, the 30-year interest rate exceeds 5%. My adult son and wife are building a new house, will have a house to sell, and will need a mortgage (sometime early next year). I am considering to finance the portion that won’t be covered by the sale of their old home. I would be charging interest (let’s assume at about 3.5%) for the financing, structured as a 30 year mortgage. However, I expect that they would refinance at a time when the rates are more reasonable.
Questions:
- Do I use a real estate attorney to prepare the legal paperwork?
- I expect that there is will have some IRS issues with the income to me.
- Should my will be structured to deal with this matter? (I’m 74 years old, in good health.)
- Note that there are only two sons that would be involved in proceeds of my estate.
- This whole matter will not have any adverse financial consequences on my daily needs.
Thanks, in advance, for your advice.”
The phrase ‘win-win’ could certainly apply to your situation – properly done, of course.
Your interest in loaning funds to your son and his wife might well benefit you both. You would earn a reasonable return and your son would avoid the expense and hassle of a lending institution.
Yes, you should have a trusted, experience, attorney draft the appropriate documents. Yes, you will need to issue documentation to your son for the interest he pays you. Yes, you will need to report that interest on your income tax return as taxable income. You would be wise to use a trusted, experiences tax professional to insure you stay on the right side of the IRS. Yes, you may wish to account for this in your estate documents. There are various approaches you might take. Explore your options with a trusted, experienced, estate planning attorney to document your wishes properly.
Do you see a theme here? Be sure to use trusted advisors to assist you in putting this transaction into effect properly. Sadly, finances (done poorly) can fracture a family. Happily, done well they can result in a ‘win-win’.
“My wife and I are retired but concerned. Although we have a nest egg (401k and IRA’s totaling around $1M) we are hoping that it’s enough to get us through and still leave some money to our three children. With the volatility in the Stock Market and threats of a recession, I think that we would be better off converting what we can to cash or some safe investments before we lose a lot of our savings to dropping stocks. My wife says we should leave it alone and that the market will rebound and we’ll be just fine.
Please let us know your thoughts on the matter.”
You are concerned and you certainly are not alone. There are more than enough reasons to be concerned about the current state of the economy – and the world. There are, however, also some valid reasons to be (cautiously) optimistic about the future.
We need to be clear about a couple of things before we get started on your question. First, when a husband and wife disagree – the wife is always right (if you’re smart). Second, any investment management process that depends on correctly guessing the direction of the markets is doomed to failure. While psychotic tendencies are seemingly everywhere in this crazy world – psychic abilities don’t exist. Last, your investment portfolio needs to be designed. Designed to fit you and your wife. Designed to fit your goals and needs. Designed to weather the inevitable ups and downs of the markets. Designed.
An appropriate investment design for you and your wife should not take an all-or-nothing approach to the stock market. You have a substantial portfolio. You have more than enough to create a quite properly diversified design. Some of your funds will almost certainly be held in the stock market. Some of your funds should almost certainly be held in safe, liquid, easily accessible funds. Exactly what investment types and the exact allocations to those investment types are appropriate to you is a question for you and a trusted, experienced financial advisor.
And – just for fun – there are investments (some call them hybrids) that allow you to invest in the stock market and also choose some level of downside protection that gives you peace of mind. Some of these platforms protect stock market investors from losses of 10%, 15%, 35%, even 100%. In exchange for these downside protections these platforms limit the upside potential returns at various levels. The maximum limit is highest for the lowest amount of protection and lowest for the highest amount of protection – naturally. For investors who wish to be in position to profit from gains in the market, but are concerned about significant losses – these hybrids might be an appropriate investment platform to explore.
Again, a trusted, experienced financial advisor can provide you with the information you need to choose the investment approach most appropriate to you and your wife. And then she will choose and you will be wise enough to agree with her.
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