Amy: Debt problem starts with Dad's enabling

  • Article by: AMY DICKINSON
  • Updated: October 9, 2013 - 2:29 PM

Dear Amy: Our daughter (the youngest of our four children) is deeply in debt.

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realityfirstOct. 9, 13 4:58 PM

I'm not saying that it is the right thing to do but it is an interesting question from an estate planning perspective. So if your husband really wanted to forgive the debt and offset it in her inheritance one way would be to explain that let's say your house is worth $200,000 and each child gets 1/4 or $50,000 in today's value. She takes $20,000 from that so now she has $30,000 or 15% of the value of the house. The other 3 siblings would now get 28.333%. When you pass it could be 30 years from now and each of the other 3 siblings would get almost twice as much each from the sale of the house which will be a lot more than the $20,000 she owed you. I'm sure all this would go right over her head but none the less is still a good financial lesson and might force her to realize the long term consequences of her financial irresponsibility are significant.

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hobothobotOct. 11, 13 7:23 AM

Re reality - i think your idea is a good one but leaves out potentially important factors: what if the parents need the money in the house for their own retirement? That is quite common and can happen via a reverse mortgage or a sale of a family home with the proceeds being used for a annuity to live on, etc. I think it is dangerous for children to think their parents will save anything for their inheritance, and for parents to think that it is a good idea to try to promise it to them. Perhaps the parents should write up a formal loan agreement and indicate it is payable to their estate if not paid before hand: maybe her siblings can get her to pay after they die.

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