Are You the Meat in the Sandwich Generation? (Part 2)

Financing the future for three generations can be expensive and overwhelming. But it can be accomplished with long-range planning. The key is to identify the potential costs of each generation in your sandwich and then put together an obtainable plan to meet these costs.

This article focuses on ways you can create a college savings plan for your children and estate planning to protect their financial future.

High Price of Admission
There’s no question, tuition is expensive. That’s why the time to start planning is now. A good plan involves contributing to a tax-sheltered education savings plan and keeping your estate plan up-to-date.

Tax-Sheltered College Savings Plans
The U.S. Congress established two programs that let you create a college savings plan for your children’s education, while also providing generous tax benefits:

Coverdell Education Savings Accounts
Congress created Education IRAs in 1997. New tax laws enacted in 2001 expanded their use and renamed them Coverdell Education Savings Accounts (ESAs).
Section 529 plans
Under Section 529 of the Internal Revenue Code, all 50 states have created tax-sheltered education savings plans, and you’re not limited to your own state’s plan. 529 plans can be either a prepaid college tuition plan or a college savings plan.

ESAs will be a better choice for you if you would like to fund elementary or secondary expenses. On the other hand, the 529 plans typically permit much larger annual contributions. Some parents contribute up to $2,000 annually to an ESA and then contribute additional funds to a 529 plan for the same beneficiary.

Four Keys to Smart Estate Planning
When it comes to providing for your children’s future, a college savings plan is just the start. You also need to consider what would happen if both you and your spouse died unexpectedly. Estate planning can help ensure your children receive excellent care in the event of your death, minimize estate taxes, and guarantee that your assets are passed along to your heirs according to your wishes.

Estate planning for parents with minor children should include:

Durable Powers of Attorney
By naming a property and/or a health care power of attorney, you are appointing someone to make decisions and do business on your behalf if you are rendered incapacitated or become legally incompetent.
A Will.
If you and your spouse die without a will, a state court judge will not only appoint a guardian for your minor children but will decide how to distribute your assets among your heirs in accordance with state law. If you have a large estate and fail to protect it from federal estate taxes, you could end up forfeiting tens or even hundreds of thousands of dollars to the IRS that otherwise could have enriched the lives of your children.
Trusts
There are several different kinds of trusts, each of which, if properly drafted, provide significant tax benefits. In addition, there are many non-tax reasons for having a trust, especially when your trust beneficiaries are too young, or otherwise unable, to manage the property themselves.
Life Insurance
One reason to buy life insurance is to replace the financial support your children would lose if you and your spouse were to die unexpectedly. Your policy should provide enough money to cover your children’s living expenses and repay any remaining debts.

Once you put your estate plan in place, remember to occasionally review and possibly amend it in response to circumstances like changes in the estate tax law, changes in your marital status, substantial changes in your net worth, the birth or adoption of a child or the death of a beneficiary.

Depending on the products and/or services being recommended or considered, refer to the appropriate disclosure brochure for important information on the Northwestern Mutual Wealth Management Company, its services, fees and conflicts of interest before investing or engaging in financial planning services. To obtain a copy of one or more of these brochures, contact your representative.

Hubbard Financial is a marketing name for Thomas W Hubbard and is not a broker-dealer, registered investment adviser, federal savings bank, subsidiary or other corporate affiliate of The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM), including its subsidiaries and affiliates, nor is it a legal partnership or entity. Northwestern Mutual Financial Network is the marketing name for the sales and distribution arm of NM and its subsidiaries and affiliates. Thomas W Hubbard is a Representative of Northwestern Mutual Wealth Management Company®, Milwaukee, WI (WMC), a wholly-owned company of NM and limited purpose federal savings bank. WMC is not a broker-dealer or insurance company. All WMC products and services are offered only by properly credentialed Representatives who operate from agency offices of WMC. Representative is an Insurance Agent of NM (life insurance, annuities and disability income insurance), and Northwestern Long Term Care Insurance Company (NLTC), a subsidiary of NM (long-term care insurance), and a Registered Representative of Northwestern Mutual Investment Services, LLC (NMIS), 2201 E Camelback Rd Ste 400, Phoenix, AZ 85016-3476, 602-808-3400, a wholly-owned company of NM, registered investment adviser, broker-dealer and member FINRA (www.finra.org) and SIPC (www.sipc.org). Representative may also be an Investment Adviser Representative of NMIS. NM and the Northwestern Mutual Financial Network - Arizona are not broker-dealers, registered investment advisers or federal savings banks. There may be instances when this agent represents insurance companies in addition to NM or its affiliates.

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