The reason why this is not the worst idea is because they are saving money. The problem is three fold:
- They don’t want to pay up until they need it, which means that if they die before needing the money, their children will have to pay it.
- If their children are not able to pay up, they are limited in what other things they can do with the funds (use them to buy a house or rent an apartment).
- These funds forming a trust can be used as collateral for a loan by the child/s. So even if these parents could afford it, as soon as their child/s received any amount of money from them, those funds are no longer accessible.
This is also one of the reason why some people would be better off taking out term insurance instead of permanent insurance where you pay for the rest of your life because when you die, there’s nothing left. Even then, you’d still have a huge tax bill when you die since you’ve paid taxes on those premiums for years and now when you die and your life insurance policy kicks in, this gets taxed as well and all goes to go back into your kids’ pockets who already got most everything else from you anyway so…
I think I’m going to start doing my own posts like this on interesting examples of how people destroy their funds so I’ll keep track of them here so that later I can link back to them instead of having another huge book full of pdfs I’ll never get around to opening.
Save your children’s college funds
You might be surprised to learn that life insurance is not the only way to save for your kids’ college fund. There are many ways you can set aside money—and then use it when they’re ready to go off on their own.
Here are some ideas:
- Save as much as you can while they’re still in school (if possible) so that they don’t have to worry about funding their education later on down the line.
- Set up 529 plans for both children, allowing them access at any point in their lives without having to pay taxes on it or wait until retirement age (which could take decades). These plans allow people who don’t have a lot of extra cash lying around but want something covered anyway—like college tuition fees—to do so without having any direct consequences from having done so themselves!
Keep a Will
A will is a legal document that appoints someone to act as your executor. It’s important to have a will because it ensures that your assets are distributed according to your wishes and not the state’s laws.
If you want to ensure that any money or property left behind goes where it should, then having a will is crucial. This can help with estate planning by ensuring everything goes where it needs to go and not into the hands of an unexpected third party who might have bad intentions towards you or your family members who are left behind after death (such as an ex-spouse).
There are several ways people can create their own wills: either through writing them down themselves; hiring someone else (such as an attorney) who has experience writing this type of document; or using software programs such as Power of Attorney Software available online today!
Buy a property insurance policy in the near future
You may have heard of a life insurance policy that can be used to secure your home or vehicles. You may also know about life insurance policies that are available for boats, motorcycles and RVs. These types of policies can help protect you if something happens to the things you own and they’re not covered by another type of policy.
However, there are some other situations in which buying coverage is important:
- Buying property insurance protection
- Protecting your business assets
A life insurance policy only covers major events like death of immediate family. If you want to protect assets, think about other things like will and property insurance.
Life insurance isn’t a substitute for any of the following:
- Will – A will can cover your loved ones after you die, but it also ensures that your assets are distributed according to your wishes. If you have children and want to leave them money in case of an accident or illness, a will can be used as evidence that you’ve made those decisions.
- Property Insurance – Property insurance can protect against fire damage and theft, but it doesn’t protect against natural disasters like floods or earthquakes. You’ll still need extra protection from these events if they happen while you’re alive — and some types of property coverage may even exclude losses because they occurred outside of normal business hours (like when there’s snow on the roof).
- Other Types Of Insurance Coverage – There are many different options out there beyond life insurance; check into what other types might work best for yourself or family members!
Things that are not covered by life insurance:
- A minor illness (this is often what we think of as death by natural causes). This is usually excluded because it doesn’t have the requisite terminal-stage relationship to the insured. The policyholder can often sue to have non-life benefits paid, at least with respect to disability.