Pay Dirt

I’m Worried My Plan for My Fortune Will Tear My Family Apart

I just can’t figure out how to divvy it fairly.

A woman divides money into piles.
Photo illustration by Slate. Photo by Getty Images Plus and Spoon Graphics.

Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here(It’s anonymous!)

Dear Pay Dirt,

I have a question about how to allocate potential inheritances to beneficiaries. I’ve been with my partner for 15 years; we’re not married, but plan to be in the next five years, if that bears upon this question. I have only one sibling, with whom I’m incredibly close, and also two step-children and three step-grandchildren—my partner’s family, whom I love.

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When I die, I’ll hopefully have a decent 401k (maybe like $1 million, pray to the gods), and a $50k life insurance policy. My plan was to leave 75% of the 401k and the life insurance policy to my partner, and let him decide what to keep for himself, based on his needs at the time, and what to give to the kids and grandkids. And I’d leave 25% to my sibling, so he could use it as he sees fit for himself, his wife, and my niece.

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But after having gone through a protracted process to clear my deceased dad’s estate (I was his designated executor, and he had a will), I am wondering if I need to be more specific in my wishes. I hate the thought of slicing things up into fractions that seem to confer “status” to my loved ones, but I also hate the thought of my partner and sibling having to make those calls on their own when I’m gone. For what it’s worth, it’s highly likely I’ll pass before my partner and sibling do, given my health, so I think this is a real concern.

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–Don’t Want to Pick and Choose

Dear Pick and Choose, 

Don’t give your partner and sibling the responsibility to divvy this up. It sounds like a recipe for disaster! While you may not foresee anyone having an issue with your estate now, grief does weird things to people. I understand the reasoning behind the way you’ve been thinking about splitting up your estate until now, but as your recent experience has shown, it shouldn’t be up to the people you leave behind to ensure everyone you love is covered. That’s what wills and trusts are for.

Make an appointment with your estate attorney to walk through your will or trust, and make the changes that are needed to make sure all of your loved ones are taken care of, as best you perceive their needs right now (or can predict they’ll evolve over time). This way, you know your partner’s needs are met, and you can relieve your own stress around wondering how things will play out when you aren’t there anymore.

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Dear Pay Dirt,

I am a 40-year-old with no retirement plan, thanks to divorce. (We were originally going to be able to comfortably rely on shared social security and my former partner’s VA benefits, with a paid-off house by retirement age—a house I now have responsibility for).

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Good news? My new job is offering a 401k! I have researched obsessively about how to make up for lost time, and know that a 401k is not my best option, but I don’t know that I have a better one. I have six months of emergency savings, and put away $100/wk toward that, but I don’t feel comfortable investing in a mutual fund option because of the initial startup costs that would drain these savings.

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Should I start putting that weekly $100 into a 401k, and cross my fingers, or bite the bullet and get into a mutual fund? Or some other thing I’m not even thinking about?

–Making Up for Lost Time

Dear Making Up, 

Starting over again is hard, but it sounds like so far, you’re kicking ass and taking names. As for putting your emergency fund into a mutual fund, don’t do it. Your emergency cash is best kept liquid, in a savings account, which you have easy (which means immediate) access to.

You’re also not as behind in retirement as you think. While it’s recommended that at age 40 you have three times your current salary, many people in your age bracket have one year, at best. So let’s take advantage of everything we can. Start contributing to your company’s 401(K). Most employers offer to match the amount of money you are saving, up to a certain percentage. And if your current employer doesn’t offer a match? Invest anyway. You can use this tax-free retirement account to your advantage, and put in up to $20,500 a year, starting on January 1st, 2022.

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So go ahead and put that $100 a week in your 401(K). Every week, try to see how you can move the needle to put more money in, until you get to being maxed. Also, check to see how your 401(K) is being invested, through whatever broker your employer is using. You want to make sure your portfolio is balanced, but you also want to have room for gains since you are making up for lost time.

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Once you find your 401(k) flow, then you can move on to opening an IRA and some index funds. Start small so you don’t get overwhelmed—and remember, it’s a marathon, not a sprint.

Dear Pay Dirt,

Seven years ago, when my children were quite small, my husband was killed while on the job. Through a settlement, I have taken several steps to make sure my children are taken care of. The money each child receives monthly from Worker’s Compensation is deposited into a savings account in their name. I do not touch it, except to occasionally move some from their savings account to their investment fund. The current balance in each savings account is just over $20,000. Each of the children now has over $100,000 in investments. With the settlement, I took some in cash, and that is what started their investment funds.

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The other money is tied up in a structured annuity. They will receive their first payment from that plan on their 18th birthday, and they will continue to receive monthly and lump-sum payments until the age of 30, when they will receive their final lump sum payment (I was not allowed, as a conservator, to stretch payments out any further than age 30).

What is the best way to teach my children about this money? How do I set them up for success, and teach them not to be adults that will burn through it? Thinking about it fills me with anxiety. My oldest is 15. She knows that there is money for her, just not how much. I started off by telling her that I had a savings account in her name. She now also knows about the investments and annuity, but once again, not dollar amounts.

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–The Kids Will Be Fine—Or Will They?

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Dear Kids Will Be Fine, 

First of all, I am sorry for your and your children’s loss. The settlement does not bring your husband back, but I am glad that you and your children were taken care of, at least financially.

I think the first step is to sit down with each child and figure out what they want. It’s important for your children to understand that their future selves are going to need money to finance their dreams, whatever those may be. If your children know they are on the hook for paying for their post-secondary plans, they may rethink their school choice, or try now to get scholarships. You can share that there is some money put aside for their education (which there is), but you do not have to share the total amount. Thinking about their future selves also allows them to think about how much money goes into buying a car, or home.

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After they have thought about their future, take them to open a checking account if they haven’t done so already, with you as a cosigner. As they get older, you can start transferring money over to them as an allowance, and then ask them to start paying for a few things crucial to their lives (clothing; cell phone bills; gas for a car or passes for public transportation; whatever else applies to your family’s lifestyle) on their own. These items don’t have to be expensive, but teaching them how to budget with the money they have is crucial to them living below their means later.

I would also take this time to teach your children about investing. Your children are in a unique position to be able to become financially independent at a much younger age than most people, which is great, and such a privilege. Investing is what has gotten them this far, so it’s important that they understand the power of compound interest, so that they could be able to live off of it later. You could start off with a custodial account, so that they can see the power of investing firsthand. Good luck!

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Dear Pay Dirt,

I have a health condition that makes regular employment difficult. I also have a master’s degree in a field that is fairly common among consultants. I’ve been trying to get into the consulting field with very little luck over the past couple of years, so I’ve taken odd jobs, one of which laid me off in the middle of the pandemic. I’ve had to apply for SNAP and Medicaid. Frankly, Medicaid has been a godsend. I’m able to see all the doctors I need and get all my medication and tests covered.

Recently, I found my first contract job, with a schedule and pay that is amazing. The only problem is, I just had to report my income to our state health and human services department. I have a contract, which the HHS agent told me might be enough proof of employment, but I’m really worried about them actually reaching out to the company. Over the last year, I’ve had to be careful about not making too much money because ACA insurance still comes with a hefty amount of copays, and won’t cover some of the tests I need, so I know I’d get some surprise bills, which aren’t allowed under Medicaid, if I had to switch.

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I think it would be incredibly embarrassing for the company that just hired me to know I am on government assistance, especially at the rate they’re paying me. I think I can explain it as pandemic-related financial issues, but I’m still worried this will look bad and they will discourage others from hiring me. Or I will have to tell them about my chronic condition, which somewhat affects my ability to work, and other potential clients will find out and not hire me.

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Do you have any advice on what I can say if the company is contacted and brings this up to me?

 –Am I Being Paranoid, Or Prepared? 

Dear Prepared, 

I feel like you are asking me about three different scenarios, each of which I’ll try to address!

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Every state has different regulations around both proving employment, and what your employer can disclose to a third party.  In regards to the state proving your employment, my assumption is they won’t be calling. Due to COVID, many states have an administrative backlog, and most likely will take your employment letter at face value. However, if they do, they will cite a state regulation that shares the purpose of their call. So while your HR Department could find out you’re on Medicaid, the state will not share your medical history with them. If you are a true contracted employee, your employer is not paying into any state benefits for you, so they will probably not even tell you they received the phone call in the first place.

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Potential employers cannot contact a previous or current employer to ask them about medical conditions you may have, nor can they disclose that you have one if asked. You also do not have to disclose your medical conditions, according to the Equal Employment Opportunity Commission (EEOC), unless you are asking for an accommodation related to that specific health issue. And that’s after you’ve already secured employment. Other than that, you do not need to disclose your medical history with your employer or potential employers at all.

Now back to Medicaid. Since your contract is proof of employment, it might affect you keeping your Medicaid. You need to ask your state what their criteria are for those that are self-employed. Despite making a significant amount of money with one client this month, next month, you might not make anything (as you well know!) If you do end up no longer being eligible for Medicaid, look into consulting a health care advocate, who can help you figure out your options both on and off the ACA marketplace.

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