Estate Planning: YOUR KIDS NEED LOANS FOR COLLEGE – BE CAREFUL WHAT YOU CO-SIGN
As a parent of kids that went to college, I know how costly college, cars and living for them become. Although they are adults (over 18) they still need our help.
Unfortunately, this comes at a time when we should be mindful of protecting our estates for our retirement. A “little” help can cost a parent substantially.
This is especially true when it comes to co-signing loans. It seems innocent enough to do. You co-sign, they get the loan, they will pay it off. This could be for a car or for a non-federally backed student loan.
Under most circumstances, this works out really well for everyone concerned. We want to be optimistic and look forward to a great future for our children. However, there are pitfalls, as a New Jersey family recently found. http://www.sacbee.com/news/nation-world/national/article87576072.html
When their college daughter murdered, they were grief stricken. Immediately thereafter, they were shocked when the state of New Jersey informed them that they were on the hook for their daughter’s student loans through the state. While the federally backed student loans are waived upon the death of the student; that is not the case for all loans. Nor would it be the case of a car loan through a bank or credit union.
Read the fine print and ask lots of questions. If your child were to die prior to the loan being paid off, would you be held responsible for the repayment? This could be financially devastating to your retirement plans if you had to pay off a $50,000 loan.
Be helpful for your children. Be wise for your own financial security.