How much money would this family need to be able to raise my daughter if I die?

[Anonymous]

We are considering changing who we ask to be the guardian of our child if we die, from a very wealthy family to a family with more modest means. The family we would like the ask lives very comfortably in a home that’s just the right size for their family of 4. Their cars really only fit 2 kids. They would probably need a larger house to get one more bedroom and would need 2 new cars. With the addition of my child, they would have 3 young kids (although the oldest two are in school), which is a lot for two working parents to handle, so I would want to leave enough money for them to hire household help. Plus money for my daughter’s expenses. She’s 6 now. College is already paid for. How much would I need to have in life insurance or other money to pass along to the family to make it so that raising her is not a financial burden for them?

[Anonymous]

A million.

[Anonymous]

Anonymous wrote:A million.

+1. At least.

[Anonymous]

I think $500k is sufficient if college is already paid for.

[Anonymous]

Before you agonize over this, please remind yourself that this is very unlikely to come to pass. If it does, the family might not agree to taking your child (for reasons that go beyond the financial).

In your situation, I'd budget for a quarter million up to age 18 (so without cost of attendance at college).

[Anonymous]

Anonymous wrote:I think $500k is sufficient if college is already paid for.

They need two new cars, a bigger house, and to support a child for 15 years? No way.

[Anonymous]

Anonymous wrote:A million.

They need to buy a new house w 5 bedrooms (likely in their school district - who knows what availability is), 2 larger cars for the foreseeable future, and food-medical-clothing-toys-holidays-etc etc until she’s employed in her 20s?? Way more than a million.

[Anonymous]

Remember that insurance is a hedge and you are unlikely to orphan your daughter, so you don't want to buy enough insurance to pay for lavish comforts. Plus, you will presumably leave other assets besides insurance. A million is a pretty typical amount of life insurance to get (usually $500k per parent) and will be fine.

If you don't like ballparking it, another way to approach it is to use the cost of household help as a proxy for "enough" -- the salary of nanny or housekeeper in your area for the years until your DD is 16 or 18 would be plenty.

I would not expect the family to buy a bigger house or car, btw. As you envision your child's life with this family, envision her sharing a room and sitting 3 across in the back seat.

[Anonymous]

$1M is - $4000K/mth until she is 26.

I’d put the $ in a trust with a trustee to ensure the funds are used properly

[Anonymous]

You want $ for the family and $ for your daughter when she 20’s-30’s

[Anonymous]

You presumably have other assets right? If you need $1 million that doesn’t mean you need an insurance policy for $1 million. Count the value of your house, any retirement savings in 401ks, and social security benefits as well.

[Anonymous]

Good for you for doing this. Make sure to follow through. I am loving my 38 year old self (Right now 50).

This is rare but does happen. I just was diagnosed with terminal cancer…I have a 30 year 1.2 million policy. (15 years left appx on policy). Kids are late teens.

I cannot tell you how calm I feel knowing my wife and kids will be fine financially. There are other assets for wife’s retirement.

[Anonymous]

Anonymous wrote:You want $ for the family and $ for your daughter when she 20’s-30’s

I think this is a good point

Put your daughter in a situation where she has a little money to help do things like put down a security deposit on a first apartment, maybe he,o towards a down payment etc. I’d still have a trustee managing it though till she was at least 26.

I’ve also read that it’s a good idea for the financial trustee to be a different person from the guardian.

Why have you decided the wealthy family isn’t as good a choice? Do they have kids?

[Anonymous]

Why do you think they need another bedroom? Kids share bedrooms all the time.

[Anonymous]

My husband and I each have a million dollar policy. 25 year term life. If our three children were orphaned, the family raising them would get $2 million. We feel great about that. But our are very young, all under 5, and we have minimal college savings. They would also get our retirement funds.