Mary
Mary’s husband,
John, died after a head-on collision with a drunk driver, leaving her the
widowed mother of two small children, David (4) and Susan (2). Since John was the sole source of income to the family, re-establishing
that lost income was the most important and immediate concern for Mary.
Due to clear liability
on the other driver’s part, Mary’s attorney was able to negotiate a
substantial settlement totaling just under $2 million. After attorney’s fees and expenses, Mary had approximately $1.267
million to work with. She decided
to simply start working down her priority list and see how far the money would
go.
First, they designed
payments to replace John’s annual salary. They established a payment stream for Mary of $35,000 per year,
increasing by 3% annually. In the
event something happened to Mary, the payments were guaranteed to be paid for at
least 20 years. To provide future
flexibility, they also scheduled her to receive lump sum payments of $20,000,
$30,000, $45,000, and $63,000 in years 5, 10, 15, and 20.
Next, she wanted to
know that her children’s college expenses were covered. She established payments of $20,000 per year for four years beginning the
summer of each child’s 18th birthday.
After all this, she
still had $150,000 leftover. She
decided to take $130,000 in cash and put it in a safe place for emergencies but
commit the last $20,000 to a special use.
Remembering how
John’s parents had loaned them money for the down payment on their house, and
knowing that John was committed to doing the same for his kids, Mary decided to
use the remaining funds to establish a “first house down payment fund” for
her children in honor of their father. Divided
evenly, this resulted in guaranteed payments of $36,000 for David and $ 42,000 for Susan when they each reached age 30.
While nothing could
compensate them for the loss of their husband, father and friend, through
intelligent planning, Mary was able to secure her family’s financial future. The structure assured Mary that she would have enough money to live on
without having to return to the work force until the children were older. They could afford to stay in the same house, attend the same schools, and
begin the slow process of healing their wounds without the added strain of
financial pressure.
Illustration
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