Just read a post on IHM’s blog and although that is a completely different problem altogether I kinda was appalled at the situation of the parents.
Working as an Investment Advisor I so many times get requests from a lot of people to invest in their child’s name. At most instances I try to reason with the parents why invest in a child’s name ?? I always recommend them to be nominee’s and not investors. My reasons are simple unless you are worried about the tax on the interest that the investment will get there is not reason to invest on your son’s name. Some very high profile clients do it just so that they can evade tax. That is one logical reason but other than that there really is none. Its only an emotional reason, some tell me at times, if I invest on my child’s name I will not withdraw the money. Its better to get some discipline rather than make such excuses I feel.
It is prudent to always invest in your and your spouse’s name, ideally the spouse should be the nominee in all your investments it is only after death of both parents that the children should inherit the money. As responsible parents we will always plan and provide for our children. However, it is foolish to invest everything in their name or pass away your belongings to them too early. It may sound over practical, but we were always taught while learning financial planning to always have a huge amount to leave as a legacy, for it automatically ensures your children take good care of you. I am not saying all children are like that or not, but the point is about doing it logically and correctly and not let a situation arise where in your retirement you have nothing in hand and are left demanding from your children. Time should never be tested, you should always plan well for your retirement. It is as important as planning your child’s future.
Also if I may digress a little bit here :
Many people even buy insurance for their children, which is the most rubbish thing you could ever do. I do not even understand why IRDA allows products where they allow life insurance of any kids who are not generating any income. If ever there should be any life insurance it should always be on the person who is earning an income be it father or mother never the child. If the person earning an income dies insurance can compensate for the income, not for the person. Taking insurance on your child’s name is the most foolish thing you can do. Insurance is an expense not an investment.
Just thought I should pour out a few thoughts in my mind after reading that post.
Related posts :