<p>I just asked H about this, and he sighed (never a good sign!) and said we were mixing up too many concepts, as it’s complicated. A state is subject only to the federal government and to its own judicial rulings about its own laws. A city is subject to state rule and federal law. If a state wanted to, it could abolish all its cities as long as its Supreme Court said it wasn’t violating law or contract. Consequently, a state can declare a city bankrupt. </p>
<p>He said a state could have more liabilities than assets (despite taxing authority, he said it’s remotely possible for all its citizens to move out, for instance a Three Mile Island situation, leaving no one left to tax). However he said there’s something in the federal code that would make it impossible for a state to declare bankruptcy. He explained it, but it went completely over my head. </p>
<p>However, both states and cities can ditch their pension obligations, unless the Supreme Court rules it violates law and/or contract. </p>
<p>Don’t know if this clarifies things, or further muddies the waters. For me, it did both! And of course, I may have misunderstood. It did sound complicated. </p>
<p>Each State has different protections for their pensions. Some are constitional, some not. I will find a link that outlines the various protections.</p>
<p>Using NJ as an example- there is plenty of money to fund the pensions each year however there is poliitcal reasons that the funds are used for other things. Every politician in the State knows that for current vested members the pension will be paid with the terms currently in place. They just use the pension as a wedge issue and kick the can down the road.</p>
<p>For anyone that says but the State is broke- no we are not we just allocate funds to things that will lose that funding when there is no longer a way to defer the pension payment.</p>
<p>Here is one article. The article also links to an article by a BC professor which is very good. There is a Minnesota professor who has also done work in this area I will find her paper also.</p>
<p>" Don’t know if this clarifies things, or further muddies the waters. For me, it did both! And of course, I may have misunderstood. It did sound complicated."</p>
<p>I agree with you, both. Though I think I understand what he’s saying. Sounds like a very smart guy.</p>
<p>After hearing Suze Orman talk about how much it cost to probate a house in CA with a will alone, it is driving me to make the appt with the great attorney that spoke to my cancer group last month (she is one of only two licensed elder certified attorneys in AL - one is in LA - lower AL, we live in N AL; I would have to dig out my notes to say exactly what the certification is). H and I have wills but need to tie up all the other loose ends. Since H and I most likely will continue to reside with primary residence in AL when we die, should have it all tied up with a bow - if H dies first, I could manage…however if both of us went, the kids should have the estate in order with our legal planning and implementation done. Also don’t want H to be left not knowing what to do if I went first - I plan to outlive H, but that is not exactly in my control…</p>
<p>Hmm, not quite sure if tom is serious or kidding…</p>
<p>“Hearing about a 29 year old man dying of a stroke really had me thinking about getting all our ducks in a row.”</p>
<p>Yes, get your ducks in a row. I just got a call from a former neighbor of ours. One of our other neighbors died yesterday from a heart attack. His son (who was my kiddos best friend when we lived there), tried to save him with CPR. What is even more tragic is that the mom died five years ago from cancer, and now those kids have no parents. The youngest one is sixteen. I so hope their dad had everything covered for them.</p>
<p>Our “fixer upper” is becoming more of a “burner downer” and we have no other assets. My kids don’t want us to leave them the house and want to just be able to walk away from it if we both die at the same time!</p>
<p>Even if the house is more of a tear down, around here, most houses have considerable value in the land alone. Isn’t there equity in your home, KKmama? I’m not sure what the kids would want to do with our home if they happened to inherit it. Perhaps they’d renovate and move in or perhaps they’d sell and buy something they prefer. Neither seems to have interest in living in H’s folk’s home–66 steps from the street to the front door!</p>
<p>Has anyone on this thread bought permanent life insurance as a part of the estate planning? </p>
<p>H and I have quite a bit in our 401Ks, regular IRAs. Since 401ks, IRAs are not part of the trust, the kids would be paying at the max tax rate even on a stretch IRA payouts if we were to die first. We were advised to buy a single life permanent life insurance to protect the asset from taxes. The premium for a 3M policy is around 112K a year payable until both of us pass. At this point, we are unsure what to do. Any advices?</p>