Ask Liz Weston

Get smart with your money

Q&A

Q&A: Relative’s oversharing puts family at risk

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Dear Liz: Your recent column on identity theft touched a nerve. My husband and I are very cautious about online security and don’t post details on social media that could be used in identity theft. But his mother constantly overshares, has no privacy filters on her accounts and ignores our requests to avoid posting our children’s names or our birthdays. Last week she posted “Happy 7th birthday to my beautiful granddaughter Bailey!” So now the world knows our daughter’s name and exact birth date. How can we get her to stop?

Answer: Older generations sometimes poke fun at younger generations for documenting every detail of their lives on social media. But many older folks ignore a basic rule of internet etiquette, which is that you shouldn’t post about others without their consent. Children, especially, need to be protected from exploitation by identity thieves, cyber bullies, sexual predators and data-mining tech companies. Your mother-in-law clearly doesn’t understand the hazard she’s creating, but her desire for attention does not outweigh your need for privacy or your right to protect yourselves and your children.

Now, first things first. Your mother-in-law may not understand how privacy settings work, so your husband could offer to help her set those up. That alone can help limit the damage she can inflict.

Next, consider having a face-to-face conversation with her where you and your husband calmly explain your concerns and repeat your request that she refrain from posting your private information. (Your husband may need to solo on this one if your relationship with her is contentious.) Focusing on her past mistakes could make her defensive, so consider framing this with “we” statements such as “We’ve made the decision to keep private details off the Internet to protect our children from predators and reduce our vulnerability to identity theft.”

Clearly explain the consequences if she ignores the request. You and her husband will need to discuss this beforehand, obviously, but the repercussions should be significant enough to communicate how important this is. With some grandparents, the idea of you no longer sending photos and details of the grandkids’ lives may be enough. With others, you may need to limit all contact.

Q&A: Coping when dementia causes reckless spending

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Dear Liz: Our son-in-law has been diagnosed with early Alzheimer’s disease and sometimes makes reckless purchases. Our daughter has appealed to their bank to close their account or cancel his credit and debit cards. They refuse because the accounts are in his name. What can she do?

Answer: What your daughter can do may depend on how advanced his Alzheimer’s is, says Carolyn McClanahan, a physician and fee-only financial planner in Jacksonville, Fla.

If your son-in-law has enough capacity to understand the situation, McClanahan suggests the couple go to his doctor and have the doctor explain why it is important for the wife to manage the finances going forward. If your son-in-law agrees, a power of attorney document can be created giving your daughter the legal power to manage their finances.

They should visit an elder law attorney to help her with the situation, McClanahan says. If the bank balks at accepting the power of attorney, as banks sometimes do, she can have the attorney send it a strongly-worded letter to force them to honor the document, McClanahan says. Having this kind of backup is an important reason why people should use an attorney to draft these documents, rather than using a form or software, she notes.

Even if your son-in-law lacks capacity, as a joint account holder your daughter should be able to withdraw all the money in the bank account to protect it. She also can cut up the credit and debit cards.

If all else fails, she can go to court to be appointed his conservator, but that option is an expensive and intrusive one, McClanahan warns. Involving an elder law attorney as early as possible may help her avoid court intervention.

It bears repeating that every adult, no matter their age, should have powers of attorney that appoint someone else to make financial and health care decisions for them in case of incapacity. Trying to get these documents in place after a tragedy strikes can be difficult, if not impossible. Get them drafted now, while there is still time to avoid unnecessary hassle, stress and expense.

Q&A: Home sale tax rules confuse many

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Dear Liz: I thought I understood about taxes and house sales, but I am now confused. It seems like the previous rules were that home sale profits could be rolled from one house to the next and one would take a one-time exemption for up to $500,000 or so, with capital gains only due on the amount above that amount. Now the latest rule is that house sales are calculated on each sale, but still based on purchase price plus improvements as the basis. Or is it?

Answer: You are confused, but you’re not alone. Many people remember the old rules, and some think they’re still in effect.

The basic way that capital gains are calculated hasn’t changed. The homeowner’s tax basis — which is the amount they paid for the home, plus qualifying improvements — is subtracted from the net sale price to determine potentially taxable capital gains.

Before the Taxpayer Relief Act of 1997, homeowners could defer capital gains on home sales if they bought a replacement house of equal or greater value. At age 55, they could take a one-time exemption that protected $125,000 of home sale gains from taxation. This allowed many if not most people to downsize without owing big tax bills (the median home price in 1997 was less than $150,000).

The rules today are quite a bit different. Home sellers can exclude up to $250,000 of capital gains, or $500,000 for a married couple, as long as they owned and lived in the home at least two of the five years prior to the sale.

Note, however, that the exclusion amount hasn’t changed since 1997. The median home price in the U.S. is over $400,000, and “starter” or entry-level homes top $1 million in over 200 cities, according to real estate site Zillow. That means many more longtime homeowners face capital gains taxes when they sell their homes.

Q&A: How do I protect myself from identity theft?

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Dear Liz: I am regularly notified by my identity theft protection service that there has been a data breach somewhere where my data is stored. I don’t know what in the world I’m supposed to do about this. I try to follow all the recommended precautions, but I also wonder: now that all Social Security data is somewhere in the cloud under some mystery person’s control, is it even worth trying to keep up?

Answer: You’ve discovered the oxymoron inherent in an identity theft protection service. Such companies can’t actually protect you from identity theft, and knowing your data has been compromised is of limited value if you can’t actually do anything to prevent its misuse.

Focus instead on what you can do to make yourself less of a target. Start by freezing your credit reports at the three major bureaus: Equifax, Experian and TransUnion. Credit freezes are free and make it hard for identity thieves to open new credit accounts in your name. You can easily and quickly “thaw” your reports temporarily if you need to apply for credit.

You’ll still need to monitor your credit reports for suspicious activity, and you can request free reports from AnnualCreditReport.com. (Type that name directly into your browser. If the site asks for a credit card, you’re in the wrong place.)

Get serious about online security. Create unique passwords and use multi-factor authentication wherever it’s available, but especially on financial, email and social media sites. Consider using a virtual private network to further protect yourself. Erase all personal data from phones and other gadgets before discarding.

Prevent tax refund fraud by getting a free Identity Protection PIN from IRS.gov. You’ll need to use the PIN to file your tax return, but that should prevent someone else from ginning up a false return and claiming a refund using your ID.

Limit the information you share on social media and elsewhere. Keep your birthday, your pets’ names and your children’s names private. Learn how the privacy features work on the sites you use. Look for options to disable location sharing, limit access by strangers and manage which third-party apps can access your account.

Finally: monitor, monitor, monitor. Regularly review every financial account for suspicious transactions and report any you find immediately. Check medical statements and health insurance records for unauthorized activity as well.

Q&A: Affordable Care Act exchange can help bridge health insurance gap

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Dear Liz: I have retired early. I can keep my employer health insurance, thanks to COBRA, until I’m 64 years and 9 months. Do you have any suggestions on how to bridge that 3-month healthcare gap while waiting for Medicare? I am relatively healthy, but things happen.

Answer: You shouldn’t be without health insurance for a single day, if you can possibly avoid it. Fortunately, the Affordable Care Act exchange can help you bridge the gap.

Once you get the notice from your employer’s health insurer that your COBRA coverage is ending, you can start your application at HealthCare.gov.

Q&A: Only married couples in community property states get this tax benefit

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Dear Liz: I own a house with my longtime boyfriend. If one of us dies, how does the capital gains step-up affect the other?

Answer: The deceased partner’s share of the home will get a new basis for tax purposes. The survivor’s share will not.

Tax basis helps determine how much of a capital gains tax bill you might face when you sell a home or any other asset that gained value over time. Your basis is generally what you paid for the home, plus qualifying improvements.

Inherited assets typically get a step-up in tax basis to their current market value, which means that no one has to pay taxes on the appreciation that occurred during the original owner’s lifetime.

If you were married and living in a community property state such as California, then the entire house could get stepped up to the current market value when the first spouse dies. This is known as the double step up. But this applies only to married couples in community property states. Unmarried couples in community property states and couples in other states don’t get this benefit.