Monday’s need-to-know money news

Pile of Credit CardsToday’s top story: How to choose your second credit card. Also in the news: How home insurance can cover your holiday disasters, how Affordable Care Act plans could change in 2017, and how to calculate how long it’ll take you to get out of the debt.

How to Choose Your Second Credit Card
Finding a card that compliments your spending habits.

No Need to Pout: Home Insurance Can Cover That Holiday Disaster
Saving you from becoming The Grinch.

How Affordable Care Act Marketplace Insurance Plans Will Change in 2017
A new administration could bring big changes.

How Long It Will Take to Get Out of Debt, Depending on Your Monthly Payment
Calculating your escape date.

Q&A: What to consider when deciding how to bequeath your home

Dear Liz: I’m at 74-year-old retired woman living in a completely paid-off condo in California. I hold title in my name only. I would like to add my partner of 20 years and my married adult daughter to my home title so they will not have to go through probate if something happens to me. What would be the easiest way to do that? Someone told me a quick deed to each person giving them a third of the condo. I want it as joint tenancy so the condo would just go to the survivors. My parents always held title with my brother and myself. Do you see a problem with this?

Answer: The “quick deed” to which you refer is probably a quitclaim deed, which would transfer your entire interest in the property to someone else and possibly create gift tax issues. That’s not what you want.

Another option is a revocable transfer on death deed. Like many other states, California now offers this option so that real estate can bypass probate. You would retain ownership of the condo until you die, when it would pass to the people you designate.

But please think carefully before bequeathing a home to two people, especially two who aren’t related or married. What if your daughter needs to sell the house to raise cash and your partner doesn’t want to move? What if your partner needs to remodel the home as she ages but your daughter refuses to share in the costs? Would one have the wherewithal to buy out the other?

Another way to avoid probate would be to create a revocable living trust that allows your partner to live in the home until her death, said Los Angeles real estate attorney Burton Mitchell. The property then could be transferred to your daughter. It may not be the right solution, especially if your partner and daughter have similar life expectancies, but it’s one of many you should explore with an experienced estate planning attorney.

Q&A: Credit cards just keep coming

Dear Liz: I use only two credit cards. But I have several credit cards I never use. When the cards expire, the issuers send me new ones. I just received two more cards, with new expiration dates, which I will not use. I keep hearing that cancellation of cards results in lower credit scores. How can I cancel all the unused cards I have without affecting my 797 score, and how can I stop them from sending me new ones without my authorization?

Answer: Your issuers can continue sending you new cards until the accounts are canceled. Your “authorization” isn’t necessary once you’ve applied for the card. Some credit card companies will close an account that hasn’t been used in more than a year, but others will keep accounts open hoping you’ll start using the cards again someday.

Having several credit cards is typically good for your scores — of which you have many, by the way, not just one. But you don’t have to keep unwanted cards forever. If your scores are in the high 700s you can close the occasional credit card account.

What you don’t want to do is shut down a bunch of cards at once, or close your highest limit cards. Credit scoring formulas are sensitive to the amount of your available credit you’re using. Anything that significantly reduces the amount of available credit you have can hurt your scores.

Q&A: Credit score after bankruptcy

Dear Liz: This is just to add to your observation that credit scores tend to improve after a bankruptcy. I filed Chapter 13, which required a five-year repayment plan. At that point my score was around 640. The day of the discharge, I was able to get a car loan at 3% interest. Also, the bankruptcy dropped off my credit reports seven years from the filing date, and my scores actually dropped a good bit.

Answer: It’s pretty unusual for scores to go down after a bankruptcy drops off your credit reports. It’s possible you weren’t looking at the same type of score because there are many different formulas in use. It also could be there were other changes that happened simultaneously, such as a high balance on a credit account or an old, paid-off loan that a creditor stopped reporting.

It’s not unusual, though, for someone who completes a Chapter 13 to get a competitive rate on a loan where there’s collateral, such as an auto loan, assuming he has a job, credit score expert John Ulzheimer said.

“Debt free plus employed equals not a bad risk, especially if they put down a decent down payment,” Ulzheimer said.

Wednesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: 4 ways you can protect your credit score over the holidays. Also in the news: Giving Tuesday and beyond, why you should think twice before grabbing certain Black Friday deals, and the used cars with the best discounts on Black Friday.

4 Ways You Can Protect Your Credit Score Over the Holidays
Monitoring is key.

Giving Tuesday and Beyond: How Millennials Like to Contribute
Bucking against the self-centered stereotype.

Think twice before grabbing this Black Friday deal
It’s all in the wording.

The Used Cars With the Best Deals on Black Friday
Used car shopping on Black Friday? Why not!

President-elect Trump, save the CFPB

Ten years ago, bullies had taken over the playground. Financial service firms preyed on their customers with impunity:

—Lenders made expensive, risky mortgages to people who couldn’t afford to pay the money back.

—Credit card issuers foisted overpriced insurance and other add-on products on millions of unsuspecting customers.

—Credit bureaus ignored evidence submitted by people disputing errors in their credit reports.

—Companies sold delinquent debts to collection agencies that ran amok, violating fair debt collection laws and strong-arming people into repaying debts they didn’t even owe.

People’s complaints fell on deaf ears, since consumer protection wasn’t a priority at any agency. Huge swaths of the credit and debt industries, including credit bureaus, collection agencies and payday lenders, operated with little government oversight.

Then the Consumer Financial Protection Bureau pushed back.

In my latest for the Associated Press, why President-elect Donald Trump needs to save the Consumer Financial Protection Bureau.

Monday’s need-to-know money news

Today’s top story: Is student loan debt really ‘Good Debt’? Also in the news: Banking moves to make next year’s holidays brighter, how to save big money when buying a used car, and how to find your Social Security earnings online.

Is Student Loan Debt Really ‘Good Debt’?
How to keep your good debt from going bad.

Banking Moves to Make Next Year’s Holidays Brighter
Getting a head start on 2017.

To save big money, find the used-car-buying sweet spot
How to get the most value for your money.

You Can Find Your Social Security Earnings Online
A look into the future.

Q&A: Mixing family and finances

Dear Liz: I have a relative who is a certified financial planner. He suggested we invest in annuities from which he will make commissions. When I asked him about his commission amount, he said he doesn’t feel the need to disclose that information because the fees don’t come out of my investment, therefore making them irrelevant. He says his fiduciary responsibility makes disclosing his commissions unnecessary. Is this correct?

Answer: Your relative needs to review the CFP ethical requirements. He wasn’t required to disclose dollar amounts or percentages of compensation until you specifically asked for that information. Once you did, he’s obligated to tell you. He (and you) can learn the details on the CFP Board of Standards site (www.cfp.net).

Commissions are far from irrelevant, especially when the product is as expensive and complicated as an annuity. Before you invest in any annuity, you should run the investment past a fee-only certified financial planner. Fee-only planners are compensated only by fees their clients pay and not by commissions that could influence their advice.

Q&A: How to protect an elderly widower from financial predators

Dear Liz: Our mother recently died after a long illness. Our father is in his 70s and is getting a lot of attention from ladies at his church and the senior center. We’re concerned because of a pattern we’ve seen in other families, where the widower remarries and the new wife convinces him that his kids are only after his money. When he dies, she gets everything. The kids and grandkids are left out in the cold. We love our dad and don’t want him to think we’re gold diggers. We also don’t want someone to take our father from us and take advantage of him. What can we do?

Answer: If your father is willing to consider it, an irrevocable trust could go a long way toward protecting his assets from avaricious future wives and any number of other financial predators, including scam artists and unethical financial advisors. The trust could continue to pay income to him while allowing the underlying assets to be transferred at his death to the heirs he chooses now, when his judgment is presumably not impaired.

This is not a do-it-yourself project. Transferring assets to an irrevocable trust could create a gift tax issue for your dad. An attorney who specializes in trusts will have to carefully craft the language to avoid that, Los Angeles estate planning attorney Burton Mitchell said.

The problem may be convincing your dad that he’s vulnerable to impaired judgment. Although our financial decision-making abilities peak in our 50s and our cognitive abilities decline fairly rapidly after age 70, our confidence in our abilities continues to rise as we get older.

Financial literacy expert Lewis Mandell likens it to driving ability. Other research has shown that older drivers often don’t perceive their driving skills as deteriorating, despite declines in sensory ability that come with aging, said Mandell, author of the book “What to Do When I Get Stupid: A Radically Safe Approach to a Difficult Financial Era.”

But the same research found that when the drivers took an objective test that demonstrated their decrease in skill, they were more willing to alter their driving behavior to reduce the probability of accidents.

It may help to have a third party, such as a fee-only financial planner or an estate planning attorney, talk to your dad about the importance of protecting his assets at this stage in his life.

If that effort fails and he marries the type of woman you fear, try to remain in his life, no matter what. She may try to pick fights with you and then demand he take her side as a way of isolating him. Avoid conflict where possible and maintain contact with regular calls, letters and visits. It will be harder for her to demonize you if you remain a constant, loving presence in his life.