Liz Weston

Q&A: Couple worries about soaring ACA health care premiums

August 11, 2025 By Liz Weston

Dear Liz: My wife and I have health insurance through the Affordable Care Act exchange. With the enhanced tax credit ending this year, our insurance bill could go up from $500 a month to about $2,000 a month. Are there any good options or plans you can recommend? Would filing taxes separately help if my wife’s income made her eligible for MediCal?

Answer: ACA premiums for next year have not been set, although the cost of coverage is expected to rise sharply after Congress ended enhanced premium tax credits that made coverage more affordable. The Peterson Center on Healthcare and KFF estimate that out-of-pocket premium payments will increase about 75% on average next year because of this change. In addition, insurers are asking for premium increases to cover rising healthcare costs and tariffs may further add to the cost of drugs, medical equipment and supplies.

Shop carefully during open enrollment, and consider a plan with a higher deductible to help control costs. You also could talk to a tax pro about ways to reduce your income in 2026, if it will help you qualify for a premium subsidy.

Just filing your taxes differently won’t get your wife qualified for MediCal, which is California’s Medicaid health insurance program for low-income people. MediCal looks at household income when determining eligibility. Actually being separated might work, but discuss this option with an attorney and a tax pro since it will have many legal and tax implications.

Q&A: Follow the rules for IRA donations

August 11, 2025 By Liz Weston

Dear Liz: Hello. I’d like to use my IRA for charitable donations when I’m required to make minimum distributions. The problem I’ve encountered is that I want to use a debit card for donations. I prefer to donate to small art organizations, which are set up for online donations and definitely not paper checks. I found one brokerage that offers an IRA with a debit card but when I spoke with them, they said it can’t be used for charitable donations. I’m at a loss. Do you know of any way to make charitable donations from my IRA with a debit card? It’s 2025! Surely someone has figured this out.

Answer: You’ve missed a key component of how this particular tax break works.

Qualified charitable distributions allow people 70½ and older to donate money from their IRAs directly to charity, without the money being taxed. The donations can count toward the required minimum distributions that must otherwise begin at age 73 (or 75 for those born in 1960 and later).

Note the word “directly.” The transfers must go straight from the IRA to the charity, without passing through your hands. The IRA custodian will be the one to send the money, either through electronic transfer or check.

Q&A: Friends don’t ask friends for condos

August 11, 2025 By Liz Weston

Dear Liz: I have a younger friend who has asked me to leave them a condo I own. I would prefer the condo remain in my daughter’s name, and designate that the income from the condo go to my friend after my death. Is there a way to do this?

Answer: Your friend just handed you a massive red flag. Please heed this warning that they may not be trustworthy.

Generally speaking, people shouldn’t be asking for bequests for themselves. That’s especially true when the request is unsolicited — in other words, if you didn’t open the door by requesting what they might want from your estate.

Someone who feels comfortable enough to ask for a handout after your death may have no compunction about helping themselves to your money while you’re still alive. Financial elder abuse is a huge problem, and the perpetrators are often people the victim knows such as friends, family and caregivers.

Please tell your daughter about this request, and consider going together to an estate planning attorney. The attorney can make sure your estate plan is in order and discuss ways you can protect yourself from schemers and fraudsters.

Q&A: “Simple” ways to avoid probate often create complications

August 5, 2025 By Liz Weston

Dear Liz: I was perplexed by your column in which you pooh-poohed pay-on-death and transfer-on-death accounts in favor of trusts. But you gave no specific explanation. Rather, you said trusts “generally allow a smoother, more organized settlement of the estate than other probate-avoidance options.” Would you please explain what is smoother and more organized than POD and TOD transfers? (Beneficiary deeds fall into the same category as POD and TOD, to my way of thinking.) These transfers simply involve a copy of the death certificate and some minimal paperwork. What could be simpler?

Answer: The fact that you asked this question suggests you may not be familiar with the many ways these transfers can cause unintended problems. An estate planning attorney could fill you in.

One issue covered previously in this column is the fact that the person settling the estate typically needs money to pay final bills. If all the funds in the estate have been transferred to beneficiaries, the executor would have to beg for money to be returned (with no guarantee beneficiaries will cooperate) or pay the expenses out of their own pocket.

Another obvious issue is unequal distribution if you have more than one heir. Account values can change over time, leading to sometimes dramatic differences in what the beneficiaries receive.

Speaking of change, it’s the one constant in life. A living trust allows you to easily update your estate plan in one centralized place as circumstances change. Altering beneficiary designations can take a lot more work, and it’s easy to miss an account if you have several.

Beneficiary designations offer limited contingency planning. If the beneficiaries die before you or otherwise can’t inherit, the account could come back into your estate and be subject to probate. Also, many people forget to update their beneficiaries after major life changes, which can mean the wrong people inherit. More than one ex-spouse has received retirement funds or life insurance proceeds because the beneficiary form wasn’t updated.

Another unfortunately common occurrence is an inheritance that disqualifies a disabled beneficiary from receiving government benefits. You also can’t control how money is spent with a beneficiary designation, which can be a problem if the beneficiary is a minor, an addict or a spendthrift.

Plus, people get sued. Beneficiary designations offer no protection against creditors, while a properly written trust can help protect your assets and your heirs’ inheritance.

This is by no means an exhaustive list of the potential issues with beneficiary designations. They can be a solution for people with limited funds who can’t afford to pay an estate planning attorney, or when they’re part of a coordinated estate plan. Many people set up a trust for real estate and financial accounts, for example, and use beneficiaries for retirement accounts, notes Jennifer Sawday, an estate planning attorney in Long Beach.

The more money you have and the more complex your situation, the more you — and your heirs — would benefit from expert, individualized advice.

Q&A: What can retirees do to deduct medical expenses?

August 5, 2025 By Liz Weston

Dear Liz: My wife and I, both in our early 90s, are fortunate to have good health insurance. However, we have significant expenses that are not covered. As you might expect, we are retired and receive income from Social Security, pensions, annuities and investments. Are we eligible to use flexible health accounts funded with pretax dollars? If so, what’s the best way to set that up and how would we pay those uncovered health bills?

Answer: Unfortunately, you don’t have access to pretax accounts that could help you pay medical bills.

Flexible spending accounts are offered by employers, and contributions are limited annually (in 2025, the limit is $3,300). Health savings accounts have higher limits but require you to have a qualifying high-deductible health insurance plan. Once you’re on Medicare, as you two presumably are, you are no longer allowed to contribute to an HSA.

You might be able to deduct medical expenses that exceed 7.5% of your adjusted gross income. To claim the deduction, you would need to have enough itemized expenses to exceed the standard deduction, which in 2025 is $34,700 for a married couple filing jointly who are 65 and older. (The standard deduction for a married couple filing jointly is $31,500, while people 65 and older get an additional deduction of $1,600 each.)

There’s also a new, temporary $6,000 deduction for people 65 and older that is available whether you itemize or take the standard deduction. This bonus deduction begins to phase out for adjusted gross income above $150,000 for married couples filing jointly and disappears at AGIs above $250,000. This deduction is set to expire after the 2028 tax year.

Q&A: Should I cash out my pension to pay off my home?

July 28, 2025 By Liz Weston

Dear Liz: I was recently and unexpectedly laid off. Money will be tight on Social Security alone. If I take the lump sum of my pension, the amount would be almost enough to pay off my home. Should I do that?

Answer: Pension payments typically continue for life and you can’t lose the money to fraud, bad investments or stock market downturns. If you had plenty of other assets and the pension was small, you might be fine cashing it out. Under the circumstances, though, consider hanging on to this valuable asset.

In general, you should be extremely wary about tying up a large sum in any one investment. That includes paying off a mortgage. You won’t have monthly loan payments anymore but you may have trouble accessing that cash again in an emergency.

Also be cautious about taking Social Security too early. Your benefits will be permanently reduced, which can have a huge effect on your future quality of life. While finding another full-time job can be extremely tough late in life, even a part-time job might be enough to help you delay filing.

You could benefit enormously from individualized financial advice. Consider reaching out to free or low-cost services, such as Advisers Give Back.