Q&A

Q&A: Yes, you can donate IRA money with a check–but should you?

August 25, 2025 By Liz Weston Leave a Comment

Dear Liz: Please have another go with respect to answering a recent question about making qualified charitable distributions from an IRA using a debit card, which is something we have also wondered about. Several of the large mutual fund companies tell their customers that checks from their IRA account going to qualifying charities will qualify as QCDs, whether the checks are written by the company to the charity or by the individual to the charity. Hence, it would seem to be functionally equivalent whether one writes a check or uses a debit card. But your answer to the reader’s question seems to suggest something else.

Answer: You’re right that my answer fell short in explaining the problem.

The original letter writer wanted to be able to use a debit card to make qualified charitable distributions from her IRA to small art organizations that accept online donations, but apparently not paper checks. Qualified charitable distributions allow people to donate money from their IRAs to charity without the money being taxed.

Since IRA custodians typically don’t issue debit cards, the letter writer would have to first have the donation amount sent to her bank account or another account that offers such a card. But this transfer would make the distribution taxable, since qualified charitable distributions must be made directly to the charity without the money passing through the IRA account holder’s hands.

Checks drawn from an IRA account and made out to the charity, either by the account holder or the IRA custodian, are considered qualified charitable distributions as long as other rules are met. For example, the donation must be from a traditional IRA, the account holder must be at least 70-½ and the annual donation limit is $108,000 in 2025.

That said, sending checks through the mail is a risky way to transfer funds. Mail theft and related check fraud are soaring. Electronic payments are a far more secure way to send money, whether you’re paying bills or charities.

If you must send checks, use gel-based pens since their ink is harder to alter and go to your local post office, rather than leaving checks in an unsecured mailbox. Monitor every check you send and report any missing checks promptly to your bank or IRA custodian so they can stop payment.

Q&A: Should I borrow against my life insurance to travel?

August 25, 2025 By Liz Weston Leave a Comment

Dear Liz: My wife and I live on her pension, my Social Security, and enough dividends from our blue-chip stocks to cover our daily living expenses. But at our age (80), we would like to spend a little more in order to travel. We will have to borrow the money for that. I see that I can take a loan against our life insurance, at a very low rate of around 2%. The alternative is to take a margin loan, which currently costs 8.75%. It appears to me I should be borrowing against life insurance (we’re thinking of a loan of $10,000, against the life insurance face value of $900,000), where repayment would be assured from proceeds at the time of death (if not sooner, depending on our regular cash flow). Are there pitfalls to using life insurance loans?

Answer: There are pitfalls to any kind of loan, so you’re smart to want to educate yourself before you borrow.

Life insurance loans allow you to borrow against the cash value that’s accumulated in a permanent life insurance policy, such as a whole or universal life policy. The cash value is the savings component of your policy that’s typically built up over time. It’s not the same as the face value, which is how much the beneficiary is supposed to be paid when you die.

You typically have a lot of flexibility over how you pay the money back. If the policy allows, you can even opt to make no payments and have the loan plus interest deducted from the death benefit.

The big risk, besides leaving a beneficiary short of funds, is that the debt could grow to the point where it exceeds the policy’s cash value. At that point, the policy can lapse and potentially trigger taxes on the borrowed money.

You may have other options to fund your travel, such as selling some stocks, borrowing against your home equity or even taking out a reverse mortgage. Each option has advantages and pitfalls, so you’d be wise to discuss your situation with a fee-only financial planner for personalized advice.

Q&A: How to track down lost savings bonds

August 18, 2025 By Liz Weston 1 Comment

Dear Liz: My mother passed away two years ago. She left a small mountain of paperwork which my brother, sister and I have finally started to sort through. Among the surprises that we have found is a receipt from a bank for the purchase of $4,500 of U.S. government savings bonds. The date of purchase is one month after the birth of her grandson in March 1992. We suspect that the bond was intended as a gift for the grandson. Is there a way to track down these bonds? Would a receipt from a bank be sufficient to satisfy the Treasury that the bond purchases were valid?

Answer: Savings bonds purchased in 1992 would have already matured and are no longer paying interest. If your mom didn’t cash in these bonds, you may be able to find them through the U.S. Treasury Department’s Treasury Hunt tool. You can find it at https://www.treasurydirect.gov/savings-bonds/treasury-hunt/.

Q&A: Bequests to household employees can trigger fights, taxes

August 18, 2025 By Liz Weston Leave a Comment

Dear Liz: Please consider mentioning employers who haven’t forgotten long-time employees in their estate planning. Caregivers and domestic workers may work for families, the elderly or seriously ill patients for decades. When there is a death, the estate or family members rarely remember these workers who feel their effort must have meant very little not to have been acknowledged in some small way. I did hear about an employer who put away $10,000 a year in a savings account for an hourly paid employee who retired after 30 years of service. By the way, the employee never asked for anything. She was just grateful to have been of service for so many years.

Answer: You’re right that a bequest could be a meaningful acknowledgment of a longtime domestic employee’s faithful service. Such bequests also can trigger huge family fights, accusations of undue influence and court challenges that drag on for years.

The size of the bequest, the size of the estate and the contentiousness of the family are all factors that need to be considered. Also keep in mind that while most bequests aren’t taxable, bequests from an employer often are since the IRS views such transfers as compensation. Anyone contemplating including an employee in their will would be wise to consult an estate planning attorney as well as a tax pro.

Q&A: Why each spouse should have a credit card in their own name

August 18, 2025 By Liz Weston Leave a Comment

Dear Liz: My husband was the primary account holder on our credit cards and I was the authorized user. When he recently passed away, I was told I had to close the cards. I have tried to open my own credit cards and have been declined by two banks because my debt is too high. I am the co-signer for my two daughters’ mortgages, making it look like I owe more than $1 million. My daughters have always made the monthly payments and have done so for six years. I also have almost $1 million in investments. I told the bankers I could bring in these documents as proof I’m credit card worthy and they said they don’t look at outside evidence, only the credit reports. So here I am, in my 60s without a credit card. Should I just settle and be an authorized user on my daughters’ cards? What can I do?

Answer: Thank you for providing another vivid example of why it’s important for each spouse to have one or two credit cards in their own names. Many people don’t realize that credit cards typically aren’t jointly held, and the death of the primary account holder can leave them cut off from credit.

Being added as an authorized user to your daughters’ cards is a good first step. You also might consider approaching a credit union, since these member-owned financial institutions are often more flexible about granting credit than the typical big bank.

Unfortunately, these mortgages will continue to affect your debt-to-income ratio until they’re paid off or your daughters refinance — and given the low rate they presumably got, refinancing is not likely to be an attractive solution.

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

August 11, 2025 By Liz Weston Leave a Comment

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.