Ask Liz Weston

Dear Liz: Can you clear up something for me regarding Social Security survivors benefits? The yearly summaries I get tell me my family will receive payments if I die. But it’s not clear to me how long these last and if they expire when my children are no longer minors. Do payments continue to be made to my surviving spouse as well, and if so for how long?

Answer: Your unmarried children can receive Social Security survivors benefits until they turn 18, or 19 if they are still attending high school full time. Your kids can get benefits at any age if they were disabled before age 22 and remain disabled.

Your spouse can get benefits as long as he or she takes care of a child receiving your survivor benefits. Your spouse also can receive widow or widowers benefits as early as age 60 (or 50 if disabled).

The amount of the benefit depends on your average lifetime earnings and is estimated on the annual Social Security statement you get. The more money you make before you die, the greater the benefit.

For more information, SSA Publication No. 05-10084 is available on the Social Security Administration website at www.ssa.gov or by calling (800) 772-1213.

Dear Liz: We want to have an estate plan that doesn’t cost a ton of money. We’re both in our early 40s and have no children. I’d label us middle class, with not much money left over after monthly bills. Lawyers want too much money to “help” us. Isn’t there a better solution?

Answer: If your estate situation is truly simple, you can draw up the documents you need with Quicken WillMaker software, which is available from the self-help legal publisher Nolo at www.nolo.com. The software costs about $50 and guides you through the process of creating wills and durable powers of attorney (which you need to name someone to make financial and health decisions for you should you become incapacitated).

Nolo also has an online will form, plus a number of books that can help you, including “Plan Your Estate” and “The Busy Family’s Guide to Estate Planning.”

The do-it-yourself approach can work when your situation is straightforward, but you should consider consulting an attorney if your estate ever gets big enough to worry about estate taxes or if complications (such as children or contentious relatives) become a factor.

Dear Liz: My parents have named me as the executor of their estate. They are elderly, and I will be called upon to perform this duty in the next few years. My sister and her husband are not good money managers. My parents’ wills have been set up to put my sister’s share into a trust administered by me. Is there any way for me to protect this inheritance from a future bankruptcy?

Answer: “Spendthrift trusts” are designed to keep profligate heirs from wasting an inheritance and keep creditors from seizing the trust money. These are fairly common trusts, but the wills have to be properly worded; if you’re not sure, have an experienced estate-planning attorney review them.

While you’re asking your parents for copies of their wills, see if you can talk them into naming someone else to be the trustee. Putting one sibling in charge of another’s money is a recipe for disaster and continuing disharmony. Even if your sister understands she’s hopeless with money, she is almost certain to resent you for standing between her and her inheritance. In many cases, the family would be far better off paying a fee to a bank or a professional fiduciary to be the “bad guy” controlling the cash.

Dear Liz: When you create a will and appoint someone to be the guardian of your children, must that person be present to sign legal documents accepting the job? And can that person later change his or her mind?

Answer: The person you name to be the guardian of your children does not have to be present when you create your will or other estate-planning documents.

But you better make darn sure that you have the potential guardian’s willing consent.

Taking care of someone else’s children is a huge responsibility, and not one that should be taken, or given, lightly. You’ll want to have a full and frank discussion with this person in advance, including what financial arrangements you’re making to take care of your children should you die while they’re minors.

Even if the person consents, understand that nothing is written in stone. Should you die, the person still could change his or her mind and decline the job. That is one of the reasons why you’ll want to name at least one back-up person in case your first choice can’t or won’t serve.

Also, many attorneys would advise you to name one partner in a couple as primary guardian, rather than both parties. If the couple later splits up or one dies, you don’t want any confusion about who you wanted to take care of your kids.

As difficult as these discussions and choices can be, you should make the effort. If you don’t name a guardian, they could wind up at the center of a bitter court battle, or in foster care. Your kids deserve better.

Dear Liz: My father-in-law was diagnosed with Parkinson’s disease a few years back and his condition has steadily worsened. He can no longer write checks or keep track of due dates. My mother-in-law now must step in to maintain the family’s books, which she has never done before. I hope to work with her to develop a basic budget, but therein lies another problem. My father-in-law has made a very decent living and until he became sick, neither of them needed to worry about basic daily expenses or even small luxuries. As the medical bills mount, she is concerned that expenses are outpacing income, but he is reluctant to economize. To develop a budget would mean confronting his illness head-on, something he has managed to avoid for almost four years. Do you have any advice on handling this process of ceding financial control from an ill spouse to the partner?

Answer: Incapacity is hard for everyone involved, but failing to acknowledge the new reality could leave your in-laws in dire financial straits.

It often helps to involve a trusted third party who is not a family member. Your father-in-law may well resent your intrusion into their finances but may be willing to work with an accountant or a financial planner, particularly if it’s framed as a way to help his wife deal with her new responsibilities.

Your in-laws also should consult an attorney experienced in estate planning and elder care issues. At some point, paying for long-term care is likely to be an issue, and an attorney knowledgeable in this area can make appropriate recommendations.

Whatever you do, tread softly. You don’t have this disease and can’t know how he feels — or how she feels, for that matter. Offer to help, give your support, research and recommend appropriate resources, but try not to judge or impose your idea of a solution on this couple. This is their path to walk, not yours.

Dear Liz: You’ve written a couple of times about how safe deposit boxes don’t necessarily keep your valuables safe. We wanted to tell you our story.

We recently went to put some papers into one of the two boxes we maintain at a bank where we’ve been customers for more than 20 years. We were given the box and I almost fainted when I discovered it was empty.

Apparently it had been drilled in error. After a week of searching, bank employees found part of our box contents tied up in a plastic bag. But property was missing that was historic, personal and irreplaceable. We had papers in there with our names on them, but apparently no effort was made to contact us.

It is a horrifying situation that a bank can be so casual and apparently unconcerned with property that most people assume will be secure. This should be made public more often.

Answer: As you’ve read here before, banks are required by law to make an effort to contact box owners before a safe deposit container is drilled and emptied, but sometimes those efforts are pretty cursory. (The fact that you were longtime customers and that your names were on papers in the box shows just how cursory.)

Some readers say they’ve tried to prevent situations like yours by putting their full contact information on a sheet of paper atop the contents of their boxes. In any case, you also should check on your box a couple of times a year and ask your bank during those visits whether you’re up to date on your box rental fees.

Many times, after a merger, banks begin to charge customers who used to have free box rental. Longtime customers may assume the charges don’t apply to them, because they’ve had free rental for so long, and fail to pay the bill. The bank could then decide the box has been abandoned and drill it open.

Dear Liz: In a recent column you discussed the issue of fairness in gifting college funds to nieces and nephews. We have an issue closer to home in setting up our bequests to our grown children.

We have been giving our daughter financial assistance that we have not given our sons because we don’t feel they need it. Our daughter is in her mid-20s and has a learning disability. Our sons know we have been helping, but they don’t know the exact nature or value of the assistance.

We want to ensure that our daughter gets a larger inheritance to compensate for her disability, but how do we do that while being fair to the others? Our attorney helped us set up a family trust in which our three children will receive equal shares of the bulk of our estate.

At his suggestion, the special assistance will go to our daughter by naming her a sole beneficiary of one or more of our retirement accounts. Does this sound like a good plan?

Answer: Tread very, very carefully here.

There’s a fundamental difference between doling out assistance unequally while you’re alive and doing so once you’re dead.

While you’re alive, your sons are paying the “success tax” — not getting as much from you because they’re doing well. Many grown children in this position are able to accept the disparity because there’s an unspoken understanding that you would help them, too, if they fell on hard times.

Once you’re gone, though, there are no more opportunities for help. How you bequeath your estate is pretty much the last word, and your kids may very well see in your distributions a reflection of your love for them.

That’s why even minor inequalities in estate distribution can set off nasty, hugely emotional battles among heirs. These bad feelings can, unfortunately, translate into lifetime estrangements, which is surely not an outcome you’d want.

Of course, if your daughter’s disability is severe and will clearly affect her lifetime earning potential, then an unequal distribution may well be justified. You shouldn’t necessarily assume, however, that her disability will translate into failure. Plenty of successful people have overcome learning disabilities, including Virgin Atlantic Airways founder Richard Branson, inventor Thomas Edison, actress Whoopi Goldberg and artist Pablo Picasso.

You also can’t assume that your sons’ success will continue unabated. Accident, illness and business reversal can affect anyone, so that the child who seems like a highflier now could be the one who needs the most help in the future.

If you do decide on an unequal distribution, consider discussing your estate plans with your children.

This is probably a talk you’d rather avoid, but openness now will avoid an unpleasant shock later and give all concerned a chance to discuss their feelings about the situation. You may or may not hear something in this discussion to change your mind, but at least you’ve given your heirs a chance to be heard — an opportunity that’s obviously lost once you’re gone.

Dear Liz: My brother and I are nearing our mid-50s. He is married; I am not. Neither of us has children. When our parents died 11 years ago, we inherited their house equally.

I live in it; my brother and his wife live in another state. He and I share taxes, insurance and a home equity loan. Other than that, all expenses are — and should be — my responsibility. He is livid that I am not leaving him my half of the house when I die, even though he is leaving his half to his wife — which I completely understand.

When I realized he was furious about this, I offered to make him the sole beneficiary of the house in my will if he will do the same for me. He will not, yet he remains angry, somehow believing that my being single should restrict my choice of beneficiaries. What am I missing here?

Answer: Once you step back a bit from the spat, you might see that neither of your positions is entirely unreasonable.

A home is typically a major asset, and you want to be able to leave it to a beneficiary of your choosing. So does he, and his wife is the natural choice.

But he’s also probably dreading the idea that you’ll die first and he’ll end up owning the property with someone else. The constant negotiations and decisions required in homeownership can be excruciating and a cause for major conflict even when you have familial ties to bind you. It can be much worse when you don’t.

The other problem with your solution — “I’ll leave you mine if you leave me yours” — is that you’d need to have a lawyer draw up what’s known as a will contract to make your promises binding, said Los Angeles estate planning attorney Burton Mitchell.

But remember, things change, and your agreement may not seem so good years later.

“The sister could always marry in the future. The brother could always get a divorce. Either could adopt a child,” Mitchell said. “No one should assume that the future is static and the facts won’t change.”

Before you do anything, you should check how your home is currently titled. If you and your brother are joint tenants, then he typically would automatically inherit, regardless of what your will or other estate planning document says.

If you want to leave your share to someone else, you probably would need to hold title as tenants in common.

There are a number of options you might want to consider and discuss. Among them:

• Take out a mortgage and buy him out. This could have financial implications for both of you. You might have trouble making the payments on a new loan, and he probably would owe capital gains tax for half the appreciation since your parents died.But he would get his share of the asset in cash, and you should be relieved of any future recriminations on the beneficiary issue.
• Sell the house and split the proceeds. This means that you’ll have to move and that both of you could have a tax bill. (Because this is your primary residence, you’re allowed to avoid paying tax on up to $250,000 of the gain since your parents died. If your profit is more than that, you will owe capital gains tax on the excess.)But this could solve the issue of who leaves whom what.
• Wait a decade or so and then get a reverse mortgage to buy him out. Reverse mortgages allow you to tap the equity in your home without having to repay the loan until you move, sell the house or die.You can get a lump sum, a line of credit or a stream of monthly checks. The older you are when you apply, the more money you can borrow, although there are limits depending on where you live.

  If you’re interested in this possibility, check out the information about reverse mortgages at the AARP website or consult Tom Kelly’s book “The New Reverse Mortgage Formula” (John Wiley & Sons, 2005).

• Do nothing. This is always an option. You should be advised, though, that your brother may have a trump card whether he knows it or not. As a co-owner, he could sell his share of the house or go to court to force a sale of the property. If that’s not an outcome you want, you’ll need to find a solution that works for both of you.

Dear Liz: You recently wrote a column that endorsed an aunt’s plan to give more money to her less affluent sibling’s children for their future college education than she would give to her other, better-off nieces and nephews. I’m an estate planning attorney who has advised clients on their inheritance plans for over 45 years and I’ve found that allocating one’s wealth unequally among family members is a recipe for disaster. No one disputes that people can leave all or a portion of their money or property any way they like. However, in my many years of experience, unequal allocation will ultimately lead to conflict, disharmony and bad feelings no matter the economic or other disparity between one’s heirs.

Answer: When it comes to parents bequeathing money and property to their own children, I wholeheartedly agree. As I explained in a more recent column, these final gifts are often interpreted, rightly or not, as the parent’s last word about how much each child was valued. Even parents who feel justified in making unequal financial gifts during life–usually because they believe one child needs more than the others–should think long and hard before making lopsided bequests after death.

More distant relatives shouldn’t be held to the same standard, however, particularly when we’re talking about gifts to further a specific goal like a college education. As the aunt noted, her other siblings are able to save for their children’s educations, while she fears that at least one of her nieces won’t attend college at all if not for the aunt’s financial support.

If the money had no restrictions on its use, or if the aunt were passing out birthday checks, then yes, the amounts should be roughly equal. But to ask her to reduce her gift to the neediest child so the others can have a surplus of money for the same goal–a college education–seems the opposite of fair.

Might some relative object to receiving less or nothing at all from Auntie? Of course, but most reasonable people will understand her actions if she decides to gift according to need. At worst, they may suspect Auntie of favoritism, but that kind of partiality is a lot easier to take from a parent’s sibling than from the parent.

Dear Liz: A distant relative who is 75, single and blind asked me to help with her financial affairs because she trusts me and no one else. After a year, I realized that taking care of her required more time than I originally anticipated. Recently, I asked her 40-year-old son to take over because I wanted out. The son said he did not want anything to do with his mother because she is an obnoxious person, and no relative can get along with her. However, he does want to inherit her assets, including three properties: a house and two condominiums.