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Estate taxes no longer a worry for most people

Jul 01, 2013 | | Comments Comments Off

Dear Liz: My father passed away two years ago and my mother recently died as well. I will be getting about $50,000 from the sale of their house. Everyone tells me the tax on this will be very high, so I need advice about how not to give my parents’ money to the government. Their grandchildren should be able to see a legacy of their grandparents.

Answer: You need to stop listening to “everyone,” since these people clearly don’t know what they’re talking about.

You have to be pretty rich to worry about estate taxes these days. The money you inherit wouldn’t be subject to federal estate taxes unless your parents’ estates exceeded the federal exemption limit (which is currently more than $5 million per person). Some states have lower limits and a few have “inheritance taxes,” which base the tax rate on who is inheriting (spouses are typically exempt, and lineal descendants such as children pay a lower rate than others).

The vast majority of inheritors, however, won’t face any of these taxes. You should check with a tax pro, but chances are good your inheritance won’t incur a tax bill and you’ll be able to pass the entire amount along to your children without taxes as well if you wish.

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Monday’s need-to-know money news

Jul 01, 2013 | | Comments Comments Off

Little Girl with Crown of EarsHow to survive your child’s summer vacation without emptying your wallet, protecting your tuition investments, and how to ensure your semester abroad doesn’t lead to financial disaster.

Six Ways to Save Money on Summer Childcare
Keeping your child busy this summer doesn’t have to mean breaking the bank.

Why a Good Student Checking Account Matters

Student checking accounts are a perfect way to teach financial responsibility.

Kids and Money: Tuition is an Insurable Investment

Tuition refund insurance can provide peace of mind.

Plan For Financial Independence, Not Retirement
Financial independence can mean working when you want; not because you have to.

4 Credit Card Tips for College Students Headed Overseas

How to avoid a financial mess when studying abroad.

Categories : Liz's Blog
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Marketplace launches “Family Feud”

Jul 01, 2013 | | Comments Comments Off

RelationshipActually, the new feature from public radio’s Marketplace Money is called “Financial Feud,” but it deals with some family arguments about money that may sound more than a little familiar. Such as:

  • Should I quit work to stay home with the baby when day care eats up most of my pay?
  • My husband is going nuts with airline credit cards. He says the rewards are worth the cost. Is he right?
  • Where do you draw the line between energy savings and comfort? (Ah, the battle of the thermostat…)
  • What’s the best way for roommates to split food costs?
  • And then there’s the $10,000 bike…

Check out these very real disputes submitted by listeners, see what the experts have said and weigh in what you think.

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Catch me on CNBC’s Closing Bell today

Jun 28, 2013 | | Comments Comments Off

DWYD cover2013I’m scheduled to talk about mid-year financial moves you should be making now. It’ll be a short appearance somewhere around 4:20 p.m. Eastern.

Also, this weekend, listen to Marketplace Money where I’ll be weighing in on a couple’s argument about whether she should quit her job to stay home with their child. Everybody’s conflicted on this one, and for good reason.

Finally, in case you missed it, a couple of columns about young people’s finances:

Why young people hate credit cards

The Great Recession made many younger consumers afraid to borrow money, but alternatives like debit cards have their own drawbacks.

Student loan debt crushing couple

As part of MSN Money’s Life Coach series, I offer alternatives for a young couple trapped by student loan bills.

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Paid education. Graduate cap on bank notesStudent loan rates aren’t about to double, despite the headlines.

Only rates for newly-issued, subsidized federal student loans are set to rise July 1 from 3.4% to 6.8% because Congress couldn’t get its act together to prevent the increase.

Loans that have already been made won’t be affected. Neither will there be an impact on unsubsidized federal student loans, since those already carried a 6.8% rate, or on PLUS loans for graduate students and parents, which have a 7.9% rate.

Subsidized loans traditionally got lower rates because the borrowers have demonstrated financial need. But subsidized loans also charge no interest:

  • while the student is still in school at least half time
  • for the first six months after the student leaves school and
  • during an approved postponement of loan payments.

Those are powerful advantages not available on unsubsidized loans, which is what you get when you can’t demonstrate financial need.

College expert Lynn O’Shaughnessy points out in her MoneyWatch column that the doubling of subsidized loan rates actually won’t have an outsized impact:

The hike will mean that a borrower will spend less than $7 a month repaying that extra interest, according to Mark Kantrowitz, the publisher of Edvisors Network and a national financial-aid expert. Keeping the subsidized rate at 3.4 percent would cost the government $41 billion over 10 years, which is a high price to pay to save borrowers a few dollars a month.

Kantrowitz has said it’s unlikely that higher interest rates would dissuade many from attending college, and he would rather see the money go toward increasing Pell grants for the neediest students, which would do a lot more to encourage them to get a degree. Here’s what he had to say in a New York Times op-ed piece co-authored with O’Shaughnessy:

But the partisan posturing is a distraction from far more pressing issues that face students and parents who must borrow to cover their college costs. What’s lost is how Congress, in numerous ways, has been hurting the most vulnerable college students and dithering on the crisis of college affordability….Congress has starved the Pell grant program, an educational lifeline for low-income families.

He goes on to question why most student loan rates are so much higher than the government’s cost, something that’s turned education debt into a profit center for Uncle Sam. Congress also hasn’t done anything about the suffocating student loan debt many graduates have already taken on or the continuing (if somewhat moderated) increase in education costs. Private student loans remain especially problematic, since they lack the consumer protections of federal student loans and many lenders have been unwilling to work with borrowers to create affordable repayment plans. I’ve argued that we should give bankruptcy judges the power to modify private student loan terms as a way of forcing lenders to play ball.

Nobody wants to pay more interest, but there are bigger problems with the way we pay for higher education than a hike in the subsidized student loan rate.

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Friday’s need-to-know money news

Jun 28, 2013 | | Comments Comments Off

HertzThe best place to rent a car for your summer road trip, six surprises that could ruin your retirement and how baby boomers can keep their identities safe both online and off.

The Best Car Rental Agency in America
Before you hit the road this summer, find out who has the best rental policies.

Insider Shopping Tips From a Grocery Store Cashier
How to get more for your dollar at the supermarket.

Don’t Let These Six Surprises Ruin Your Retirement
Rule No. 1: Expect the Unexpected

Homeowner Tax Breaks Not as Great as You Think
Tax breaks always sound good, but they don’t always pay off.

How Boomers Can Keep Their Identities Safe
Simple tips to protect your identity.

Categories : Liz's Blog, Saving Money
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Thursday’s need-to-know money news

Jun 27, 2013 | | Comments Comments Off

Passenger airplane landing on runway in airport.How travel rewards can make a vacation even sweeter, deciding on whether to buy or rent, and how to avoid pitfalls on the road to retirement.

 

The Best Travel Rewards Credit Cards in America
Using your credit card could save you money on a vacation.

 

Same Sex Couples: Celebrate, Then Call a CPA

How does the Supreme Court ruling on DOMA affect the finances of same sex couples?
When to Rent vs. Buy a Home
Weighing the pros and cons of buying vs renting.

 

Best cars for teens

Here are 14 cars with top safety ratings that don’t cost a fortune.

 

10 Keys to Retiring on Your Own Terms
The sooner you begin planning, the smoother the road to retirement will be.

 

 

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Our #CreditChat is about to begin!

Jun 26, 2013 | | Comments Comments Off

liz-westonIn a few minutes I’ll be answering your questions about how to deal with your debt on Experian’s #CreditChat, which starts at 3 p.m. Eastern/noon Pacific today. Topics include how to balance savings and paying off debt, which debts to tackle first, how to handle student loans and what to do if you’re drowning in debt. Easy ways to follow the conversation include Twubs or tchat.

Please join us!

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Wednesday’s need-to-know money news

Jun 26, 2013 | | Comments Comments Off

heart of flowers and plants in sandDOMA struck down, squeezing the most out of free credit reports,  the smartest places in America, and how to get the most car for your buck.

Preparing for Marriage Equality

What the Supreme Court decision means for the marital finances of LGBT couples.

How to Get the Most Out of Free Credit Reports
The best times to take advantage of your free credit reports.

Tips for Moving During Your Retirement Years
What things to consider before moving.

The Most Educated Places In America Is your city one of the smartest?

Luxury Car Alternatives for Less
Get the trappings of a luxury car without emptying your wallet.

The Slippery World of Online Pricing
Learn the five factors that make online pricing so fluid.

Categories : Liz's Blog
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Champagne glassesThe Supreme Court’s decision to invalidate the Defense of Marriage Act means that gay married couples will have access to the federal benefits now enjoyed by other marrieds.

These benefits include tax breaks, Social Security benefits and estate planning advantages that until now were denied gay couples, even if their marriages were recognized under state law.

Among other things, gay marrieds will now be able to:

  • claim Social Security benefits based on a spouse’s working record and qualify for survivor benefits.
  • fund an IRA or Roth IRA for a nonworking spouse.
  • split a retirement fund or other assets without triggering tax bills if they divorce.
  • exempt health care benefits for a spouse from their federal income.
  • bequeath their estate to a spouse without triggering potential federal estate taxes.

These gains may come with a cost: as NerdWallet puts it, “federal income tax brackets are in fact easier on high-income individuals than they are on most high-income married couples.” NerdWallet figured that same-sex couples earning more than $146,000 may see their tax bill go up by over $1,000.

One of my gay friends, a financial planner, just posted to her Facebook page that her taxes are likely to go up by several thousand dollars. But she was happy, as she put it, to “take one for the team.”

 

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