Q&A: This trust avoids probate (but not death and taxes)

Dear Liz: Reading your articles I understand that having a revocable living trust makes transferring wealth quicker and easier. What about taxes? If you use a will to bequeath your house, for example, the beneficiaries get a stepped-up cost basis. What are the taxes with a revocable living trust? Do you pay taxes on assets going into the trust and again going out to the beneficiaries? What are the tax advantages and disadvantages of a trust?

Answer: Many kinds of trusts have tax implications, but revocable living trusts typically don’t. Your assets get the same tax treatment as if you held them outright.

Some people mistakenly believe that revocable living trusts can help them avoid or eliminate estate taxes. The purpose of a living trust is primarily to avoid probate, the court process that otherwise follows death. In some states, including California, probate can be lengthy and expensive, which often makes a living trust worth the cost and effort to set up.

Living trusts also offer more privacy because they don’t have to be made public, unlike a will, which becomes a public record at your death. Living trusts also make it easier for your appointed person to take over for you in case you become incapacitated.

Thursday’s need-to-know money news

Today’s top story: How to cash in on short-term rentals like Airbnb. Also in the news: How to get your business out of debt in five steps, and how to make to make the most of your summer vacation.

How to Cash In on Short-Term Rentals Like Airbnb, VRBO
Generating extra income with your extra bedroom.

How to Get Your Business Out of Debt in 5 Steps
Taking the first step.

How to Make the Most of Your Summer Job
Put aside some cash.

Friday’s need-to-know money news

Today’s top story: What to do when you get an IRS audit notice. Also in the news: Budgeting for new parents, where to sell your stuff online, and how your credit score is linked to your chance of divorce.

I Got an Audit Notice From the IRS — Now What?
Take a deep breath.

Budgeting for New Parents: From Day Care to College
In it for the long haul.

Where to Sell Your Stuff Online
Getting rid of what you don’t need.

Your Credit Score Is Linked To Your Chance of Divorce
What the two have in common.

Wednesday’s need-to-know money news

Today’s top story: Goofed on your tax returns? Here’s what to do. Also in the news: 5 awful reasons to buy a stock, what newlyweds need to know about insurance, and does free shipping make you spend more money.

Goofed on Your Tax Return? Here’s What to Do
Don’t panic.

5 Awful Reasons to Buy a Stock
Be cautious when buying.

What Newlyweds Need to Know About Insurance
Changes you need to make.

Does Free Shipping Make You Spend More Money?
When free shipping gets costly.

Q&A: Capital gains taxes explained

Dear Liz: Do I understand correctly that I must live in a house for two years before selling it to avoid paying capital gains tax, regardless of how much I may profit from the sale?

Answer: You do not. You must live in a home for two of the previous five years to exempt up to $250,000 of home sale profits. (Married couples can exempt up to $500,000.) After that, you’ll pay capital gains taxes on any remaining profit.

Even if you didn’t last the full two years, you may be able to claim a partial exemption if you meet certain criteria, such as having a change in employment, a health condition or other “unforeseen circumstance” that required you to move out.

Thursday’s need-to-know money news

Today’s top story: Trump’s Tax Plan: Big Changes, Big Unknowns. Also in the news: Savings lessons from retirees for millennials, how to teach your kids about money when you’re a financial disaster, and why 40% of Americans spend up to half of their income servicing debt.

Trump’s Tax Plan: Big Changes, Big Unknowns
What we know so far.

Millennials, Take This Savings Lesson From Retirees
Retiree wisdom.

How to Teach Your Kids About Money When You Are a Financial Disaster Yourself
Learning from your mistakes.

40% of Americans spend up to half of their income servicing debt
Discretionary spending is a big part of the problem.

Wednesday’s need-to-know money news

Today’s top story: 3 questions to answer before taking out student loans. Also in the news: Debt collection goes high-tech, 7 alternative ways to pay your taxes, and credit card rental insurance doesn’t cover as much as you think.

3 Questions to Answer Before Taking Out Student Loans
Important things to consider.

From Stone Age to Drone Age: Debt Collection Goes High-Tech
Send in the drones!

7 Alternative Ways to Pay Your Taxes
Thinking outside the box.

Credit Card Car Rental Insurance Doesn’t Cover as Much as You Think
Reading the fine print.

Monday’s need-to-know money news

Today’s top story: April 18th isn’t just the tax-filing deadline. Also in the news: Why so many credit cards are from Delaware, how to file a tax extension online, and lowering your tax bill with IRA contributions.

April 18 Isn’t Just the Tax-Filing Deadline
Other items to add to your to-do list.

Why So Many Credit Cards Are From Delaware
The answer may surprise you.

How to File a Tax Extension Online
Don’t delay when you need more time.

Reminder: You Have Until Tomorrow to Lower Your Tax Bill With IRA Contributions
Tick-tock.

Tuesday’s need-to-know money news

Today’s top story: What student loan borrowers need to know about the Navient lawsuit. Also in the news: 5 ways to avoid blowing your tax refund, how to prepare financially for a baby, and spreading your tax refund across multiple accounts.

Navient Lawsuit: What Student Loan Borrowers Need to Know
Navient is facing three lawsuits.

5 Ways to Avoid Blowing Your Tax Refund
Using it wisely.

Baby on the way? Here’s how to prepare financially
Preparing for parenthood.

The IRS Will Split Your Tax Refund for You
Spread your refund across multiple accounts.

Monday’s need-to-know money news

Today’s top story: These 4 tax bills can surprise, but you can be ready. Also in news: Can’t pay your taxes? Here are 6 ways to cope. Why stay-at-home spouses should buy life insurance, and how to avoid blowing your tax refund.

These 4 Tax Bills Can Surprise, but You Can Be Ready
Be prepared.

Can’t Pay Your Taxes? Here Are 6 Ways to Cope
Don’t panic.

Why Stay-at-Home Spouses Should Buy Life Insurance
Guidlines for the right policy.

5 ways to avoid blowing your tax refund
Spending it wisely.