Ask Liz Weston

Get smart with your money

Liz Weston

Tuesday’s need-to-know money news

By

Today’s top story: How to find the right business coach and avoid the wrong one. Also in the news: Why the 15/3 credit card hack is nonsense, how death-planning apps work, and the pros and cons of vacation loans.

How to Find the Right Business Coach — and Avoid the Wrong One
A good business coach can help you develop your ideas, set goals and make plans to achieve them.

The 15/3 Credit Card Hack Is Nonsense — Here’s What to Do Instead
The supposedly secret trick does not build your credit scores, despite what you may have heard. But there are some concrete steps you can take.

Dealing With Death? There’s an App for That
How death-planning apps work.

Should You Use a Vacation Loan to Finance Your Next Trip?
Although fairly easy to obtain, travel loans could cause more problems than they solve.

How to reduce taxes when you sell your home

By

If your home’s value has soared, congratulations. If you decide to sell, beware.

Financial advisor James Guarino says some clients don’t realize that home sale profits are potentially taxable until their returns are prepared — and by that time, they may have spent the windfall or invested the money in another house.

”They’re not happy campers when they find out that Uncle Sam not only is going to tax this as a capital gain, but they’re also going to have some exposure at the state level,” says Guarino, a certified public accountant and certified financial planner in Woburn, Massachusetts.

In my latest for the Associated Press, understanding how home sale profits are calculated and how you can legally reduce your tax bill.

Monday’s need-to-know money news

By

Today’s top story: What rising prices could mean for your retirement plans. Also in the news: A new episode of the Smart Money podcast on student debt and money baggage, how guests can honor their budgets in peak wedding season, and ways to mitigate credit card use during inflation.

What Rising Prices Could Mean for Your Retirement Plans
Inflation means your retirement savings won’t go as far. Here’s how to pivot.

Smart Money Podcast: New Student Debt, and a Couple’s Money Baggage
This week’s episode starts with a discussion of the student debt new high school grads — and their parents — could take on.

How Guests Can Honor Their Budgets in Peak Wedding Season
All signs point to a banner year for weddings in 2022. Here’s how guests can manage the costs to attend celebrations.

Ways to mitigate credit card use during inflation
Use them strategically.

Q&A: A widow’s Social Security earnings problem

By

Dear Liz: My dear friend lost her husband a few years ago. The husband did something wrong with working and collecting Social Security, so they are now withholding her $2,000 monthly Social Security check, which is devastating to her. Can she be punished for what he did unbeknownst to her? She is stuck and doesn’t know what to do.

Answer: People who start Social Security before full retirement age face the earnings test, which reduces benefits by $1 for every $2 earned over a certain amount (in 2022, the amount is $19,560).

It sounds as though the husband didn’t properly notify Social Security about his earnings and the overpayment wasn’t discovered until after his death. Whenever Social Security is unable to recover an overpayment from someone, the agency can collect from anyone else receiving benefits on that person’s earnings record, said William Meyer, founder of Social Security Solutions, a benefits claiming site.

The letter notifying her about the overpayment would have included a section about her appeal rights. If the earnings information was incorrect, for example, she would have 60 days to appeal and supply the correct amount of his earnings.

She also can call the agency’s toll-free number, (800) 772-1213, and request that less be taken from each check. As long as the total owed is paid off within 36 months, the agency will comply, Meyer says. If she can’t afford to have the overpayment repaid within 36 months, she can request longer but she’ll have to provide proof of her income, resources and expenses, he said.

If she’s in dire straits and can’t afford to pay any of the money back — in other words, if she can’t meet her “ordinary and necessary living expenses” — she should submit an SSA-632, “Request for Waiver of Overpayment Recovery” form, Meyer said.

Q&A: Updating old trusts, estate plans

By

Dear Liz: I am 97 with two sons and have a trust prepared in 1991, shortly before my husband died. You warned there can be problems with bypass trusts created in older estate plans. I suspect that’s what I have. The attorney who created my trust died years ago, so I asked my son to do the research. He found an attorney near where I live who told us we should terminate my existing trust. We’re told it would avoid capital gains and my sons would enjoy a stepped-up basis in the assets. The charge would be close to $5,000. If I do nothing, the assets transferred to my sons will have no stepped-up basis and will incur capital gains taxes. I am thinking of a second opinion.

Answer: A second opinion might be a good idea, but please don’t delay. Your sons could wind up paying a potentially large and unnecessary tax bill if you don’t take action soon.

As mentioned in previous columns, bypass trusts were a common feature in estate plans back when the exemption limit was much lower. Although the trusts still have their uses, they’re often not necessary and cause problems for survivors and heirs.

Estate plans should be revisited after a major life change, a revision in estate tax laws or five years, whichever comes first.

Q&A: How to kick your ex off the credit cards

By

Dear Liz: My divorce was final in 2016. My ex and I divided our credit cards as part of the settlement. I have several joint credit cards with high credit limits and zero balances. I have used them once a year to keep them in active status. Do I consider canceling them or do I risk lowering my credit score if I do?

Answer: If these truly are joint credit cards, then your ex potentially could run up a balance and default, damaging your credit. Obviously, that’s not ideal. With joint cards, neither party can be removed by the other, so the best option may be shutting down the account.

But joint credit cards are increasingly rare. Most cards used by couples have a primary cardholder and an authorized user. The authorized user is not responsible for paying the bill and can be removed at any time.

Contact the issuers to find out your status on each card: Are you a joint account holder? Primary or authorized user?

If you’re the primary holder on a card and your ex is still an authorized user, ask that your ex be removed. If the account truly is joint or if you’re the authorized user, consider opening one or two cards in your own name before taking any further action.

Your credit scores may still take a hit when you close accounts or get removed as an authorized user, but the additional lines of credit may limit the damage and ensure you still have access to credit.