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Liz Weston

Q&A: Should this couple leave their estate to kids who don’t share their values?

May 9, 2022 By Liz Weston

Dear Liz: My husband and I are in our 60s and have two grown children. There are no grandchildren, and it’s not looking like there will be any. Sadly, our children do not share our values. We don’t want to leave them our estate because it will end up being given or bequeathed to charities of their choice. They are doing well and don’t “need” the money. However, we also don’t want to “cut them out.” I was thinking about a charitable remainder trust so they could have income during their lifetimes and the assets will go to our charities when they die. Can it be funded with what is left when we die or do we have to put some or all of our assets in it now? Is our estate sizable enough for such a trust? Our assets total about $3 million. A less complicated solution would be to leave them the house and bequeath the cash to charity. What are your thoughts?

Answer: Consider going with the less complicated solution.

Charitable remainder trusts are typically created while you’re alive. You contribute assets to an irrevocable trust and get a tax deduction for the contribution plus an income stream for life. At your death, the charity keeps the remaining assets — the remainder. Because the trusts are irrevocable, you should have careful counseling from an accountant, financial planner, the charity and an attorney before you sign away your assets, said Jennifer Sawday, an estate planning attorney in Long Beach.

You could create a trust that at your death pays income to your children and then contributes the remainder to a charity when they die. Such a trust probably would have to be administered for decades, so you’d need a corporate or other institutional trustee — and those aren’t cheap.

Also, keep in mind that a lot of things could change between now and your deaths. The kids who don’t “need” the money could suffer reverses, or you could. Opinions also can change; they might come closer to your point of view, or you could decide that the issues that divide you are less important than the bond you share. An unchangeable trust may not be the best option in a world that’s constantly changing.

Filed Under: Estate planning, Q&A Tagged With: Estate Planning, q&a

Q&A: Friend’s write-offs might be fraud

May 9, 2022 By Liz Weston

Dear Liz: I have a friend who is driving me crazy because she keeps telling me that I need to start a company. She claims she writes off “everything” from her two companies and a nonprofit. She says her accountant encourages this and that she doesn’t pay taxes. However, when my friend had to claim unemployment benefits during the pandemic, her weekly amount was very small. She kept complaining that she “paid into the system” but thought she should get a higher amount. Maybe she didn’t pay into the system, or isn’t paying enough?

Answer:
People who write off “everything” are often committing tax fraud. Although businesses can write off a number of different expenses, those expenses must be both “ordinary” — common and accepted in the business’ specific industry — and “necessary,” or helpful and appropriate for that particular business or trade. Nonprofits, by IRS definition, are supposed to be organized and operated exclusively for religious, educational or charitable purposes — not the benefit of a single individual.

Your friend could face a substantial tax bill plus serious penalties if she’s audited. She may be counting on the IRS not noticing, but all it may take to trigger an audit is a tip from a disgruntled employee or someone who hears her bragging about not paying taxes. If her accountant is in the habit of filing dubious returns, the IRS might catch on to the pattern and start looking more closely at all that accountant’s customers.

Your friend’s strategy of minimizing her taxable income has already bitten her once when she applied for unemployment and may bite her again when she applies for Social Security. If she doesn’t pay Social Security taxes, or pays only a small amount, her retirement benefits will reflect that. By the time many people realize the enormity of that particular mistake, it’s too late to fix.

Filed Under: Q&A, Taxes Tagged With: q&a, Taxes, write-offs

Friday’s need-to-know money news

May 6, 2022 By Liz Weston

Today’s top story: What to do if a loved one owes you money. Also in the news: How to save more when inflation makes your money count less, how to visit Hawaii on a budget, and 9 ways to bolster financial intimacy in a new relationship.

A Loved One Owes You Money. Now What?
What should you do when they don’t pay you back?

How to save more when inflation makes your money count less
During inflation, consumers can adjust their spending and saving strategies to help lessen the impact that inflation has on the value of their money

Save on Hawaii Travel Even as Demand Soars
With the lifting of COVID restrictions, vacationers are once again flocking to the Aloha State.

9 Ways to Foster Financial Intimacy in a New Relationship
https://lifehacker.com/9-ways-to-foster-financial-intimacy-in-a-new-relationsh-1848878428

Filed Under: Liz's Blog Tagged With: financial intimacy, Hawaii travel, inflation, money owed by loved ones

Thursday’s need-to-know money news

May 5, 2022 By Liz Weston

Today’s top story: To fight inflation, take down food expenses. Also in the news: A new episode of the Smart Money podcast featuring a nerdy travel diary, how to handle the benefits at your new and improved job, and how to avoid 13 of the most persistent online scams.

To Fight Inflation, Take Down Food Expenses
Rising food prices are putting pressure on household budgets, but cooking more creatively can help control costs.

Smart Money Podcast: Nerdy Travel Diaries: Weightlifting in New Mexico
A Travel Nerd shares her story about going to New Mexico for a weightlifting meet and how she saved money along the way.

You Got a Better Job. Now, How Do You Handle the Benefits?
Between 401(k)s, HSAs and ESPPs, new benefits can feel confusing. Knowing how to prioritize them can help you take full advantage of your new perks.

13 Persistent Online Scams (and How to Avoid Them)
Learn how to protect yourself from these common online scams and schemes.

Filed Under: Liz's Blog Tagged With: food expenses, inflation, job benefits, online scams, Smart Money podcast, travel diaries

Wednesday’s need-to-know money news

May 4, 2022 By Liz Weston

Today’s top story: What to do instead of worrying about the Fed’s latest interest hike. Also in the news: Why the Fed wants home buyers to face higher mortgage rates, staying off the beaten path for summer travel deals, and how college-bound grads could exit with nearly $40K in student loan debt.

Worrying About the Fed’s Latest Interest Hike? Do This Instead
Yes, the Fed just raised rates again. But take action rather than agonizing over what’s ahead for the economy.

Why the Fed Wants Home Buyers to Face Higher Mortgage Rates
The Federal Reserve yanked a short-term interest rate higher this week, making it more expensive to borrow money to buy a home or fix it up.

For Summer Travel Deals, Stay Off the Beaten Path
Summer vacationers should brace themselves for intense travel demand this season.

College-Bound Grads Could Exit With Nearly $40K in Student Loan Debt
College-bound high school graduates will amass thousands in debt. Many will share this debt with their parents.

Filed Under: Liz's Blog Tagged With: federal reserve, interest rates, student loan debt, summer travel bargains

Monday’s need-to-know money news

May 2, 2022 By Liz Weston

Today’s top story: What every parent should know about investing for retirement. Also in the news: To fight inflation, take down food expenses, a new episode of the Smart Money podcast on small business benefits and buying a hybrid, and these U.S. cities are seeing the biggest drop in home prices.

What every parent should know about investing for retirement
Don’t make these mistakes when it comes to saving and investing for yourself and your kids

To fight inflation, take down food expenses
February food prices were 7.9% higher than they were a year ago, according to the U.S. Department of Agriculture’s Economic Research Service.

Smart Money Podcast: Small Business Benefits, and Buying a Hybrid
Learn the perks of shopping small. Then hear whether high gas prices make now the time to switch to a hybrid.

These U.S. Cities Are Seeing the Biggest Drops in Home Prices
What this means for those looking to buy and sell houses.

Filed Under: Liz's Blog Tagged With: food expences, home price drops, hybrid cars, parents and investing, small business benefits, Smart Money podcast

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