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Liz Weston

This week’s money news

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This week’s top story: What Trump and Harris have in store for your taxes. In other news: Credit card-bonus-friendly season is here, October mortgage outlook, and drawbacks to consider before getting metal credit card.

What Trump and Harris Have in Store for Your Taxes
Most, if not all, of the candidates’ tax proposals would need approval by Congress.

If You’re Considering a Credit Card, Bonus-Friendly Season Is Here
The October-through-December holiday window is an especially ideal time for snagging a rich welcome offer.

October Mortgage Outlook: No Rate Jumps or Scares
Mortgage rates may idle above 6% until markets and the Fed catch up.

Is Your Metal Credit Card Losing Its Edge?
Once a rare luxury enhancement, metal credit cards are more attainable for the average consumer today. And there are drawbacks to consider before getting one.

Q&A: Beware of penalties that can come with delaying Medicare enrollment

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Dear Liz: I have a high-deductible insurance plan from my employer and I contribute to a Health Savings Account. I understand people on Medicare can’t contribute to an HSA. If I’m still working at full retirement age, can I start my Social Security benefit but avoid enrolling in Medicare?

Answer: No. Once you start Social Security, you’re automatically enrolled in Medicare if you’re 65 or older.

If you delay Social Security and don’t plan to enroll in Medicare at 65, you’ll want to make sure your employer-provided health insurance will allow you to avoid penalties for late enrollment. These penalties, which are permanent, result in higher premiums for Part B (which covers doctor visits) and Part D (which covers prescriptions). You can avoid those penalties if your employer has 20 or more employees and your health insurance provides at least as much coverage as Medicare. Check with your company’s human resources department.

Q&A: In a divorce, are Social Security benefits on the table?

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Dear Liz: Twenty years ago, after 14 years of marriage, a friend divorced her husband. She says that as part of her divorce settlement, she signed a document agreeing not to collect divorced spousal benefits from Social Security. Is that even legal? She’s in her 60s and fears she can never retire because her own Social Security won’t be enough to live on.

Answer: Your friend may well have signed such an agreement, but it doesn’t matter. Federal law — specifically Section 407(a) of the Social Security Act — forbids including Social Security benefits as part of a divorce settlement. In a fact sheet titled “5 Things Every Woman Should Know About Social Security,” the agency notes that some women have signed divorce decrees giving up their rights to divorced spousal benefits, but says such clauses “are worthless and never enforced.”

So if she’s entitled to a bigger benefit from her ex’s record than from her own, she can claim it.

A divorced spousal benefit doesn’t decrease the ex’s benefit, or the benefit of any of the ex’s subsequent spouses. Trying to prevent someone from claiming a divorced spousal benefit is mean-spirited as well as pointless.

Q&A: Trust in the flexibility of living trusts

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Dear Liz: Is naming a beneficiary for a nonretirement, “payable on death” account as effective as putting the account in a living trust? It seems easier than doing all the paperwork each time I open an account, but is it a good idea?

Answer: Both living trusts and payable on death accounts avoid probate, the court process that otherwise typically follows death. But living trusts offer more flexibility and control.

Let’s say you want to benefit two relatives equally, and are leaving a savings account to one and a brokerage account to the other. The balances of the two accounts may be roughly equal today, but could be dramatically different by the time you die. A trust allows you to divvy up your assets regardless of where the money is kept.

Trusts also allow you to put restrictions on how money is spent, which can be important if your heir is a minor child, a spendthrift or someone reliant on public benefits. Payable on death accounts don’t allow restrictions.

Should you become incapacitated, the successor trustee of your living trust could access trust assets to pay for your care. Beneficiaries of payable-on-death accounts can’t get to the funds until you die, so a court procedure may be necessary to provide for you.

After you die, the person settling your estate probably will need money to cover your burial and funeral expenses, pay your bills and final taxes and perhaps get your house ready for sale. If the needed funds have already been distributed to beneficiaries of payable on death accounts, this person might be faced with asking for funds to be returned or paying out of their own pocket, says Jennifer Sawday, an estate planning attorney in Long Beach.

There’s also the piecemeal nature of payable on death accounts. Keeping track of and updating beneficiaries can be a chore. If a beneficiary dies before you, that can create administrative problems as well.

Payable on death accounts can be a low-cost solution for people who don’t have much money and who can’t afford to pay for a trust. If you already have a trust, though, it makes sense to use it.

You typically don’t have to update your living trust every time you open a new account, by the way. Discuss the issue with your estate planning attorney, but typically all that’s needed is to add the account to the schedule of assets that’s usually at the end of your trust document.

This week’s money news

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This week’s top story: Harris v. Trump on student loans. In other news: What the Fed’s rate cutting plans mean for the housing market, what small-business owners need to know about digital security, and how to watch football without cable.

Harris v. Trump on Student Loans: Where the Candidates Stand
As president, Harris would likely champion student loan relief and free community college. Trump would likely restrict or dismantle loan forgiveness and promote access to non-traditional degrees.

What the Fed’s Rate Cutting Plans Mean for the Housing Market
If lower mortgage interest rates are finally here, what does that portend for potential home buyers, refinancers and sellers?

What Small-Business Owners Need to Know About Digital Security
Any small-business that has an online presence may be vulnerable to digital security breaches and cyber attacks. Consulting with professionals and being proactive about policies can help protect your business.

How to Watch Football Without Cable
Finding all the football on TV isn’t as easy as it used to be, but there are good options for every fan.

Q&A: More about health savings accounts and the ‘deathbed drawdown’

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Dear Liz: I just read your column on HSA accounts. I was with you right up until “deathbed drawdown.” I sincerely hope that I am not thinking about my HSA when I am nearing death. I’d just rather pay the tax.

Answer: That’s certainly your prerogative, but financial planners note that good record keeping can allow those with large HSA balances to avoid an otherwise unnecessary tax bill.

HSAs offer a rare triple tax break: contributions are tax-deductible, the money grows tax deferred and withdrawals are tax free when used for qualifying medical expenses. Furthermore, HSAs can be rolled over from year to year and invested for growth, which has led some people to accumulate substantial sums as a supplement to their retirement funds.

Fortunately, you don’t have to take a withdrawal in the same year you incur an unreimbursed medical expense. As long as the expense was incurred after you established the HSA and before your death, it can justify a tax-free withdrawal years or even decades later. Those who have kept good records of their unreimbursed medical expenses can justify last-minute withdrawals if necessary.