Ask Liz Weston

Get smart with your money

Liz Weston

Q&A: Successor trustee can use estate funds to hire help

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Dear Liz: I have named my daughter as executor of my revocable living trust. I am concerned that she may not have the ability to carry out all of the functions required of an executor. Are there entities she can hire using trust funds to fulfill her duties?

Answer: Technically, an executor is a person who settles an estate through probate court. Because you have a living trust, your estate should avoid probate court, and your daughter’s role is known as a “successor trustee.”

The jobs of executor and successor trustee are much the same after a death. They’re required to inventory assets, pay your final bills, file your last tax returns and distribute your assets according to your estate documents. Both executors and successor trustees are allowed to use estate funds to hire any help needed, including an attorney and a tax pro. If you’re already working with professionals you trust, make sure she has their contact information.

Q&A: Claiming Social Security when the higher earner is younger

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Dear Liz: I am three years younger than my spouse. I have been the primary breadwinner with significantly higher earnings over our 31 years of marriage as he was a stay-at-home dad for many years. Taking my spousal benefit will be much higher for him than his own, even if he waited until he was 70. Do I have to have filed myself in order for him to be able to claim a spousal benefit, or can he claim it when he turns 67 even if I do not file for another three years (when I turn 67)?

Answer: Your spouse won’t be eligible for a spousal benefit until you apply for your own. He could, however, get his own benefit for a few years and then switch to yours once you apply.

The ability to switch from one benefit to another is typically limited. If you were already receiving your benefit, for example, he wouldn’t be able to choose between his own and a spousal benefit when he applied. He would be “deemed” to be applying for both, and get the larger of the two.

One more thing to consider: Since you’re the higher wage earner, it’s important for you to maximize your own benefit because it’s the one that determines how much the survivor will get. Usually the best course is to wait until your benefit maxes out at age 70, but other factors, including health and potential spousal benefits, should also be factored in. Consider using a Social Security claiming calculator or talking with a financial planner to determine the best strategy for your individual situation.

Q&A: Changing your married name? Expect a mound of paperwork

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Dear Liz: I use my first name, maiden name and married last name as my legal name. Just before we got married 46 years ago, I told my husband-to-be that I didn’t want to take his last name. I lost that argument. If he passes before me, I want to drop his last name. I know I would need to change my Social Security card but would I need to change everything else like my house deed?

Answer: Yes. Whenever you change your name, you can expect a mound of paperwork. You’ll start by changing the name on your identification cards, including Social Security, your driver’s license and your passport. Be sure to notify Social Security before filing your tax return, since the IRS uses Social Security records to verify your identity.

After your IDs are updated, you’ll change the name on other paperwork, such as voter registrations, property deeds, the U.S. Postal Service, banks, insurance companies, utilities and so on.

When you married, your marriage certificate and your previous identification cards were likely all you needed to update IDs. Had you divorced, you could have included the name change as part of the paperwork to help change your identification cards. In other situations, you typically need to get a court order to legally change your name. Filing fees depend on where you live. In California, for example, you can expect to pay between $435 to $450 and the process typically takes two or three months.

Q&A: Spousal benefits require “one continuous year” of marriage

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Dear Liz: I want to apply for a benefit based on my spouse’s Social Security but how long do we have to have been married? I was not eligible until the Social Security Fairness Act changed the rules. We have been married for four years in May. I am not receiving Social Security benefits since I worked for over 30 years for the government and do not have enough credits to qualify based on my earnings.

Answer: You typically need to be married for “one continuous year” before applying for a spousal benefit, according to the Social Security Administration.

Had you divorced, the rules would be different. Divorced spousal benefits require the marriage to have lasted at least 10 years, and two years must have passed since the divorce.

For those who don’t know, the Social Security Fairness Act repealed the windfall elimination provision and the government pension offset that reduced or eliminated Social Security benefits for people who received pensions from jobs that didn’t pay into Social Security.

The Social Security Administration says most affected people will see their adjusted payments starting in April. Those who never applied for Social Security because of the old rules can do so now.

Q&A: Sale of last home can trigger capital gains taxes

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Dear Liz: I am 74 and my husband is 68. We have decided to sell our last home and rent. Do we have to pay taxes, specifically capital gains, on the sale of our last home or are we able to keep the sale proceeds in full?

Answer: Any home sale is potentially subject to capital gains taxes. Your gain is determined by subtracting your tax basis — the price you paid for the home, plus any qualifying improvements — from the net sales proceeds. If you owned and lived in the home as your primary residence for at least two of the previous five years, you can exclude up to $250,000 (or $500,000 if married filing jointly) of home sale profits. You would owe taxes on the capital gains that exceed those limits.

A large-enough capital gain could affect how much you pay for Medicare. The “income-related adjustment amount,” or IRMAA, is based on your income two years prior, so a big gain in 2025 could increase your premiums in 2027.

You’d be smart to talk to a tax pro before you sell so you understand the ramifications.

Q&A: Bowing out of trustee duty

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Dear Liz: My husband agreed to serve as successor trustee for his brother’s living trust several years ago. My brother-in-law also added me as a backup. My brother-in-law’s financial situation has gotten very complicated and we would like to be removed as trustees. How do we go about this removal? My husband has asked his brother to see the lawyer who drafted the trust so they can both discuss the change, but his brother has ignored this request for several months.

Answer: A successor trustee’s role is similar to that of an executor. Both are charged with settling someone’s estate. Being asked to serve is an honor, since the person choosing you is saying they expect you will act with honor, integrity and prudence. But you can’t be forced to serve, even if you initially said yes.

Your brother-in-law may have already named other alternatives. If not, a court can appoint someone. This would undermine one of the benefits of a living trust, which is to avoid a court’s involvement in settling an estate. But that’s ultimately your brother-in-law’s problem to solve, not yours.

Before you bail, though, understand that as successor trustee or executor, you don’t have to be a legal or tax expert. You can use the estate’s resources to hire people to help you — and in all but the simplest estates, you probably should.

Of course, financial complications can lead to other complications — family fights, disgruntled heirs and so on. You may no longer have the energy or willingness to face such difficulties. If that’s the case, you’ve given your brother-in-law the heads-up he needs to make other arrangements.