Ask Liz Weston

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Liz Weston

This week’s money news

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This week’s top story: 3 side gigs for full-time working moms. In other news: Two key student debt relief programs expire Sept. 30, weekly mortgage rates, how to score a low personal loan rate in 2024.

3 Side Gigs for Full-Time Working Moms
Four moms share side gigs that are flexible and provide solid sources of extra income for their families.

Act Now: Two Key Student Debt Relief Programs Expire Sept. 30
If you have defaulted student loans or you’ve been skipping payments, you need to act by Sept. 30, 2024 — before the on-ramp and Fresh Start programs expire.

Weekly Mortgage Rates Stand Still as Housing Market Cools
They’ve fallen more than a percentage point in the last four months, and lots of people are waiting for them to drop even more before they press play.

How to Score a Low Personal Loan Rate in 2024
Borrowers who maintain high credit scores and low debt-to-income ratios have the best chances at getting a low personal loan rate.

Q&A: My house grew, but not my insurance policy

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Dear Liz: My home insurer has outdated specifications for my home that seem to come from public records (the house has more bedrooms and is larger now). So the estimated replacement cost can’t be anywhere near accurate. What’s the best way to provide them with authoritative information that would leave no doubt what we need to rebuild if that becomes necessary? An appraisal?

Answer: An appraisal may be overkill, but you’re long overdue for a conversation with your insurance agent.

Ask the agent to calculate the cost to rebuild your home given the actual square footage and other features. Insurers use proprietary systems to calculate these costs, so you may also want to check with two or three other companies. Also consider talking to a local contractor or two to find out the average cost to rebuild in your area.

Going forward, you should be checking to make sure your coverage is adequate every two or three years and after any major improvements.

Your premiums are likely to rise, perhaps substantially, once your insurer has the correct information. But your policy will do what it was designed to do, which is to protect you from a catastrophic loss. Otherwise, you could be left without enough money to rebuild.

Q&A: Looking to Medicaid to pay for assisted living

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Dear Liz: I am going to sell my house, pay back my reverse mortgage, spend down and go on Medicaid in order to pay for assisted living that I need. What are some good resources I can contact to help me navigate all this? I have done a lot but am still needing more help.

Answer: Medicaid, the government health insurance program for the poor, typically doesn’t cover the room and board costs of assisted living, but many states offer Medicaid waivers that pay some assisted living expenses. Even if you qualify, though, there are typically a limited number of waivers available and you may be put on a wait list.

You definitely shouldn’t sell your home or spend down your resources before consulting with an expert. You can contact the National Academy of Elder Law Attorneys (NAELA) for a referral to a lawyer who specializes in this complex area or use the American Council on Aging’s free locator tool to find a Medicaid planner.

Q&A: These major financial decisions shouldn’t be DIY projects. Talk to an expert!

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Dear Liz: I anticipate being dead soon (cancer). I have established an irrevocable trust for my 8-year-old child, with my 47-year-old wife as the trustee. With respect to taxes and other issues and naming beneficiaries, what is the optimal strategy regarding my child for life insurance and traditional and Roth IRAs? My wife will get the 401(k).

Answer: The best person to answer those questions is the estate planning attorney you (presumably) used to create the irrevocable trust. Estate planning should not be a do-it-yourself activity, particularly when minor children are involved. The wrong plan could give too much too soon to your child, or tie up the money too long. You also don’t want to unreasonably stint your wife in your efforts to preserve money for your child. Also, the optimal strategies for tax purposes may not be the best for your family’s situation.

For example, the best way to minimize taxes may be to leave all the retirement money to your wife. Spouses who inherit retirement funds have the option of treating the accounts as their own. That means your wife wouldn’t have to begin required minimum distributions from the 401(k) or the traditional IRA until she’s 75. (The current RMD age is 73, but it rises to 75 for people born in 1960 and later.) She would not have to take distributions from a Roth IRA she inherits from you.

Non-spouse heirs generally have to drain retirement accounts within 10 years. Minors who inherit retirement funds don’t have to take the first distribution until they turn 21, but then the accounts must be emptied within 10 years.

Life insurance proceeds typically aren’t taxable, or payable to a minor child. But you can create a trust to receive and dole out the proceeds to your child. Your estate planning attorney can help you set this up.

This week’s money news

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This week’s top story: First-time home buyer affordability report – Q2 2024. In other news: September mortgage outlook, weekly mortgage rates drop, and pay interest while in school.

First-Time Home Buyer Affordability Report – Q2 2024
Making a larger down payment or choosing a less desirable home could make this initial purchase easier, but not all homebuying hopefuls will find those options possible.

September Mortgage Outlook: Rates Should Fall Again
Mortgage rates have fallen four months in a row, and they’ll probably go down in September and extend the streak to five months.

Weekly Mortgage Rates Drop, Easing Affordability
Mortgage rates fell this week after the chair of the Federal Reserve uttered long-awaited, market-moving words.

Want Cheaper College? Pay Interest While in School
Making optional student loan payments while you’re in school or during your grace period can save thousands in the long-run.

Q&A: After her husband died, a widow’s credit limit plummeted

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Dear Liz: You’ve mentioned how important it is for spouses to each have credit cards on which they are the primary account holder. My husband died last year. We had a credit card with statements that showed the charges we each had made on our separately numbered credit cards. I found the account was in his name only. I had to get a new credit card in my own name, and the credit limit dropped from $75,000 to $7,000. Hope this warns others.

Answer: It bears repeating that most credit cards these days are not joint accounts. If two of you are using a card, one is probably the primary account holder and the other the authorized user.

After a primary account holder dies, credit card companies are often willing to work with surviving spouses who were authorized users to establish new accounts. But as you experienced, the credit limits for these new accounts may be much lower than those of the original.