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Liz Weston

This week’s money news

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This week’s top story: What the big relators settlement means for home buyers and sellers. In other news: The evolution of retirement and what it might mean for you, next target in Biden vs. junk fees, and dynamic pricing.

What the Big Realtors Settlement Means for Home Buyers and Sellers
The agreement could mean that home buyers would set their own agents’ pay, and sellers might save on commissions.

The Evolution of Retirement — and What It Might Mean for You
From adapting your portfolio to playing more pickleball, here’s how retirement might be shaping up for you.

Next Target in Biden vs. Junk Fees: Colleges, Student Lending
The Biden administration is now tackling fees that fall on college students and student loan borrowers.

Wendy’s Isn’t the First: Dynamic Pricing Is Everywhere
Dynamic pricing uses real-time supply and demand data to fluctuate prices up or down.

Q&A: How capital gains boost Medicare premiums

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Dear Liz: We are retired and living mainly on a pension, which covers our month-to-month needs. We own our house outright and are considering downsizing. When we do that, will the capital gain cause our Medicare premiums to go up two years later? If so, will it automatically go down again after one year?

Answer: A big-enough capital gain can trigger Medicare’s income-related adjustment amount, which are surcharges on your Part B and Part D premiums. As you note, there’s a two-year delay between the higher income on your tax returns and higher premiums.

If you’ve had a life-changing event — marriage, divorce, a spouse’s death or loss of income, for example — you can appeal the increase by filing form SSA-44. Otherwise, consider saving some of the home sale profits to cover your higher premiums for that one-year period.

Q&A: Property transfers trigger tax problem

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Dear Liz: I’m considering giving property (a condo) to my child through a quitclaim deed while I am still living. If she continues to live in the condo for two years after gaining possession, doesn’t she get a $250,000 capital gains exemption when she sells the property?

Answer: Yes, if she owns and lives in the home for at least two of the previous five years, she can exclude up to $250,000 of home sale profits from her income. However, her taxable gain would be based on your tax basis in the property: basically what you paid for the home, plus any qualifying improvements. Only if she inherits the home would the tax basis be updated to reflect its fair market value on the date of your death. Although taxes should never be the sole consideration for property transfers, the favorable step-up in basis may be a powerful incentive to hold off. Consider discussing your options with a tax pro.

Q&A: Can 529 college savings plan fund be used to study abroad?

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Dear Liz: Can my daughter use her 529 funds for summer study abroad in Costa Rica? She will be taking two Spanish classes for credit through her university. She has a minor in Spanish. Could she use the 529 for tuition, living expenses and airfare? What if it is all part of a package deal paid to her university?

Answer: Yes, tax-free withdrawals from 529 college savings plans are allowed for study abroad as long as the classes are accepted for credit by the sponsoring university and the sponsoring university qualifies for federal financial aid (the vast majority of U.S. institutions do).

Qualifying expenses can include tuition, books and supplies, plus room and board if she’s enrolled at least half time. Other living expenses and transportation costs, including airfare, aren’t considered qualifying expenses.

Q&A: Update trusts after life changes

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Dear Liz: My wife and I have a trust created in California to distribute our assets to our children after our deaths. In 2017, we moved to Texas and had the trust updated by a Texas attorney to reflect some changes and any differences between Texas and California rules. We moved back to California in 2020. Do we need to update our trust documents again because of the relocation? Do we need to do it any time we move? The terms in the document are generally fine. I just don’t know if the change in residency requires an update to the document.

Answer: Your last move required updates. Why wouldn’t this one?

Any major life change, including a move to another state, should prompt a review of your estate documents. Such a review is a good idea anyway every five years or so, even if you think nothing has changed in your personal circumstances. Laws can change, or you may have different ideas about who your beneficiaries should be, or whom you want to make decisions for you should you become incapacitated.

People often think (or hope) estate planning can be a one-time process. But life and the law aren’t static, so estate plans need to evolve too.

Worried about money? Ways to keep your kids from feeling your stress

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When it comes to parents and children, money stress can be contagious.

That’s what Amy Weimer, director of the School of Family and Consumer Sciences at Texas State University, found when she and a colleague studied 60 children last year. They were more likely to report feeling worried if their parents were experiencing long-term financial stress.

“As a parent, if I know I’m in deep debt, I would want to do something to address that issue so it doesn’t trickle down and have an impact on my child’s mental well-being,” Weimer says. Parents may want to seek financial counseling to help with debt management, for example, if they are experiencing financial strain, she adds.

According to researchers and financial professionals, there are also other steps parents can take to help teach their children about money without sharing their financial worries with them. In Kimberly Palmer’s latest for the Seattle Times, learn ways to keep your kids from feeling your stress.