Ask Liz Weston

Get smart with your money

Liz Weston

Wednesday’s need-to-know money news

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Today’s top story: Finances for same-sex couples – what to consider before saying ‘I Do.’ Also in the news: Use caution when giving gift cards for grad gifts, how loved ones can destroy your finances, and what airlines owe you for an overbooked flight.

Finances for Same-Sex Couples: 7 Things to Consider Before ‘I Do’
Taking a big step.

This Graduation Money Gift Can Disappear Before It’s Spent
Pay close attention to those gift cards.

How Loved Ones Can Destroy Your Finances
Money and emotional ties can be a bad mix.

What does airline owe you for overbooked flight?
It might be more than you think.

Money hacks for real people

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Everyone loves a hack — an uncommon solution to a common problem. There’s a reason so much of the internet revolves around things like “This One Little Trick” and “The Secret Doctors Don’t Want You to Know.”

Sometimes money hacks evolve from details buried in the fine print. Wealthy people employ professionals who seek out financial loopholes and aggressively exploit them.

But not every hack requires an accountant. Some can spur you to save more money for retirement or help you to pay bills on time every time. In my latest for the Associated Press, do-it-yourself hacks to make life easier.

Tuesday’s need-to-know money news

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Today’s top story: How to take the heat off your summer budget. Also in the news: How to find out if you’ll owe taxes on an inheritance, 3 things your student loan servicer might not tell you, and what happens to your credit score when you transfer a balance.

How to Take the Heat Off Your Summer Budget
Keep your costs in check.

Find Out If You’ll Owe Taxes on an Inheritance
Don’t spend all that money quite yet.

3 Things Your Student Loan Servicer Might Not Tell You
They’re not always forthcoming.

What Happens to Your Credit Score When You Transfer a Balance?
Looking at the numbers.

Monday’s need-to-know money news

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Today’s top story: How to get a tax deduction for moving. Also in the news: Learning about penny stocks, how to deduct graduate school on your taxes, and how to find and purge unwanted recurring charges.

Moving for Work? How to Get a Tax Deduction
An unexpected housewarming gift.

What Is a Penny Stock? An Investment Most Should Avoid
Is it worth the risk?

Deduct Graduate School on Your Taxes? It’s Possible
Looking at the qualifications.

Find and Purge Unwanted Recurring Charges with This Virtual Assistant
Cancel those long-forgotten subscriptions.

Q&A: When generosity becomes a taxing issue

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Dear Liz: I recently came into some money, and I would like to share it with my family. I understand that there are annual tax caps on how much you can give to someone ($14,000 per person per year). However, does this limit apply only to cash and cash equivalents or also to any other gifts? For instance, can I pay off a sibling’s student loan for more than $14,000 without running afoul of the limits?

Answer: There’s no cap on how much money you can give to another person. But if you give more than $14,000 to any one person, you have to file a gift tax return (IRSForm 709). You won’t actually owe gift taxes until the amount you give in excess of that limit totals more than $5 million. (The precise limit this year is $5.49 million and it’s scheduled to rise by the rate of inflation in coming years.)

Paying most bills, including student loans, on behalf of another person counts as part of that $14,000 limit. The only exceptions are if you pay someone’s tuition, medical expenses and health insurance. To avoid the limit, you would have to pay the bills directly to the provider (such as the school, doctor, hospital, insurance company and so on). If you give the money to the person to pay these expenses, it counts as part of the $14,000 exemption.

Some people keep rigidly to the $14,000 limit to avoid having the excess gifts reduce their estate tax exemption. (Gifts over the $14,000 limit are added back into a person’s estate at death, and the prevailing estate tax exemption — which is also currently $5.49 million — is deducted from that enhanced total.)

If you aren’t a multimillionaire, though, this probably isn’t something you need to worry about. If you go over the $14,000 per person limit, you just have to deal with a little paperwork.

Q&A: How one spouse’s bankruptcy filing affects the other spouse

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Dear Liz: If one spouse files for bankruptcy, how does that affect the other spouse? What happens to the joint accounts?

Answer: How the nonfiling spouse is affected depends on whether they live in a community-property or a common-law state.

Most states are common-law states. Property and debts acquired during marriage can belong to only one spouse.

In these states, the filing spouse’s separate property and their share of any jointly owned property become part of the bankruptcy. Any property that isn’t protected under the state’s bankruptcy exemption laws can be taken and sold to pay creditors.

The bankruptcy trustee may try to partition any joint property so only the filing spouse’s share is sold, but if that’s not possible the whole property may be sold and the nonfiling spouse will be paid for his or her share. The bankruptcy erases the filing spouse’s separate debts and share of any joint debts, but the nonfiling spouse still has to pay his or her share of those joint debts.

In community-property states, property and debts acquired during marriage typically belong to both spouses, even if they’re in only one spouse’s name. So a bankruptcy filing by one spouse in a community property state can put more property at risk. (Community-property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.)

As in common-law states, a completed bankruptcy erases the filing spouse’s debts but leaves the other spouse on the hook for his or her share of any joint debts.

In community-property states, though, the nonfiling spouse can get a benefit known as a “phantom discharge.” If the filing spouse gets debts wiped out and is able to protect community property under the state’s exemption laws, then that property stays protected. As long as the couple is married, creditors won’t be able to touch it.

Bankruptcy has gotten complicated enough that you’ll want to get good, solid advice from an experienced bankruptcy attorney before you proceed with any filing. Most such attorneys offer a free or low-cost initial consultation to discuss whether it’s the right solution for your situation. You can get referrals from the National Assn. of Consumer Bankruptcy Attorneys at www.nacba.org.