Ask Liz Weston

Get smart with your money

Liz Weston

Q&A: Can an adult child inherit a deceased parent’s Social Security payments and pension?

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Dear Liz: My mom passed away recently. She had a teacher’s pension as well as Social Security benefits. Am I eligible to receive part of her benefits? If so, what steps must I take?

Answer: Social Security survivor benefits are meant to help a deceased worker’s dependents. Dependents include spouses, minor children and disabled children, as long as the disability started before the child turned 22. If you qualify, contact Social Security at (800) 772-1213.

Similarly, pension survivor benefits are typically limited to spouses and dependent children. You may be eligible for a one-time death benefit, if your mother named you as her beneficiary. Contact the pension administrator for details.

Q&A: Should this reluctant retiree pay an advisor?

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Dear Liz: I’m about to retire. A friend’s money manager has done well by her, doubling her portfolio in five years. This manager would charge a 1.5% fee to take control of my money, invest it, and generate income to supplement my Social Security. My heart is truly uncomfortable turning over control of my life savings to professional management, even though my head tells me it makes sense. Would a fair compromise between my heart and head be to pay a financial advisor to tell me what to do, but allow me to retain control of my hard earned savings?

Answer: Yes. You may have to search a little harder to find such an advisor, but you could be better off.

First, don’t be too impressed by a manager who doubled a portfolio in the last five years. An investment in a plain vanilla S&P 500 index fund would have performed about as well, at a much lower cost.

Speaking of cost, a 1.5% fee is relatively high for asset management. A 1% fee is much more common. If instead of a money manager you hired a fiduciary, fee-only financial planner — one committed to putting your best interests first — you typically would get comprehensive financial planning advice as well as investment management for that 1%. Such planning could include a tax-smart, sustainable plan for tapping your retirement funds, advice on Social Security claiming strategies, help picking the right Medicare coverage and a review of your estate plan, among other services.

If you’d rather not have someone else manage your portfolio, though, you have other options. The Alliance for Comprehensive Planning (www.acplanners.org) and the XY Planning Network (/www.xyplanningnetwork.com) represent fiduciary, fee-only planners who charge retainer fees. You can find fiduciary, fee-only financial planners who charge by the hour at Garrett Planning Network (www.garrettplanningnetwork.com).

Q&A: Are living trusts a DIY project?

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Dear Liz: I have a living trust. I’ve also got family who have become estranged and priorities that have changed in terms of charities I’d like to benefit. Is there any way to set up a trust that allows me to make these changes without having to pay an attorney?

Answer: There are certainly do-it-yourself options for estate planning. But if you can afford to pay for expert help, why wouldn’t you? Estate planning is complicated, and the cost of making a mistake can be significant. That’s especially true if there are disgruntled family members who could challenge your estate plan.

The good news is that updating a living trust typically costs a lot less than setting it up in the first place. As mentioned in previous columns, you should consider having an attorney review your trust about every five years, and after major life changes.

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.