Ask Liz Weston

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Liz Weston

How to put more in working-class pockets

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The American working class lost a shocking amount of wealth in recent decades as wages stagnated. Despite campaign promises, making up that lost ground will be no easy feat.

Creating more well-paying jobs would help, but that could take years. Tax cuts could mean bigger paychecks for higher earners but won’t immediately help the many working people who don’t pay federal income taxes — people in the bottom 40 percent of incomes receive more back from the federal income tax system on average than they pay in, thanks to tax credits.

Expanding those credits, on the other hand, quickly could make a real difference in people’s lives and help return some of the income that’s been sacrificed to changing economies and technology.

In my latest for the Associated Press, a look at which tax credit expansion would put more money back into working-class pockets.

Tuesday’s need-to-know money news

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Today’s top story: Don’t hit the brakes on uninsured motorist coverage. Also in the news: Giving your child excellent credit, the pros and cons of telemedicine, and how to trim your tax burden.

Don’t Hit the Brakes on Uninsured Motorist Coverage
Protect yourself from the unexpected.

Sean Talks Money: How to Give Your Child Excellent Credit
Making sure they’re on the right track.

Online Medicine: What to Know Before You Sign Up
The pros and cons of telemedicine.

Trim your tax burden by deducting phone, Internet bills
Take advantage of all the deductibles.

Q&A: How to make sure your financial planner is looking out for you

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Dear Liz: As a recent retiree, I opened an IRA with a well-reputed, independent financial planner. I was assured of our fiduciary relationship and told “besides, it will soon be law” that advisors will have to put their clients’ interests first when offering advice about retirement funds.

I guess that whole “soon to be law” thing is out the window along with many other consumer protection regulations. My question is, should I ask my advisor to reaffirm our relationship formally and if so, is there a mechanism available to me to assure this relationship?

Answer: Technically, the U.S. Department of Labor fiduciary rule for advisors is still scheduled to begin taking effect in April, despite fierce opposition from the financial services industry. The Trump administration, however, has asked for a review to see if the rule should be modified or scrapped. That has been widely taken as a signal that the rule may never be enforced, even if it does go into effect.

So yes, retirement savers should continue to be skeptical. One way to make sure that your advisor is ready to put your interests first is to ask him or her to sign the fiduciary oath that you can find at www.thefiduciarystandard.org. The oath was created by a group of financial advisors who think that advice should always be in the clients’ best interests.

Q&A: Which is better: Will or living trust?

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Dear Liz: I am 48 and my wife is 45. Should we set up a will or a living trust? Which is better?

Answer: One of the major differences between wills and living trusts is whether the estate has to go through probate, which is the court process that typically follows death. Living trusts avoid probate while wills do not.

Probate isn’t a big problem in many states, but in some — including California — it can be protracted, expensive and often worth avoiding. Another advantage of living trusts is privacy. While wills are entered into the public record, living trusts aren’t.

Living trusts can help you avoid another court-supervised process called conservancy. If you’re incapacitated, the person you’ve named as your “successor trustee” can take over management of your finances without going to court. To avoid the court process without a living trust, you’d need separate documents called powers of attorney. If you have minor children, your living trust trustee can manage their money for them. If you have a will, you would need to include language setting up a trust and naming a trustee.

One big disadvantage of living trusts is the cost. Although price tags vary, a lawyer typically charges a few hundred dollars for a will, while a living trust may cost a few thousand. Also, there’s some hassle involved, since property has to be transferred into the trust to avoid probate.

There are do-it-yourself options, including Nolo software and LegalZoom, that can save you money if your situation isn’t complicated and you’re willing to invest some time in learning about estate planning. If your situation is at all complicated, though — if you’re wealthy or have contentious relatives who are likely to challenge your documents — an experienced attorney’s help can be invaluable.

Whichever you decide, make sure that you have one or the other before too much longer. Otherwise, when you die, state law will determine who gets your stuff and who gets your kids.

Q&A:Prenup may help with student loan issue

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Dear Liz: You recently heard from someone who discovered after marriage that his wife had more than $100,000 in student loans. Would having a prenuptial agreement help in this situation?

Answer: Possibly. Debts incurred before marriage are considered separate rather than joint debts, but creditors still sometimes try to go after joint assets to get paid. A prenuptial agreement, which is a written contract created before marriage, could help a couple limit liability for each other’s debts.

In this case, the husband was willing to help his wife resolve the debts, but knowing about them before marriage would have been helpful — to put it mildly. The loans probably would have turned up during the financial disclosures required when drafting a prenuptial agreement. Even couples who won’t consider a prenup should pull their credit reports together so each knows what he or she is getting into.

Friday’s need-to-know money news

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Today’s top story: Consumers have a powerful tool in credit card chargebacks. Also in the news: Credit card trends for 2017, how to stay on budget and still have a social life, and deducting your student loan interest.

Consumers Have Powerful Tool in Credit Card Chargebacks
When to dispute a charge.

4 Credit Card Trends for 2017 and What They Mean for You
Going back to basics.

Ask Brianna: How Can I Stay on Budget and Still Hang Out?
You don’t have to give up your social life.

PSA: Don’t Forget to Deduct Your Student Loan Interest
Deducting every penny possible.