Ask Liz Weston

Get smart with your money

Liz Weston

Gift cards aren’t gifts

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gift-cardsIf it’s the thought that counts, then gift cards don’t count much at all.

They’re popular, granted. Six out of 10 people responding to National Retail Federation surveys this year said they wanted to receive gift cards for the holidays, and more than half said they planned to give them.

The rest of us may think of gift cards as a cop-out. Gift cards are what you give when you don’t have a clue what makes the recipient tick and can’t trouble yourself to find out.

In my latest for the Associated Press, why it makes more sense to give cash this holiday season instead of gift cards, and why the search for the perfect gift still matters.

Tuesday’s need-to-know money news

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shutterstock_38185810-2Today’s top story: How to tell your checking account is the right fit. Also in the news: Tips for handling holiday financial stress, financial concepts you’ll actually use, and important things to know about 529 college savings plan withdrawals.

5 Ways to Tell If Your Checking Account’s the Right Fit
Avoid excess fees.

5 Tips for Handling Holiday Financial Stress
More celebrating, less stressing.

6 Financial Concepts You’ll Actually Use
Applying concepts to everyday life.

4 important things to know about 529 College Savings Plan withdrawals
They aren’t necessarily tax-free.

Monday’s need-to-know money news

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Zemanta Related Posts ThumbnailToday’s top story: NerdWallet’s best credit card tips for December. Also in the news: How to tell if a Roth 401(k) is for you, why postdating checks is a waste of time, and how many credit cards you should have.

NerdWallet’s Best Credit Card Tips for December 2016
Just in time for holiday spending.

How to Tell If a Roth 401(k) Is for You
Choosing the right retirement savings.

Postdating Checks Is a Waste of Time — Here’s Why
Not worth the risk.

How many credit cards should you have?
What’s the magic number?

Q&A: Proposition 13 considerations

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Dear Liz: I read your column with some interest since I just had a client who received a life estate from his long-term partner. They neither married nor formed a registered domestic partnership, either of which might have saved my client some bucks.

The Los Angeles County assessor reassessed the property at its full value even though the remainder will go to my client’s partner’s children on my client’s death. The property was originally purchased in the 1970s. I’d like to think that I or any other estate planning lawyer could fashion a satisfactory work-around for this potential problem faced by folks who wish to give a life estate to someone without Proposition 13 protection and the remainder to someone with that protection.

Of course, one must always bear in mind that the tax tail should not wag the business dog, so a weighing of burdens and benefits is always in order in any plan.

Answer: Here’s another case where stinting on an estate planning attorney’s fee probably cost the heirs vastly more.

For those of you who don’t live in California, Proposition 13 limits property taxes to 1% of the assessed value, and assessments typically can’t increase more than 2% a year until the home changes hands. The lower “Prop. 13” value of a home can be inherited by the children, which means their tax bill would be a fraction of that owed by someone who purchased a similar property more recently.

Instead, the property in question lost its Proposition 13 protection and its tax bill more than tripled.

Q&A: Transferring property after death

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Dear Liz: Just a quick comment on the woman who contemplated transferring her house to her partner and daughter as joint tenants. One must always consider the property tax impact on such transfers. In Los Angeles, real property that is transferred to a transferor’s significant other who is not the spouse or domestic partner will ultimately be reassessed by the county assessor. There are a number of property tax reassessment exclusions on transfers, such as from a parent to a child, from a person to his or her revocable trust and between spouses. This is why all factors must be considered before such a transfer is made.

Answer: A revocable transfer on death deed allows real estate to avoid probate in many states, but this option shouldn’t be used before thoroughly researching the consequences and consulting an estate planning attorney. Read on for an actual case where an ill-considered transfer had big financial consequences.

Q&A: Does moving to a new state necessitate a new living trust?

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Dear Liz: My husband and I have a revocable trust that was drawn up in Florida. We live in California now. We are renting and don’t own a house. Do we still need a trust if we don’t own property and have just one adult child to leave our financial funds to? One tax planner wants to charge us $1,800 to revise our trust to comply with California laws. That sounds high to me. What do you recommend?

Answer: Any time you move across state lines, you should have your estate documents reviewed and — probably — revised. State laws differ, and in this case you moved from a common law state to a community property state, where the rules differ a lot. Property acquired during marriage in a common law state isn’t automatically owned by both spouses, while in community property states, it typically is.

“Property,” by the way, doesn’t just refer to real estate. It refers to pretty much all your assets, including financial funds.

A relatively simple revocable living trust typically costs $2,000 and up, so the price you were quoted does not seem high, but you can check with one or two other estate planning attorneys if you want to compare costs.