Ask Liz Weston

Get smart with your money

Liz Weston

Q&A: Transferring bonds after a spouse dies

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Dear Liz: In 2001 I bought $50,000 worth of I Bonds. Half of them were in my name with my wife as beneficiary; the other half were in her name with me as beneficiary. She died two years ago but I do not want to cash her bonds in. How do I get them in my name without selling and repurchasing?

Answer: You can have the bonds reissued in your name alone because you were named as the beneficiary. The reissued bonds will be in electronic form, so if you haven’t already, you’ll need to create an account with TreasuryDirect, which is operated by the U.S. Department of the Treasury. If you have questions, you can reach the site’s call center at (844) 284-2676 from 8 a.m. to 5 p.m. Eastern time Monday through Friday.

Q&A: Explaining required minimum distributions

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Dear Liz: When my wife reached age 59½, we initiated required minimum distributions for all of her retirement funds. During the process, the investment company representative stated that as long as she was still working and contributing to her 401(k) and 403(b) at work, she was not required to take RMDs for those accounts. With all the changes lately in those types of accounts, is that still the case, or has the law changed?

Answer: Minimum distributions have never been required at age 59½ from any retirement fund. That’s the age at which people no longer have to pay penalties for accessing their retirement funds, not the age at which they must start taking money out.

The current age at which retired minimum distributions must begin is 73, and it rises to 75 for people born in 1960 and later. If your wife is still working at that point, she can put off RMDs from the retirement plans sponsored by her current employer. RMDs will still be required on other retirement accounts, such as IRAs and 401(k)s or 403(b)s from a previous employer. The other RMD exception is for Roth accounts, which don’t have RMDs for the account owner.

Generally you want money to stay in tax-deferred retirement accounts as long as possible. Unnecessary distributions just increase your tax bill and can reduce the amount you have to live on later in life.

If your wife has already taken a distribution, she has 60 days to roll it over into an IRA and avoid taxation.

Tax law can be confusing and mistakes can be expensive. Please use this experience as a reason to hire a good tax pro who can answer your questions and ensure you don’t make another potentially expensive misstep.

Smart steps to take when helping your grandchildren financially

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In his early 20s, Chris Chen’s nephew dreamed of becoming a professional photographer, but to pursue that dream, he needed equipment that cost over $5,000. His nephew worked hard to save $1,500, then his maternal grandmother provided an additional $750. Chen, a certified financial planner in Newton, Massachusetts, covered the rest.

“It helped him understand the value of money,” Chen says of his nephew, who now earns his living as a photographer.

Grandparents — and other family members — often have the best intentions when it comes to helping their grandchildren financially, but experts say they don’t always know how best to do so and can accidentally hurt their own finances along the way.

In Kimberly Palmer’s latest for the Seattle Times, learn smart steps to take when helping your grandchildren financially.

This week’s money news

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This week’s top story: December mortgage rate forecast. In other news: 2024 housing trends, 5 steps to creating financial boundaries during the holidays, and how to make a liberal arts degree count.

December Mortgage Rate Forecast: Falling and Heading Lower
Mortgage rates are likely to slip a bit lower in December as inflation cools.

2024 Housing Trends: Lower Rates, Lower Rents, More Affordability
The housing market could be a little friendlier to home buyers and renters in 2024.

5 Steps to Creating Financial Boundaries During the Holidays
Establishing parameters for your money this season can set you up for financial success in 2024.

No STEM Major, No Problem: How to Make a Liberal Arts Degree Count
A liberal arts degree can help you land a great job, too — as long as you plan ahead.

Q&A: Transferring a house to heirs

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Dear Liz: We are updating our estate plan to account for the transferral of our home to our six children when we die. The home currently has a large mortgage balance on it. We would prefer that it not have to go through probate, and that any outstanding mortgage balance would not be immediately due. I know there are various options for the transferral, all with pros and cons. Do you have any recommended best practices for our situation?

Answer: Yes. Discuss the situation with an experienced estate planning attorney, who can give you personalized advice. Estate planning can get complicated fast, and expert guidance is typically worth the cost.

Your attorney probably will suggest creating a living trust to avoid probate, the court process for settling an estate. Another way to avoid probate in many states is a transfer-on-death deed. The deed can be a solution for smaller estates, but the trust allows you to transfer other assets in addition to your home, provides for the administration of your estate and helps you plan for incapacity, as well.

You probably don’t need to worry about your lender immediately calling in your loan. Your mortgage may include a clause that technically makes the full balance due if the home is sold or transferred. While the estate is being settled, though, inheritors typically are protected from these clauses by state and federal law as long as payments continue to be made. Your attorney can provide more details on the protections in your state.

With a living trust, your successor trustee will be able to access other funds in the trust to make the payments while the estate is being settled, said Jennifer Sawday, an estate planning attorney in Long Beach. With a transfer-on-death deed, the heirs would be responsible for making the payments.

Inheritors often can assume a mortgage, but having six people own one house would be unwieldy, at best. Most probably, the best solution would be to have the estate continue to make the mortgage payments until the home is sold.

Q&A: Why debt settlement companies are the wrong way to deal with high credit card debt

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Dear Liz: Finance companies claim if you owe too much credit card debt that by law you need not pay it all back, but can retire some or most of this debt. They say this is not a credit card debt reduction program through balance transfers or debt consolidation loans. It sounds more like a faux semi-bankruptcy declaration. Are you familiar with these programs? They sound too good to be true.

Answer: Most likely you’re seeing advertisements for debt settlement companies. With debt settlement, the debtor stops making payments on their credit card debt, hoping that the issuers eventually will settle for less than what is owed. Results aren’t guaranteed and the process often takes a few years.

As you might expect, not making payments can lead to significant credit score damage as well as creditor lawsuits. In addition, any amounts that are forgiven in this process may be considered taxable income to the debtor. You’ll also pay fees to the debt settlement company if you hire one to handle these negotiations. The fees and taxes can significantly offset any savings achieved through the process.

Most people who struggle with credit card debt would be better off filing bankruptcy or using a credit counseling service’s debt management program.

Debt management programs enable people to pay off what they owe over three to five years, typically at reduced interest rates. Bankruptcy, meanwhile, allows credit card debt to be legally erased without triggering a tax bill. The most common form of bankruptcy, Chapter 7, usually takes just a few months, after which people can begin rebuilding their credit.