Ask Liz Weston

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Liz Weston

Q&A: Vehicle insurance coverage limits

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Dear Liz: You recently answered a question from someone who lent a van to a friend for more than a year. You mentioned the borrower “may have benefited from free insurance coverage if you continued to pay those premiums.” Some insurance companies limit the time they extend coverage when a car is driven by someone other than the owner or immediate family. Our insurance has a four-month limit.

Answer: That’s a good point. Insurers often require that anyone who regularly uses a vehicle be added to the insurance policy as a driver. In addition, someone who borrows a vehicle and who is otherwise uninsured might want to consider getting a non-owner insurance policy. This wouldn’t cover damage to the vehicle but would provide liability coverage in case of an accident.

How to make summer camp more affordable

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To create a fun but affordable summer for her daughters, ages 11 and 13, Flossie McCowald plans out camps well in advance. The Pennsylvania resident snags early bird discounts, takes advantage of a church-based sleepaway camp that offers scholarships and leverages sibling discounts.

“Every little bit helps,” says McCowald, who is the founder of SuperMomHacks.com, where she writes about parenting.

That’s especially true when camp is more expensive than ever. “We’re in an inflationary environment, and camp is no exception,” says Tom Rosenberg, president and CEO of the American Camp Association, which represents camps and industry professionals. He adds that camps are facing price increases across every major cost category, including staffing, insurance and transportation.

In Kimberly Palmer’s latest for the Associated Press, learn how to make summer camp more affordable.

This week’s money news

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This week’s top story: Smart Money podcast on the future of college debt, and rent vs. buy (with a dog). In other news: Record levels of debt, how trusts can support loved ones with mental illness, and Fed has ‘moved a long way’ but doesn’t promise rate hike pause.

Smart Money Podcast: The Future of College Debt, and Rent vs. Buy (With a Dog)
This week’s episode starts with a discussion on the future of college debt.

The Worst Inflation of All: Record Levels of Debt
Money News & Moves: Battle adding more debt, and if you’re struggling to pay bills on time, take action in days, not weeks.

How Trusts Can Support Loved Ones With Mental Illness
Setting up a loved one with a mental illness for financial stability often requires an estate planning tool like a trust.

Fed Has ‘Moved a Long Way’ — But Doesn’t Promise Rate Hike Pause
The federal funds rate level is now 5% to 5.25%.

Q&A: This spouse wants to keep an inheritance secret from the other spouse. Here’s a better idea

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Dear Liz: A good friend is leaving me money from her IRA after she dies. I have asked that the gift be designated as “sole and separate property” to me. As I am married and file joint state and federal taxes, can this money be kept separate for my use only? I prefer that my spouse not be made aware of this as they have different ideas about how to use our money.

Answer: Inheritances can be kept as separate property even in community property states where other assets acquired during marriage are considered jointly owned. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

An inherited IRA, however, would be tough to keep secret if you file taxes jointly with your spouse. You’ll be required to take yearly minimum distributions to empty the account within 10 years, and those withdrawals will be taxed as income.

Few couples are entirely on the same page about money, but keeping financial secrets from each other generally isn’t the best way to cope with these differences. Instead, many people find it helpful to have some “no questions asked” money that they can spend as they please without consulting their partner.

Q&A: Social Security survivor benefits

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Dear Liz: My beloved brother died recently. He was 70, retired and collecting Social Security. His husband, age 63, is still working. They had been married since 2008 but when he applied for survivor benefits, he was denied. Several in our friend group looked into this and the way we all read it, he should be entitled to survivor benefits. What are we not understanding?

Answer: Your brother-in-law wasn’t denied a survivor benefit, precisely. He just earns too much to receive one.

If your brother-in-law was born in 1960, his full retirement age is 67. People who apply for Social Security benefits before their full retirement age are subject to the earnings test, which reduces their benefit by $1 for every $2 they earn over a certain limit, which in 2023 is $21,240.

The earnings test will go away once he turns 67. At that point — or earlier, if he reduces his work hours and earnings sufficiently — he will have a choice between starting a survivor benefit and starting his own, with the option to switch later. If he’s earned a sizable benefit on his own work record, for example, it could make sense to start the survivor benefit and allow his own benefit to grow until it maxes out at age 70. A claiming strategies site, such as Maximize My Social Security or Social Security Solutions, can help him choose the right course, or he could consult a fee-only financial planner.

Q&A: When WEP doesn’t apply

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Dear Liz: I am a retired police officer who worked for an organization that did not pay into Social Security or Medicare. During my career I worked side jobs and paid my own self-employment taxes to get my 40 quarters to qualify for Medicare once I reach age 65. I did have Social Security earnings for about eight years prior to my law enforcement career. My understanding is any Social Security I would otherwise be entitled to will be wiped out by the windfall elimination provision. The WEP calculator on Social Security’s website isn’t user friendly so I can’t tell if I will lose all or a portion of my Social Security to WEP.

Answer: Your own Social Security benefit won’t be wiped out. The windfall elimination provision can reduce your Social Security retirement benefit by up to half when you get a pension from a job that didn’t pay into Social Security.

By contrast, another provision called the government pension offset (GPO) can and often does eliminate Social Security benefits, but only those based on someone else’s work record, such as spousal or survivor benefits.

Also, you misunderstood how Medicare works. You need to work 40 quarters to qualify for a Social Security retirement benefit, but you can qualify for Medicare at age 65 as a U.S. citizen regardless of your work history.