Ask Liz Weston

Get smart with your money

Liz Weston

Q&A: Living trust setup costs

By

Dear Liz: A friend of mine contacted an estate planning attorney to do a living trust. The attorney gave her an estimate of $5,900 for this job. My friend is single, never married, no children, does not own property or a business. She has no complex financial situations. She does have a financial planner, who she works with on her investments and retirement funds. I am also thinking of doing a living trust with an attorney, and my situation is similar to my friend’s — very simple. However, I can’t afford $6,000 to do a trust or will. Is this a reasonable cost for a simple estate? It seems high to me; should it be more in the range of $2,500?

Answer: Your friend’s experience is why many people put off estate planning or opt for do-it-yourself solutions when they would really benefit from an experienced attorney’s advice.

Let’s start with this: Not everyone needs a living trust. Living trusts are designed to avoid probate, the court process used to settle estates. But probate isn’t a huge hassle in many states. Even in states where probate is notoriously slow and expensive, such as California, there are simplified processes for smaller estates. Plus, there are a number of ways other than a living trust to avoid probate, including pay-on-death designations for financial accounts and, in many states, transfer-on-death options for vehicles and real estate.

Living trusts have other advantages: They’re typically private, whereas wills must be made public after death. And living trusts usually include a relatively easy way to have someone else make decisions for you if you’re incapacitated. But you can set up something similar by creating powers of attorney for healthcare and finances. Those documents, plus a will, typically cost less than $1,000.

There are self-help legal options online that allow you to create estate plans yourself, and some give you access to attorneys for help. Ideally, though, you would find a lawyer who would charge a reasonable fee to review your situation, offer you personalized advice and draft the necessary documents for you. If you’re having trouble finding someone, ask a tax pro or financial planner for recommendations. If finances are a consideration, avoid law firms with big fancy offices in expensive urban centers and look for those with more modest overhead in outlying areas.

All that said, the amount your friend was quoted could make sense if she has a lot of money. Even without real estate investments, substantial wealth will require substantial estate planning, and that comes with a substantial price tag.

How to fight the ‘pink tax’ amid inflation

By

Trae Bodge, a shopping expert who lives in the New York City area, sees higher prices for products and services marketed to women everywhere: Socks, razors, shampoo and apparel are a few of the product types aimed at women that tend to cost more.

“I don’t know why brands think this is acceptable,” Bodge says. “It’s another punch to the gut as we’re trying to manage our budgets right now,” she adds, referring to rising prices across consumer goods categories due to inflation.

The phenomenon known as the “pink tax,” when products and services aimed at women cost more than their counterparts aimed at men, is well-documented across many goods and services. A 2021 paper co-authored by Stephanie Gonzalez Guittar, assistant professor in the sociology department at Rollins College in Florida, found that women pay more for deodorants and lotions, and that personal care products are increasingly differentiated by gender. For example, lotion for women cost an average of $2.97 per ounce compared to $1.86 for men.

While Equal Pay Day on March 14 focuses on the pay gap between men and women, it can also be a reminder to consider why being a woman so often comes with a higher price tag — and what to do about it. In Kimberly Palmer’s latest for the Associated Press, learn how to avoid paying the pink tax.

This week’s money news

By

This week’s top story: Smart Money podcast on how COVID-19 changed our finances — and our advice. In other news: Ride out fed rate hikes at a credit union, tax tips for crowdfunding, and credit or debit card for kids.

Smart Money Podcast: How COVID-19 Changed Our Finances — and Our Advice
This week’s episode features a roundtable discussion of Nerds reflecting on the financial impact of the COVID-19 pandemic.

Ride Out Fed Rate Hikes at a Credit Union
Credit unions return profits to their members through low fees, better rates on loans and higher rates on savings.

Are GoFundMe Donations Taxable? Tax Tips for Crowdfunding
If you set up a GoFundMe or another crowdfunded campaign in 2022, the money you earned could be considered a nontaxable gift — if you were mindful of the rules.

Credit or Debit Card For Kids: Which Is Best?
Choosing to give a child a credit or debit card depends on age, maturity and the goals for the child.

Q&A: How to get started managing your retirement assets

By

Dear Liz: I’m 72 and still employed with a salary of $80,000. My wife and I have a home with about $1.6 million in equity. We have almost $4 million in real estate investments, $200,000 in stocks, IRAs worth about $250,000 and about $175,000 in cash. Although it may seem like we have a lot, I really have no clue what to do at this time. I worry about the need for long-term care in future for me or my wife, or what would happen if I stopped working and lost that income. I don’t know how to manage the stocks and cash I do have or how to plan for the future. I tried contacting quite a few fee-only financial planners and they all told me they wouldn’t work with me unless I had $500,000 to give them to invest. Any suggestions on where I can get some real advice without giving someone complete control of money that I don’t have anyway?

Answer: You’re describing the “assets under management” model, in which advisors charge a percentage of the assets they manage for clients and often require the clients to have a minimum level of investable assets such as stocks, bonds and cash. This model evolved in part because many people balked at paying directly for comprehensive financial planning, which is time- and labor-intensive.

But this model often isn’t a great fit for people who are just starting out, who don’t want asset management or who, like you, have most of their money in less liquid investments.

Fortunately there are other ways fee-only planners get paid. Some, including those represented by the Garrett Planning Network, charge by the hour. Others, represented by the XY Planning Network and the Alliance of Comprehensive Planners, use the retainer model, in which clients pay monthly or quarterly fees. Interview a few planners from these organizations to find a good fit.

Q&A: Giving a gift without strings

By

Dear Liz: My brother and his wife are living modestly on Social Security and delivering for a food service. Occasionally, I send him some money when I can. I have some money put aside and am able to send him about $5,000 now instead of leaving it to him in my will. (He is six years older.) I am afraid that he and his wife may spend it on a trip or frivolity and will not put it aside for home health or nursing care when they need it. Your thoughts?

Answer: Please make the gift and hope that they do spend it on a trip or something else fun.

According to the U.S. Department of Health and Human Services, someone turning 65 today has about a 70% chance of needing long-term care services. Women typically need care for 3.7 years on average while men need 2.2 years of care.

Medicare, the government healthcare program for people 65 and older, typically doesn’t pay for nursing home and other custodial care expenses. However, Medicaid — the government health insurance program for the poor — does. If your brother and his wife do need custodial care, chances are good they will quickly run through their assets and wind up poor enough that Medicaid will pick up the bills.

The amount you can give them wouldn’t make much of a dent in the bill if they need potentially expensive custodial care someday. Your $5,000 gift would pay for about a month of an in-home health aid, and a couple of weeks in a typical nursing home.

But $5,000 could go a long way in delivering a memorable experience while they still have the health and energy to enjoy it.

Q&A: Social Security survivor benefits can be confusing. Here’s how they work

By

Dear Liz: My husband passed away, and I am 59 years old and no longer working. Social Security’s site says that once I turn 60, I can get 71.5% to 99% of what he would have received at his full retirement age. What determines whether I get 71.5% or 99% or something in between?

Answer: The range you mention applies when you start survivor benefits before your own full retirement age for such benefits. For people born in 1962 and later, the full retirement age for survivor benefits is 67.

(This is different from the full retirement age for retirement benefits, which is 67 for people born in 1960 and later. Just in case you thought Social Security benefits weren’t quite complicated enough.)

It also matters if your husband was receiving Social Security benefits when he died. If so, the survivor benefit would be based on that check. If not, the survivor benefit would be based on the amount he would have gotten at his full retirement age (if he died at or before that age) or the benefit he earned (if he died after full retirement age).

In general, though, the earlier you start Social Security benefits, the less you get. If you start survivor benefits at 60, then you’d get 71.5% of your husband’s benefit. If you wait until right before you turn 67, you could get 99%. If you wait until you turn 67, you get 100%.

Your check also could be reduced if you start survivor benefits early and then go back to work. The earnings test would reduce your check by $1 for every $2 you earned over a certain limit, which in 2023 is $21,240. The earnings test would apply until you turned 67.

Something else you should consider is the Social Security benefit you’ve earned based on your own work record. This benefit can continue to grow if you put off claiming it until the amount maxes out at age 70.

You’re also allowed to switch between survivor benefits and your own, or vice versa. (Switching is something that’s not typically allowed with other benefits, such as spousal benefits.)

You could start receiving reduced survivor benefits at 60 and switch to your own maxed-out benefit at 70 — or start your own reduced benefit at 62 and switch to the unreduced survivor benefit at 67, for example. The right course will depend on the amounts involved and the math can be complicated, so consider consulting a financial planner or Social Security claiming strategy sites such as Social Security Solutions or Maximize My Social Security.