Ask Liz Weston

Get smart with your money

Banking

Q&A: Here’s a 2024 resolution: Stop using paper checks. Fraud is soaring

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Dear Liz: I had several checks stolen from the U.S. Postal Service. The thieves altered and cashed the checks. I monitor my bank accounts religiously and discovered the altered checks quickly. I immediately put holds on the checks and for the most part I have been reimbursed. One check, however, was written out to one bank for $4,339 and then cashed through another bank. The first bank told me they were pursuing the second bank for payment, and that when they get reimbursed, I’ll get reimbursed. I’ve been waiting since October 2022! Recently I received a letter from the first bank saying, in effect, that the other bank hasn’t responded so they consider the case closed. Basically, I’m out the money. This is obvious fraud and no one is taking it seriously.

Answer: Check fraud is soaring even as the use of checks has declined. Thieves take signed checks from mailboxes, sometimes using keys stolen from mail carriers, and “wash” them with common solvents such as nail polish remover. Once the checks dry, they change the amounts and payees and then cash the altered checks.

If you report the problem to your bank promptly — typically within 30 to 60 days of your statement date, depending on state law — then you should be made whole.

You can start by making a complaint to the Consumer Financial Protection Bureau online or by calling (855) 411-2372. The CFPB has a pretty good track record of getting companies to respond.

Also, please look into other payment methods. Electronic payments are much more secure as well as faster and easier to trace.

Q&A: Watch out for probate triggers

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Dear Liz: My wife and I have a living trust that includes most of our assets. We have two bank accounts that are not in the trust totaling $130,000. Will these accounts be subject to probate? If it matters, she is in memory care and I handle all finances. Our executor son is a signer on one bank account to have ready access to cover final expenses in case I predecease my wife.

Answer: As you know, living trusts are designed to avoid probate, the court process that otherwise follows death to distribute someone’s estate. In some states, including California, probate can be expensive, prolonged and often worth avoiding. Assets typically must be titled in the name of the living trust or have a designated beneficiary to avoid probate. There are some exceptions, but you’d be smart to consult an estate planning attorney to make sure you don’t inadvertently trigger the probate you’re trying to avoid.

Q&A: Why those great deals banks are offering might be less lucrative than they appear

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Dear Liz: I’m receiving numerous email offers from big banks offering significant incentives and bonuses to open checking and savings accounts. I usually don’t pay much attention to them but the latest one is offering $900 to open these accounts. I’ve read all the fine print and understand all the requirements, but I can’t help but think there is a mischievous motive on their part. How do I decide if these offers are a good financial alternative for me?

Answer: Banks offer these incentives to lure in new customers, but you’re wise to consider all the potential costs because the bonuses may be less lucrative than they appear.

For starters, you’ll pay income taxes on any sign-up bonus, which could substantially reduce what you net from the deal. Plus, many banks that offer sign-up incentives pay a paltry interest rate or no interest at all. You could be better off putting your money in a high-yield savings account. (Some online banks are paying around 5%.)

You typically must maintain a certain balance to avoid monthly account fees, and you may need to set up a direct deposit or make a set number of transactions per month as well. The bonus often isn’t paid until after your account has been open 90 days or more. If you close the account, you may face an account closure fee.

Q&A: Whether to close elderly mom’s CDs

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Dear Liz: I have the power of attorney for my 92-year-old mother, who has dementia. She has numerous financial accounts including money market, checking and savings accounts and certificates of deposit. When she passes, would it be easier to settle her estate if I start closing her CDs now and put that money into, say, her money market? I am the sole beneficiary for all of this.

Answer: If your mom has multiple accounts at different institutions, then consolidating those accounts now can save time and hassle later. You’ll want to review the rules for FDIC insurance, though, to make sure her accounts would remain adequately covered.

There’s probably less urgency if all her accounts are already at the same institution and under FDIC limits. Closing CDs prematurely could mean losing some interest, which may not make sense unless she urgently needs the money.

If you haven’t already, consider checking in with an estate planning attorney who can give you suggestions about what you can do now to ease the transition later.

Q&A: Bank failures spotlight brokerages’ SIPC insurance: How it works

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Dear Liz: In light of the recent bank failures, I am wondering about the safety of investments with a brokerage firm. If the brokerage firm that I am using fails, do I stand to lose money even though I am invested in specific stocks or bonds? Does it make a difference if I have money in one of their branded money market funds?

Answer: Your brokerage probably is a member of the nonprofit Securities Investor Protection Corp., which protects against the loss of cash and securities when a covered brokerage fails. Accounts are insured up to $500,000 per customer, including a $250,000 limit for cash.

Covered securities include stocks, bonds, Treasurys, certificates of deposit, mutual funds and money market mutual funds. (Money market accounts and certificates of deposit are considered investments rather than cash under SIPC rules.)

The “per customer” limit is based on how the accounts are owned or titled. If you have a retirement account and a regular brokerage account, for example, separate $500,000 limits would apply to each.

SIPC coverage kicks in if a brokerage fails and securities or cash are missing from your account. You also have protection in case of unauthorized trading or theft from your accounts. SIPC insurance does not protect you against stock market drops or other declines in the value of your investments.

Q&A: Here’s a tip to take advantage of rising interest rates

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Dear Liz: Now that interest rates on savings accounts have started to rise, I have a quick tip for you to share: Check the rate you’re getting on your accounts! I discovered my online bank changed its account structure a few years back, and legacy high-yield savings accountholders aren’t getting the recent increases. I was earning only a paltry 0.3% rate, while people who opened accounts more recently were earning over 2%. I’m sure many customers like me assumed they had high-yield accounts, since that’s what they opened originally, but they are, in fact, not receiving competitive rates.

Answer: Thank you for the heads-up. People who have certificates of deposit also should check whether those CDs have matured. Some banks renew the CDs at competitive rates, while others dump the proceeds in a low-rate account. A little vigilance can help you squeeze out a much better rate of return.