Ask Liz Weston

Get smart with your money

Q&A

Q&A: An inheritance sounds great, but what will it mean for my free meds?

By

Dear Liz: I live on Social Security alone, which puts me at the poverty level. The state pays for medical and dental premiums, so I have no copay for doctor visits or prescriptions. I was just notified that I was left $175,000. If this shows up in my bank account, I will lose all the medical benefits I’m receiving. My medications total $80,000 a year. I’d like to at least have some access to the funds to make some home repairs that I’ve needed for 20 years and to prepay my future funeral expenses.

Answer: Inheritances can wreak havoc with government benefits such as Medicaid (called Medi-Cal in California), which have strict income and asset limits. But you may have options to put the money in trust, says Jennifer Sawday, an estate planning attorney in Long Beach. Consult a special needs trust planning attorney for details.

Q&A: Co-owned credit cards are great … if you can find them.

By

Dear Liz: Recently you recommended that both spouses have a credit card on which they are the primary account holder. Another option is for the spouse to apply to be a co-owner of their current credit cards. This worked for me when my husband passed away five years ago. The bank canceled his access, but left mine intact.

Answer: Few credit card issuers offer joint accounts these days. Most are set up so one person is the primary account holder, with the option of adding other people as authorized users. That’s why it’s important to make sure each spouse is the primary account holder on at least one card because the authorized user’s access will probably end when the primary account holder dies.

Q&A: Til death do your credit part?

By

Dear Liz: My wife and I have credit cards where I am designated as the primary account holder. What happens to my wife’s access to the account should I pass? Should she now apply for credit cards where she is the primary holder?

Answer: Credit card companies typically close accounts when they learn of the primary cardholder’s death. (It’s usually the executor’s job to inform creditors of the death, but card issuers also learn of deaths from the Social Security Administration.)

So it makes sense for both spouses to have at least one or two cards where they are the primary account holder. If you die first and all the cards are in your name, she might have to scramble to get replacements.

Q&A: When temptation to spend an inheritance strikes, what’s the right move?

By

Dear Liz: My brother is 54 and has always worked low-wage jobs. He owns a condo thanks to the help of our parents, and his monthly expenses are very low. He’s in a stable position. He does not have any retirement savings or really any other savings to speak of. Recently, he came into an inheritance of $62,000. He has asked my sister and I to help him make that grow and be secure until he retires and chooses to draw on it. What is the best way to help him grow this money in a safe way? We’d like it to be somewhat secured as we all are aware that the temptation to spend it now is strong.

Answer: The first step in investing is understanding your goal for the money and your timeline (how long until you may need the cash).

Your brother likely has at least two goals: an emergency fund and retirement savings.

Financial planners typically recommend an emergency fund equal to three to six months of expenses. A smaller amount can work for people with a lot of other resources, such as stocks they can sell, lines of credit they can borrow against or generous relatives who are willing to help. A larger amount might be smart for people with fewer resources or who might be out of work for extended periods.

Emergency funds need to be accessible, so the money should be in a safe, liquid place such as a bank account. To make the cash less tempting, your brother could consider opening a savings account with an online bank. These banks typically have no minimums and no fees, plus they pay a higher interest rate than their brick-and-mortar kin. Transferring the money to his checking account would typically take a few days, making it less easy to spend on impulse. Another option is to buy certificates of deposit to tie the money up for a set period of time. He can break into the CDs in an emergency but would have to forfeit some interest.

He can take more risk with his retirement funds, as he is likely at least a decade away from retirement. One option is to invest in a low-cost target date retirement fund, which gradually gets more conservative as the retirement date approaches.

Your brother can contribute up to $7,000 this year to an IRA or a Roth IRA. A Roth IRA may be the better option, since he’s unlikely to get much tax benefit from an IRA’s deductible contribution and Roth IRAs don’t have minimum distribution requirements.

He doesn’t have to limit his retirement savings to that annual contribution, however. He could consider investing more with a regular brokerage account and just mentally earmarking it for retirement.

Q&A: A little known, and restrictive, benefit for vets and their spouses

By

Dear Liz: Some time ago you referenced an “aid and attendance benefit” for veterans and their spouses. We have a 94-year-old bedridden widowed mom who has a permanent catheter and is tube-fed each day. I had never heard about this benefit and can’t seem to find a contact anywhere within the Department of Veterans Affairs who can help. Who can I contact?

Answer: The aid and attendance benefit isn’t well known, perhaps because the rules for who can get it are restrictive and complex.

You can find a summary of the benefit on the Veterans Affairs website. The benefit is actually a supplement to veterans’ pensions. To get a pension, the veteran must have served during wartime and meet income and asset restrictions. To get the aid and attendance benefit, the vet must have a medical need for assistance or supervision. Surviving spouses may be eligible if they were married to the veteran at the time of their death. There are numerous other rules and the application can be tough to navigate. For help, consider contacting the National Veterans Foundation, a nonprofit that helps vets and their families. Its Lifeline for Vets toll-free helpline is (888) 777-4443.

Q&A: Is it better to spread your wealth between two financial advisors?

By

Dear Liz: My parents left me with financial accounts at two companies. My instinct is to combine them to deal with one less company. Is there a downside to doing this?

Answer: You should first determine whether any of the inherited accounts is a retirement account because those come with special rules. You can’t simply merge an individual retirement account with a taxable brokerage account, for example. And you’ll want to consult a tax pro to understand how to properly title and take distributions from any inherited retirement account.

If the accounts are regular taxable accounts, then consolidating can have many advantages. Your accounts will be easier to monitor, asset allocation strategies will be simpler to execute and your account expenses could drop, particularly if you use the lower-cost company. Some brokerages offer deposit bonuses, and a higher combined balance also may entitle you to additional perks.

The primary downsides to consolidation involve risk mitigation. Brokerage failures are rare, but they do happen, and some investors opt to use more than one brokerage if their account balances exceed coverage by the Securities Investor Protection Corp.

SIPC provides coverage of up to $500,000, including $250,000 for cash, if cash or securities are missing from an account when a brokerage fails. Similar accounts are combined for SIPC purposes, so multiple IRA accounts at one brokerage will be considered one account. However, the $500,000 limit applies to each category of account. So someone with an individual account, a joint account, an IRA and a Roth would have a total of $2 million in SIPC coverage.

Having accounts at different companies also can help you retain access to at least some of your money if one of your accounts is hacked.