Ask Liz Weston

Get smart with your money

Q&A

Q&A: Another view of house bequest

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Dear Liz: You recently answered a question about a mother who gave her home to her two children shortly before she died. You wrote that when a home is gifted, the recipients also get the original owner’s tax basis and thus there is no step up in tax basis at death. However, if the mother continued to live in the home and didn’t pay rent, an argument could be made that it wasn’t a real gift and the home should be included in her estate at death. Then the children could get the step up in basis and not owe capital gains taxes when they sell.

Answer: The estate tax experts at Wolters Kluwer tax research firm agree that if the mother continued to live in the house, IRS Code Sec. 2036(a)(1) could apply, “assuming that there was an express or implied agreement between the mother and the children that she would live in the home rent-free until her death.” Then the fair market value of the home could be included in the gross estate and the children would receive a step up in basis at the mother’s death.

A similar argument could be made if the mother had added the children as joint tenants and continued to live rent-free in the home until death.

Making such arguments to the IRS might require hiring knowledgeable tax and legal help, however. Plus, adding children to home deeds can create other problems. The children’s creditors could go after the house, for example, and transfers of home ownership can complicate Medicaid eligibility.

It would probably be much more cost effective to get tax and legal advice before changing a home’s deed than to hope your heirs prevail against the IRS afterward.

Q&A: When Social Security isn’t enough

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Dear Liz: I am 87, divorced for 45 years, never remarried. I applied for my 93-year-old former husband’s Social Security support and qualified. I was refused by the local Social Security office. I really don’t understand why. I am a COVID long-hauler and I get confused. I was a stay-at-home mom until my kids were in college, and my husband divorced me. My Social Security is not enough to support me, and I am seriously in debt. I am set up with Social Security to receive my share of my former husband’s Social Security at the time of his death. What am I doing wrong?

Answer: If your former husband is still alive, it’s possible that your current Social Security retirement benefit is larger than any benefit you would have gotten from his work record. Spousal and divorced spousal benefits are limited to 50% of the primary worker’s benefit at full retirement age.

Should he die, you could be eligible for a divorced survivor benefit, which is up to 100% of the amount he was receiving.

Rather than wait, though, you should consider talking to a bankruptcy attorney about your debt. Consider asking one of your kids or a financially savvy friend to come with you and take notes so you understand your options.

Q&A: Finding free tax help

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Dear Liz: You recently mentioned the AARP Foundation Tax-Aide Program as a resource for getting help with tax returns. I just want to point out that there are other, IRS-sponsored programs that provide free income tax assistance to the elderly and low-income taxpayers. These programs are Volunteer Income Tax Assistance (VITA) and Tax Consulting for the Elderly (TCE). The site where I’ve volunteered for many years does approximately 2,000 tax returns each year. A mention in your column would be a great way to spread the word about this valuable service.

Answer: Consider it done. The IRS has a tool to find VITA and TCE resources using your ZIP Code.

Q&A: Should extra cash go to retirement or emergency savings?

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Dear Liz: I have an excessive amount of money in my bank checking and savings account (about $20,000 in each) and need to know where to invest it. My financial planner advised putting it in my 401(k), but I can’t transfer a chunk of money, I can only increase the percentage I contribute (which is currently at 10% of my salary). I have IRAs, but I can only deposit a certain amount there as well. Where would be the best place for this extra money to go that will pay interest?

Answer: You may not be able to put the money directly into your 401(k), but you could boost your contribution rate at work and tap the “excess” money in your accounts to make up the difference in your paychecks.

First, though, make sure you have an adequate emergency fund. Most financial planners recommend keeping a reserve equal to three to six months’ worth of expenses. This money should be kept in a safe, liquid account, such as an FDIC-insured bank account. You don’t need to settle for the tiny amount of interest many banks pay, however. Some online high-yield savings accounts are now paying over 4%.

Q&A: Caught in the IRS backlog

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Dear Liz: In 2021, we helped two of our children buy a condo. One of them confessed she hadn’t filed taxes for several years. We worked on the returns together, and it turned out that nothing was owed. Meanwhile, the IRS has never acknowledged the delayed tax filings or refunded the (small) overpayments. Shouldn’t the IRS have completed these filings by now?

Answer: The IRS says it has processed all paper and electronic individual returns for tax year 2021 or earlier if those returns had no errors or did not require further review. Returns that were filed late, however, may still be part of the agency’s backlog.

Your child can try using the “Where’s My Refund?” tool on the IRS site or create an online account to check for possible updates. Keep in mind that there’s a three-year limit to claim a refund; after that point, the U.S. Treasury gets to keep the money.

The best free museums in Paris

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Museums in Paris typically aren’t cheap, with adult ticket prices often ranging between $15 and $20, depending on the exchange rate. There are, however, a number of absolutely wonderful museums in Paris that are also absolutely free.

Here are some that I highly recommend:

Shops signs in the Musée Carnavalet.

The Musée Carnavalet. This Paris history museum is housed in two gorgeous 17th-century mansions in the Marais district. One of its highlights greets you as soon as you walk in: a collection of shop signs, some dating back to the Middle Ages. Another of my favorite rooms is an intact Art Nouveau jewelry store designed by Alphonse Mucha. Several beautifully decorated rooms, some imported from other mansions, illustrate how the upper crust lived in previous centuries. Downstairs you can see prehistoric tools as well as statues, jewelry and other remnants of Paris’ time as a Roman settlement. Upstairs there’s an extensive collection of Revolution memorabilia as well as maps, models, paintings and other exhibits illustrating the city’s history. Don’t miss the small but well-curated gift shop for unique items, including magnets shaped like some of those iconic signs.

Petit Palais

Petit Palais: The Petit Palais is another Paris museum where the building rivals the artwork. Both it and the nearby Grand Palais are considered outstanding examples of the Beaux-Arts style (think “over the top, more is more” architecture characterized by lots of statues, columns and decoration). The Petit Palais has a fine collection of paintings and sculptures from the 19th and 20th centuries, but I love it for its beautiful interior garden, which you can enjoy while having lunch or coffee in the museum cafe. The Petit Palais is located just off the Champs-Élysées, not far from the Place de la Concorde.

A view of Place des Vosges from Victor Hugo’s apartment.

Maison Victor Hugo. You can check out two Paris must-sees with one visit: the Place de Vosges, a prestigious square in the Marais that dates to the early 1600s, and the home of Victor Hugo, who lived in one of its mansions from 1832 to 1848. Hugo wrote a big chunk of “Les Misérables” here and also indulged in a hobby of reworking old Gothic furniture. He wasn’t a bad draftsman, either; his drawings decorate several of the rooms.

Musée de la Vie Romantique. The “Museum of Romantic Life,” dedicated to the Romantic period in French art and literature, is housed in a compound once owned by painter Ary Scheffer in the Pigalle neighborhood, about a 15 minute walk downhill from Sacre Coeur. The writer George Sand attended salons there, and the exhibits include some of her (surprisingly good) landscape paintings as well as a large oil portrait of her. Once again, a highlight is the museum’s garden and cafe–another great place to rest your feet before heading back out onto Paris’ lively streets.

Musée Cognacq-Jay. Another standout museum in the Marais is the former home of Ernest Cognacq, founder of La Samaritaine department store chain, and his wife, Marie-Louise Jay. The museum’s collection focuses on 18th century art, including  paintings, sculptures, furniture and decorative arts, but more than half the pictures I took were of the lovely mansion itself.

You can find a list of other free museums at Paris’ official tourism site, along with a lengthy list of museums that are free on the first Sunday of the month (including heavyweights like the Centre Pompidou and the Musée d’Orsay). Some of these free-Sunday tickets must be reserved well in advance, however. If you can’t land a slot at one of the biggies, consider my all-around favorite Musée des Arts et Métiers, a science and technology museum that proves the French invented everything of importance, or Cité de l’Architecture et du Patrimoine, a museum of architecture and monumental sculpture at the Trocadéro.

A tip for families: Children under 18 are typically free even at the more expensive museums. Also, free admission is often extended to people under 26 if they’re residents of European Economic Area countries.