Q&A

Q&A: How to handle cash savings of deceased parents

March 17, 2025 By Liz Weston

Dear Liz: My mother passed away a little over a year ago, and my father about 18 months prior to her. I discovered that my parents saved up quite a lot of cash (in the six figures), and I’m afraid to deposit it without triggering the IRS. My parents routinely saved anywhere from $5,000 to up to $20,000 per year for the last 30 years. I read my mom’s handwriting on the envelopes with the dates. How can I deposit all this without triggering the IRS? Some of the bills are “vintage” so I will keep them to see if they’re worth more than face value. I also thought about using it to buy real estate.

Answer: You mention “triggering the IRS” as if your deposit might set off an explosion of audit notices and tax liens. In reality, you’re far more likely to cause yourself grief by trying to avoid IRS notice than you are by simply depositing the money.

Banks report large cash deposits — typically those of $10,000 or more — to the IRS as a way to combat money laundering. Anti-money-laundering rules also have been extended to real estate deals. Banks are looking for smaller deposits that could add up to more than $10,000, so don’t think spreading out the deposits will help you avoid scrutiny.

“Depositing the money all at once would probably arouse less suspicion with the bank than making a continuing series of deposits just under $10,000,” says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

Luscombe suggests retaining all those envelopes with your mother’s handwriting. If you are questioned by your bank or the IRS, the envelopes could help show your parents were gradually saving the money over time rather than engaging in some money-raising scheme on which taxes were never paid.

You didn’t mention if your parents had wills or other estate documents, or if there are other beneficiaries. Consult with an estate planning attorney to see if the cash needs to be deposited in the name of your mother’s estate.

Jennifer Sawday, an estate planning attorney in Long Beach, Calif., recommends going in person to your bank to ask for an appointment to make a large cash deposit. Ideally, you can discuss the situation and disclose the source of the funds in a private office, where you can’t be overheard. Ask if the bank can hire an armored courier to pick you up at your home to reduce the chance you’ll be robbed en route, Sawday suggests.

Please don’t delay, since theft isn’t the only concern. Cash also can be lost to fire, floods and other disasters. (One can only imagine how many bank-averse people lost cash in the recent Los Angeles fires.) Plus, cash tends to lose value over time thanks to inflation–the vast majority of “vintage” bills are worth much less than when they were printed. You’ll want to at least start earning some interest on the money, and perhaps put it to work in other investments.

Q&A: Reverse mortgages can be a boon, but come with potential risks

March 3, 2025 By Liz Weston

Dear Liz: Please write about the issues people can face when they have a reverse mortgage and need to move out to get long-term care. My mother, who is now 94 and lives on a small teacher’s pension, got a reverse mortgage in her late 60s to donate to charity because she was sure she would not live past her 80s. Now she needs long-term care and does not have the funds for it. If she moves out, she is required to sell the home. The capital gains taxes will eat up any remaining equity after that reverse loan is paid.

Answer: A reverse mortgage can be a helpful tool for people 62 or older who are house rich and cash poor. These mortgages allow people to tap some of their equity without requiring that the balances be paid back until the borrower dies, sells the home or permanently moves out.

The problem is that the debt can grow over time and leave too little equity for late-in-life expenses, such as long-term care.

Of course, many people make the mistake your mother made by underestimating their longevity risk — the chance they’ll live longer than expected and run short of money. They focus on maximizing current income by saving too little, taking out reverse mortgages too soon or applying early for Social Security without fully considering what these decisions could mean for their future selves.

Please get your mother in touch with an elder law attorney who can assess her situation and suggest alternatives. He can advise her about qualifying for Medicaid, the government health program for the poor. Medicaid will pay for long-term care expenses but rules vary by state, and a mistake could delay her eligibility.

Q&A: Confusion about spending HSA money after 65

March 3, 2025 By Liz Weston

Dear Liz: I’ve read that after age 65, health savings account money can be spent on anything. Your recent column said it could be spent only on medical expenses. Which is true?

Answer: At age 65, there is no longer a penalty if you spend HSA money on something other than qualifying medical expenses. Those withdrawals will be subject to income tax, however, so you’d be losing one of your HSA’s three tax breaks (deductions on contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses).

You don’t have to have incurred the medical expenses in the same year you spend the money for the withdrawals to be tax-free, however. Savvy HSA owners keep records of any out-of-pocket medical expenses that weren’t reimbursed by insurance, flexible savings accounts or other means. As long as the unreimbursed expenses were incurred after the HSA was established, they can be used to justify tax-free withdrawals years or even decades in the future.

Q&A: Getting an HMO to cover an outside specialist

March 3, 2025 By Liz Weston

Dear Liz: You’ve written about health maintenance organizations and how they may not cover care outside their networks. Be aware that HMOs will sometimes cover specialists outside of their network, especially in cases where they don’t have that type of specialist, or for an unusual condition needing a second opinion. It doesn’t hurt to ask! I did that when I knew that I should see an orthopedic oncologist to evaluate my scans recently, and my HMO did not have that specialist. I found that type of doctor, and then requested a referral and obtained it, and so it was totally covered. I also did that in 2007 when I had a similar condition needing surgery, and I even had surgery in a hospital different from the one that my HMO normally used, all totally covered.

Answer: Thanks for sharing your experience! HMOs typically don’t cover out-of-network care except in emergencies, but there may be exceptions. HMO members should educate themselves about their plan’s coverage and learn how to advocate for their care. It can also help to have a primary care physician who understands the system and is willing to ask for exceptions to HMO rules when appropriate.