December 3, 2012 By

Get a lawyer’s advice before transferring home

Dear Liz: Your column on the tax issues that develop when parents deed their property to their children should help educate a lot of people. But sometimes this is done to reduce the parents’ assets so they will be eligible for Medicaid after the expiration of the look-back period. In this case, paying the capital gains tax is appropriate, because they are asking the state to pay potentially very large senior care bills.

Answer: Some would question whether it’s ever appropriate for seniors to deliberately impoverish themselves by transferring away assets in order to qualify for Medicaid, which pays long-term care expenses for the indigent. The “look back” period, in which states examine asset transfers before a Medicaid application, was established to discourage such maneuvers. Once again, it’s smart to get a legal opinion before transferring big assets. An elder-law attorney could weigh in on the pros and cons of Medicaid planning.

Filed Under: Estate planning, Q&A, Real Estate, Saving Money Tagged With: , , , ,
October 1, 2012 By

Home sale tax break won’t disappear

Dear Liz: My wife and I are trying to sell our home, which has been our primary residence for six years. I am very concerned about the $500,000 capital gains exclusion. As I understand it, the exclusion would mean we wouldn’t have to pay taxes on our home sale profit. But we are confused about this exemption being tied to the “Bush tax cuts” that could expire Dec. 31. If we sell our home after that, could we lose the exemption?

Answer: No. The law creating a capital gains exemption for home sales went into effect May 6, 1997. It’s not tied to the tax cuts approved during President George W. Bush’s tenure that are set to expire at the end of the year.

So people who live in a home for at least two of the previous five years will still be able to avoid paying capital gains on their first $250,000 of home sale profit (or $500,000 for a married couple).

Another tax you likely won’t have to pay is a new 3.8% levy on what’s called “net investment income.” Some emails circulating on the Internet falsely claim that the tax, which is scheduled to kick in Jan. 1, is a real estate sales tax. In reality, it’s a potential tax on home sale profits that exceed the capital gains exemption limit, as well as on other so-called unearned income, including investment and rental income.

If your home sale profit doesn’t exceed the capital gains exemption limit, you won’t owe the new tax. If your profit does exceed the limit, the excess amount would be added to your adjusted gross incomes to determine whether you’d have to pay it. The 3.8% tax would be levied only on people whose adjusted gross incomes are more than $200,000 for singles and $250,000 for married couples.

Filed Under: Q&A, Real Estate, Saving Money, Taxes Tagged With: , , , ,
September 27, 2012 By

How to set up savings “buckets”

Dear Liz: You’ve written about how helpful it can be to have “savings buckets” or separate savings accounts earmarked for different goals such as vacations, property tax payments and so on. I have been trying to do this myself, but every bank I find charges so much in fees that it would cost more money than I would save. Either that, or they tie the savings accounts to a “free” checking account that has a high minimum balance. Can you please pass along any information about free savings accounts that have no minimum balance? I cannot use Internet banks because I cannot deposit cash when I have $5 or $10 in my pocket that I would take to the bank.

Answer: Actually, you can. Internet banks can be linked to your checking account at a brick-and-mortar bank. You can take your money to the bank, then transfer it to one of your savings accounts at the Internet bank. Unlike traditional banks, Internet banks such as ING Direct, Ally and FNBO don’t have balance minimums or monthly fees. You can set up several savings accounts without paying extra fees.

You still need a low-cost checking account, of course. You should be able to find one at a local credit union.

Filed Under: Q&A, Saving Money Tagged With: , , ,
September 7, 2012 By

What I learned from our “almost free” vacation

Back in June I wrote a post about “How to get free summer travel.” I’d arranged a 5-day trip with my daughter to the Pacific Northwest using a variety of rewards programs. The trip, which we took over Labor Day weekend, was a heck of a lot of fun. Like most vacations, it wound up costing a bit more than planned but I also learned a few things.

Including:

Re-price your reservations before you go. I checked both hotel and car reservations a few days beforehand to see if prices had dropped. They hadn’t at the Doubletree in Portland, which was in fact sold out. But the rates at Enterprise car rental fell like a rock. Plus, Enterprise emailed me a last-minute 10% off coupon for being part of its frequent traveler program. My cost for the two-day car rental went from over $100 to just $37. I love that.

Don’t try to make a same-day connection on Amtrak. We took the sleeper car up from Los Angeles, and the train fell waaaaay behind schedule–five hours, in fact. That was good news for us, since we got to see some gorgeous scenery around the California-Oregon border that would normally pass by in the dark. Passengers who were trying to make a connection to the Empire Builder, the train that goes from Portland to Chicago, weren’t so happy. They had to get off in Klamath Falls and ride several hours on a bus to meet the other train. If I were to book an Amtrak trip that involved a connection, I’d try to arrange it so that we had an overnight stay in between.

Portland’s public transportation is awesome. There was a light-rail MAX station right outside our hotel, and it took us everywhere we wanted to go while we were in town, including the Saturday Market and the zoo. A day pass for an adult was just $5. Parking at the zoo alone would have been $4, and a hassle, since there are limited spaces. When it was time to leave, I took the red line out to the airport to pick up our rental car–easy peasy.

Check out the artist/farmers markets. Speaking of the Saturday Market: I was blown away by many of the vendors there. This weekend market along the river features some really skilled craftsman offering handmade stuff at reasonable prices. I stocked up for Christmas.

Splurge a little. My daughter’s a huge fan of the Great Wolf Resort and its indoor water park south of Olympia. The rates in the summer can be steep, but my sister and I decided to split the cost of a Kid Cabin room with bunk beds. That way, we got to spend more time together, our kids had a ball and we were each out of pocket $160 rather than $320.

Peach fritter with cream cheese? Might want to skip that. My friend Michelle Rafter suggested we meet at VooDoo Donuts for a treat. Yes, the long wait was worth it, but no, I don’t think I’d order the peach fritter again–it was almost as big as my head. Next time it’ll be the maple bacon donut, for sure.

Filed Under: Liz's Blog, Saving Money Tagged With: , , ,
August 28, 2012 By

Now available: My new book!

Do you have questions about money? Here’s a secret: we all do, and sometimes finding the right answers can be tough. My new book, “There Are No Dumb Questions About Money,” can make it easier for you to figure out your financial world.

I’ve taken your toughest questions about money and answered them in a clear, easy-to-read format. This book can help you manage your spending, improve your credit and find the best way to pay off debt. It can help you make the right choices when you’re investing, paying for your children’s education and prioritizing your financial goals. I’ve also tackled the difficult, emotional side of money: how to get on the same page with your partner, cope with spendthrift children (or parents!) and talk about end-of-life issues that can be so difficult to discuss. (And if you think your family is dysfunctional about money, read Chapter 5…you’ll either find answers to your problems, or be grateful that your situation isn’t as bad as some of the ones described there!)

Interested? You can buy this ebook on iTunes or on Amazon.

Filed Under: Annuities, Banking, Bankruptcy, Budgeting, College, College Savings, Couples & Money, Credit & Debt, Credit Cards, Credit Counseling, Credit Scoring, Divorce & Money, Elder Care, Estate planning, Financial Advisors, Identity Theft, Insurance, Investing, Kids & Money, Liz's Blog, Real Estate, Retirement, Saving Money, Student Loans, Taxes, The Basics Tagged With: , , , , , , , , , , , , , , , , , , , , , ,
August 17, 2012 By

Wealthy families may be missing an opportunity to save

This post won’t be relevant to the vast majority of you. But if you’re rich or have rich parents, listen up.

There’s a window of opportunity right now to reduce future estate taxes by moving money out of large estates. People who don’t take action could be missing a chance to save their heirs a bundle.

Here’s the deal: Currently, the estate tax exemption limit and the gift tax exemption limit are both $5.12 million. Both are scheduled to revert to $1 million after Dec. 31.

What that means is that wealthy people can give over $5 million away (over $10 million for a married couple) without owing any gift tax on that transfer. Such gifts can reduce the size of the wealthy person’s estate, so that the estate tax bill will be lower when he or she dies.

The money can be given away directly, or put into certain kinds of trusts. Any good estate planning attorney can outline the possibilities. If you’re planning to pass money to your kids, or a business, or real estate, it’s worth reviewing these.

Interestingly, a recent survey from U.S. Trust found two-thirds of the wealthy folks it polled hadn’t taken advantage of this opportunity and didn’t plan to do so. The survey respondents all had a minimum of $3 million in investable assets, with 31% having $5 million to $10 million and 32% having more than $10 million.

Now, it’s possible that Congress with pass some kind of patch or extension of the current exemption limits. It hasn’t been able to agree on much late, of course, but that can always change.

Still, if you’re concerned about estate taxes, it would make sense to meet with both a fee-only financial planner (to see if you can afford to give money away) and an estate planning attorney to see if it makes sense to pass some money along to your heirs now, rather than waiting until death.

Filed Under: Estate planning, Liz's Blog, Saving Money Tagged With: , , , , , , ,
August 7, 2012 By

Don’t throw that away!

Please welcome Jeff Yeager, one of my favorite cheapskates and an all-around good guy. I asked him to write the very first guest post for AskLizWeston.com based on advice from his latest book, “Don’t Throw That Away!” The book, and this post, focus on the middle part of the “reduce, reuse, recycle” mantra, with creative ways to get more mileage from what you already have. Here’s what Jeff has to say:

By getting a little creative and reusing would-be throwaway items, you’ll not only help save the Earth’s resources and live lighter on the planet, but you can also save some money at the same time.  Here are a few examples of creative repurposing:

Fruit and vegetable peels:  Of course you can compost them (and I give readers all the rotten details about composting in the book), but the skins of many types of fruits and veggies have a multitude of other uses as well, including: banana peels can be used to shine shoes (I call it a “banana split shine”) as well as fertilize your prize rose bushes and protect them from insects;  papaya peels contain vitamin A and papain, which makes them great for softening skin and soothing cracked heels, and peach skins work similar magic; scrub copper pots and pans with lemon peels or other citrus rinds and a little baking soda for a bright and shiny finish; you can even naturally darken greying hair using potato peels!
Old cellphones: Did you know that under FCC regulations, you can call 911 in case of an emergency using any cell phone, even phones with expired service contracts?  So don’t throw away your old cells when you get a new ones, just keep them powered up and scattered around the house, car, office, everywhere in case of a true emergency.
Refashioning:  Restyling old clothing into new apparel (aka “refashioning”) is becoming a hot new trend, to the point where some designers are now coming out with lines that are simply made to look like refashioned garments– I guess that would be faux repurposing?  Many of the projects are simple, like making “tee-skirts”– fun little skirts made out of old t-shirts – requiring little in the way of sewing skills or equipment.
Cheapskate-soap-on-a-rope:  Save those little slivers of soap from the shower, put them in the heel of an old pair of pantyhose, and keep it tied to the outside water spigot to wash up after working in the garden.  The mesh lets you get every last bit of suds out soap slivers.
Eggcellent reuses for eggshells:  Crumble them up and sprinkle them around the garden to fertilize the soil and deter slugs, deer and other pests; add some along with the coffee in the filter for a less bitter cup of java; or make adorable “egg shell candles,” a chance to repurpose both eggshells and leftover candle stubs.
And whatever you do, don’t throw away that dryer lint!  Stuff it inside an empty toilet paper tube and use it to light a fire in the fireplace.  Dryer lint is highly flammable, so it’ll really light your fire, so to speak.
Remember:  “Reduce – Reuse, Reuse, Reuse, and Reuse Again – Then Recycle.
# # #
Don’t Throw That Away! is only available in e-book formats, so you won’t have to worry about how to reuse it after you’ve read it. It is published by Three Rivers Press and is available wherever e-books are sold.  Jeff Yeager is also the author of The Ultimate Cheapskate’s Road Map to True Riches and The Cheapskate Next Door. You’ll find him at The Ultimate Cheapskate.

Filed Under: Saving Money Tagged With: , , ,