Giving 401(k) to someone other than spouse means huge tax break

Congress has enacted a huge new tax break for people who inherit a 401(k) account from someone other than a spouse.

This is great news for anyone who wants to leave a 401(k) to a child, grandchild, domestic partner, or other person other than a spouse. [Read more…]

Give a lot of thought to choosing a trustee

When a Texas millionaire died, he left all his money to a trust.  He ordered the trustee to support his second wife in the standard of living she had enjoyed while he was alive, if her own income and resources weren’t sufficient to do so.  Once that was done, the trustee could use the trust to benefit the children of his first marriage. [Read more…]

Medicare’s nursing home coverage may be less than you think

While Medicare covers nursing home stays, exactly what it covers is complicated and in some cases it can be much more limited than people think. If you or a loved one might need a stay in a nursing home, it’s very smart to understand the rules ahead of time, so you can be prepared and not have an unpleasant surprise.

Medicare covers up to 100 days of “skilled nursing care” per illness. However, in order for the care to be covered, the patient must enter a nursing home (or a Medicare-approved “skilled nursing facility”) within 30 days of a hospital stay, and the hospital stay must have lasted at least three days. The care in the nursing home must be for the same condition as the hospital stay. In addition, the patient must need “skilled care.” This means that a doctor must order the treatment, and the treatment must be provided daily by a registered nurse, physical therapist, or licensed practical nurse. [Read more…]

Many married men claim Social Security benefits too early

You can generally begin claiming Social Security benefits at any age between 62 and 70. Most married men begin claiming benefits at 62 or 63 – despite the fact that their family’s overall expected lifetime income from Social Security would be much greater if they waited a few years, because the amount you get from Social Security each year increases the longer you wait to start receiving it.

The people who are most affected are wives who outlive their husbands. While men who claim benefits at age 62 lose an average of 4 percent of their lifetime expected income as a result of claiming early, if they die before their wife, the wife will typically receive a survivor’s benefit that is 20% less than she would if her husband had waited a few years. That can make a big difference! [Read more…]

Three different ways that you can co-own property

When two or more people own property – whether it’s a home, a condominium, or a piece of land – the relationship between the owners is known as a “tenancy.” There are a number of different kinds of tenancy. Understanding the differences is important, because different kinds of tenancy can mean different rules for whether an interest in the property will pass at an owner’s death outside of probate and whether creditors can claim the property.

Tenancy comes in three main forms: tenancy in common, joint tenancy, and tenancy by the entirety. Each form has advantages and disadvantages, and must be properly specified in the deed or conveyance. If the form isn’t properly specified, then state default rules will determine which form of tenancy applies – which might result in an outcome you’d rather avoid.  [Read more…]

‘Medigap’ insurance coverage is changing

A number of changes are coming to health insurance plans that supplement Medicare’s coverage, which are commonly known as “Medigap” plans.

Medicare doesn’t cover all medical expenses – even if you have Medicare, you’re still responsible for co-payments, deductibles, and items that are excluded from coverage. To supplement Medicare’s coverage, you can purchase a Medigap policy from a private insurer.

There are currently 12 different Medigap plans available, identified by the letters A through L. Each plan offers a different combination of benefits, allowing you to choose the combination that is right for you. [Read more…]

Lack of estate tax creates problems for people with older wills

The federal estate tax expired at the end of 2009, and this has created a serious problem for many people who haven’t revised their wills in a while.

The tax applied in 2009 to estates of more than $3.5 million. It is slated to come back in 2011, and apply to estates of more than $1 million. Most people expected that Congress would “fix” the estate tax before it expired, and there would be a new exemption amount, such as $3.5 million, for 2010 and beyond.

However, Congress has done nothing so far – at least as of when this newsletter was written. And while it might seem great if there is no estate tax in 2010, it’s actually a problem in many cases…even for people whose estates aren’t anywhere near $3.5 million. [Read more…]

Real estate quips

“A man complained that [on] his way home to dinner he had every day to pass through that long field of his neighbor’s. I advised him to buy it, and it would never seem long again.”
– Ralph Waldo Emerson

“Everyone says buying your first apartment makes you feel like an adult. What no one mentions is that selling it turns you right back into a child.”

– Anderson Cooper

Condo association can’t prohibit religious displays

A condominium association can’t adopt a rule that prohibits owners from displaying religious objects outside their unit entrances. That’s the word from a federal appeals court in Chicago, which allowed a Jewish family to bring a lawsuit after their condo association removed a mezuzah from their front door. (A three-judge panel of the court had earlier sided with the association, but the full court reconsidered and sided with the family.) [Read more…]

Amount you can borrow with a reverse mortgage reduced by 10%

The amount that homeowners can borrow with a reverse mortgage has been reduced by 10% by the Federal Housing Administration. The new rule applies only to reverse mortgages obtained after October 1, 2009. If you took out a reverse mortgage before that date, you won’t be affected. But if you want to take out a new FHA-insured reverse mortgage, the maximum amount you can borrow will be 10% less than it was.

In a traditional mortgage, you borrow money against your house and pay it back in monthly installments over time. With a reverse mortgage, you borrow money against your house, but you don’t have to pay it back until you die, sell the house, or move, which means you don’t owe anything as long as you stay in your home. In most cases, you must be at least 62 years old to qualify. [Read more…]

New limits on FHA-backed mortgages

The Federal Housing Administration, which insures up to a third of all new mortgages, has adopted some limits on the mortgages it will insure.

The FHA doesn’t make loans, but it insures loans made by other lenders in order to encourage lenders to give mortgages to people with shaky credit or little in the way of a down payment. The new restrictions will make it somewhat harder for such people to get mortgages. [Read more…]

Own real estate? Whose name is on the deed?

When a couple buys a home, they often simply put both names on the deed. When a homeowner gets married, he or she often adds the spouse’s name to the deed. And when a single person shares a home with an elderly relative, they often put both names on the deed.

This may be common, but it’s not necessarily the best idea. Here are some things to consider:

Capital gains. Under certain circumstances, if you add a new spouse’s name to the deed and sell the house shortly afterward, you can end up owing more capital gains tax on the sale than if you had left the house in one spouse’s name. [Read more…]

10 common myths about your credit score

Anyone looking for a mortgage (or other loan) needs to worry about credit scores. But how much do you really know about your score? Take this quick test and see.


1. If I pay my credit card bill in full each month, that will significantly improve my credit score.      True    False

2. Any time I miss a bill payment, my credit score is negatively affected.      True    False

3. If my income goes up, so does my credit score.      True    False

4. I can use an online service and find out what credit score my lender will see.      True    False [Read more…]

Ideas that can prevent a will contest

Some people are worried that after they die, family members may be unhappy about certain provisions in their will and may try to challenge the will in court. This is particularly true if one child is getting less in the will than others, for instance.

Here are some ways to head off a will contest:

  • Talk to your heirs now about what you’re doing and why. Many will contests are triggered because a relative is surprised to discover after a death that they have been disinherited or treated differently from others. Letting the person know ahead of time won’t necessarily prevent a lawsuit, but it can make it less likely. [Read more…]

You might need a trust if your spouse isn’t a U.S. citizen

Ordinarily, there’s no estate tax on assets that pass at death to someone’s spouse. But that’s true only if the surviving spouse is a U.S. citizen. If the spouse isn’t a citizen, then the estate tax generally applies…unless you set up something called a “Qualified Domestic Trust,” or QDOT.

Instead of leaving your assets directly to your spouse, you can put them into a QDOT for his or her benefit. When you die, there is no estate tax on these assets. Your spouse can receive income from the trust during the rest of his or her lifetime. When your spouse dies, the assets will then be taxed as though they were part of your estate (not as though they were part of the spouse’s estate). [Read more…]

Have you changed your investment manager recently?

A large number of people have changed their investment manager recently – or have decided to become their own manager – as a result of the 2008 market collapse that led to widespread terrible returns. That’s fine – but keep in mind that if you change your manager, you should check with your estate planner to make sure that any new account you create is titled properly and in accordance with your estate plan.

Many estate plans are carefully constructed to title certain assets as solely owned, jointly owned, owned with a transfer-on-death provision, owned by a revocable trust, etc. It’s possible to destroy much of the benefit of a well-built estate plan by moving accounts and not thinking carefully about how to title them.

Be wary of online retirement planning calculators

A lot of websites offer retirement planning calculators, where you can enter your age, assets, and other types of information and find out how much income you can expect in retirement.

These calculators may be somewhat useful, but many of them have serious flaws, and in general they produce results that are way too optimistic, according to a new study by the Pension Research Council. [Read more…]

Put burial or cremation instructions in writing

If you have strong preferences regarding burial or cremation, it’s a good idea to put these in writing in your will or in your health care power of attorney. You may have expressed your wishes verbally to your loved ones, but people can become uncertain in a time of crisis, and family members might have differing views. If there is ever a dispute, having a written direction will be vital evidence of your intent. 

Also, if you have specific instructions regarding cemetery plots, funeral homes, etc., putting these in writing can be a big help to your loved ones as they try to sort through matters quickly in a difficult time.

Revise your estate planning if you’re diagnosed with a serious disease

 If you or a loved one has recently been diagnosed with a serious disease, it’s a good idea to review your estate planning documents and adjust them to reflect the diagnosis.

For instance, if someone is diagnosed with the early stages of Alzheimer’s disease – or any other disease that could affect cognitive functioning down the road – it’s wise to expedite your estate planning. Sign documents as soon as possible, while mental competency is not yet in question. You might want to get a letter from a doctor confirming that you or your loved one is still competent to make decisions. [Read more…]

How to talk with aging parents about estate planning

Many people are concerned about their aging parents and want to talk with them about estate planning, but this can be a difficult conversation to have. Frequently, parents don’t want to discuss the subject because they don’t like thinking about their own death, and because they’re afraid that estate planning will involve a loss of independence and control. Also, children may be afraid that bringing up the topic will make them seem greedy.

Yet this is one of the most important conversations a family can have. Parents who don’t engage in estate planning risk losing their assets to taxes, having their assets go to people they wouldn’t have chosen, and making it difficult for their children to care for them and make the right decisions in an emergency. [Read more…]

Consider owning your investment property in a Limited Liability Company (LLC)

If you are thinking about purchasing or already own rental or other investment property, you should consider transferring it to a Limited Liability Company (LLC). This can be a great way to protect your assets, while at the same time you may be able to reap some tax advantages.

Suppose someone slips and falls on your rental property and sues you. If you own the property as an individual, all your assets would be at risk – your home, your investments, your savings accounts, etc. But if the property is owned by an LLC, in most cases the risk would be limited to the amount of your investment in the LLC. Your personal assets should be safe.  The same is true for other types of claims involving a property, such as fire-related claims or problems with environmental contamination. [Read more…]

Non-compete agreements valid despite moves, mergers

Suppose a Massachusetts employee signs a non-compete agreement, but then leaves to work for a competitor in California – a state that generally doesn’t approve of non-compete agreements. Can the agreement still be enforced against him?

Yes, according to a recent decision by a Massachusetts court. The employee was a vice president at the EMC computer company Massachusetts. After 20 years with EMC, he quit to become vice president at Hewlett-Packard in California. The employee had signed an agreement saying that if he left, he wouldn’t work for a competitor for a year. When EMC sued, he argued that the agreement wasn’t valid because it violated the law of California. But the Massachusetts court said that while that might be true, the agreement was still valid in Massachusetts, and Massachusetts law applied – so the employee was out of luck. [Read more…]

‘Medical leave’ law doesn’t allow vacation travel

An employee took a seven-week trip to the Philippines. The trip was arranged so that she could obtain help for her husband, who suffered from a variety of health problems. However, almost half the trip was spent visiting friends, family, and local churches. The employee had applied for leave under the federal Family and Medical Leave Act, but the employer had turned her down. When she went on the trip anyway, it fired her.

A federal court sided with the employer. It said that the medical leave act “does not permit employees to take time off to take a vacation with a seriously ill spouse, even if caring for the spouse is an ‘incidental consequence’ of taking him on vacation.”

Job applicant sues for improper drug test

A temporary employee in Alabama applied for a permanent position as an electronics technician, and took a drug test as part of his application. When the test came back positive, the employee explained that he took barbiturates to manage his epilepsy.

His supervisor – who knew about the test results – didn’t hire him for the permanent job, and fired him from his temporary position. The employee sued. He claimed the drug test violated the Americans with Disabilities Act, which imposes strict limits on when a drug test can be given. [Read more…]

Worker can’t collect damages if she would have been fired anyway

An employee tore her rotator cuff, and her doctor gave her a note saying she shouldn’t be required to lift more than 10 pounds. Later, she was fired, and she sued under the Americans with Disabilities Act, claiming the firing was illegal because it was due to her perceived disability. At trial, a jury agreed that the employee was fired because of her perceived disability. However, it also decided that she would have been fired anyway, even if she hadn’t had a perceived disability.

So who wins? The employer wins in this case, according to a federal appeals court in Chicago. Cases like this are known as “mixed-motive” cases, because there are multiple motives for a firing, some of which are legal and some of which are illegal. But according to the court, as long as the employer would have done what it did anyway for legitimate reasons, the fact that it was also motivated by reasons that violate the disabilities law doesn’t matter and the employee can’t collect any damages.

COBRA coverage extended for the unemployed

 Congress has extended the law that allows additional COBRA coverage for workers laid off because of the recession. The new law grants a six-month extension of the 65-percent COBRA health insurance subsidy to cover workers laid off through February 28, 2010. Under the original law, the benefit extension was available only to workers who were laid off on or before December 31, 2009. The six-month extension will be provided for workers whose normal nine-month coverage has run out.

‘Tomboy’ sues for sex discrimination

A female employee who claims she was fired because she didn’t have a sufficiently “feminine” appearance can sue for sex discrimination. That’s the word from a federal appeals court in St. Louis. [Read more…]

Genetic discrimination law takes effect

The employment provisions of the federal Genetic Information Nondiscrimination Act have now taken effect. This new federal law says that a company can’t refuse to hire people because they are genetically disposed to develop a particular disease or condition, even if this would cause the company’s health care costs to skyrocket.

The law not only prohibits discrimination based on genes, but also creates a new right to medical privacy for employees. In some cases, employers can get into big trouble if they violate this right to privacy, such as by requesting, requiring or disclosing genetic information about employees.

Discrimination claims near all-time high

Workplace discrimination charges filed with the federal Equal Employment Opportunity Commission hit the second highest level ever in 2009, according to statistics from the agency. There were 93,277 employment discrimination charges last year. Awards to workers came to more than $376 million.

A number of factors appear to be coming together to create a “perfect storm” of discrimination claims, including: [Read more…]

Many seniors ‘hiring’ their children to take care of them

As people get older, they often hire people to perform services for them, such as housekeeping, cooking, driving, paying bills and personal care.

But what’s new is that a lot of seniors are hiring their own children. They’re signing contracts with the children specifying what services will be performed and how much the children will be paid. [Read more…]

Who’s entitled to overtime? It’s not always clear

Although the U.S. government has required employers to pay their workers overtime ever since the 1930s, it’s still unclear in many cases whether certain workers are eligible. A big reason is that the nature of people’s jobs and the workplace itself continues to evolve…so new questions keep coming up about eligibility.

For instance, the federal overtime law says that workers don’t have to be paid overtime if they have “administrative” jobs, which are jobs that involve using one’s discretion to make choices. In the old days, it was clear that factory workers on an assembly line weren’t making choices, whereas the factory managers were. But today, the line between administrators and non-administrators can often be blurry. [Read more…]