Dear Liz: I recently found out that my ex loaned one of her former bosses $2,500 to get his brother out of jail on bail. My ex took the money from a joint account I opened with the inheritance I received when my father died. It's been four years now and I haven't gotten a cent back on the loan. I could really use the money right now because I have medical bills to pay. The question is: who should I follow? My ex or the boss?
Answer: You may have read in this column that inheritances can be held as separate property, even in community property states where other assets acquired during the marriage are generally considered jointly owned.
However, an estate may lose its status as a separate property if it is commingled with community funds. That's what you did when you opened a joint account with the money: you gave your ex access to the money.
You can certainly ask the ex and the boss to give the money back. If that doesn't work, you can try the subdistrict court judge. You can also hire a lawyer, but the costs of getting the loan repaid may far exceed the amount at stake.
My parents cut my child out of their will. (Ouch!) Can I give her some money?
Dear Liz: My parents wrote my youngest daughter out of their will (my other children remained in it). Now that both parents are gone, I am busy settling the estate. I feel terrible that my parents did this. My daughter is very angry with me and her siblings for not sharing the inheritance. I have the impression that there is nothing we can do about the will. That said, I would like to give my daughter a good amount of money, but I don't think I can give more than $18,000 a year. Am I right in my two assumptions?
Answer: Yes and no.
Yes, as the executor of the estate, you are obligated to carry out your parents' wishes as expressed in their estate planning documents.
But no, there is no limit to how much money you can give someone. Gifts over a certain size – this year $18,000 – must be reported to the IRS. But you won't owe gift taxes until the amounts you give away above the annual limit exceed your lifetime limit, which is currently $13.61 million.
That said, a large enough gift can make an impact on your own legacy. Consider seeking advice from your estate planning attorney before proceeding.
Is getting old reason enough to cancel some credit cards?
Dear Liz: Recently someone asked if closing a credit card would be worth it and you replied that there is no compelling reason to do so and that it could actually hurt your credit score. As an older person, I can think of two good reasons: theft and fraud. Many of us no longer have mortgages or other debts after a certain age. But I'm finding it harder to keep track of my finances. For that reason, I want to cancel three of my five credit cards.
Answer: You misquoted my response. What I actually wrote was“If there is no compelling reason to close a card, consider leaving the account open and using the card occasionally to prevent the issuer from closing the card.”
Wanting to reduce your risk is reason enough to close a card account. We would all be wise to simplify our finances as we age, says Carolyn McClanahan, a certified financial planner and physician in Jacksonville, Florida.
You may also want to think about who can help you manage your finances as the task becomes more difficult. A legal document called a power of attorney allows you to appoint a trusted person who can take over if you become incapacitated. You may want to familiarize this person with your finances and consider giving them online access to your accounts so that they can help you detect fraud, theft, or missed due dates. It's generally better to get them involved now, if you can guide them, than to wait for a crisis and hope they can figure it all out on their own.
Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions can be sent to her at 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or by using the “Contact Us” form at asklizweston.com.
