A senior seeks advice on surrendering her assets
QMy daughter is in her 40s and I am in my 80s. We live together. The house is in my name only. I know I should have it changed over to my daughter's name. But what about my other assets? Should everything be registered in my daughter's name only, such as: stocks, insurance, teacher's retirement fund, car, checking and savings accounts, and certificates of deposit? My medical expenses currently help reduce my taxes.
AExamine your motives for wanting to make a total transfer, says Gary Schatsky, a fee-only financial planner in New York. He lists three main reasons to consider a transfer:
1) To avoid probate. But you can also accomplish this by creating a trust for your daughter.
2) To pay less income tax. If, for example, your daughter reported far less income than you do and took possession of your nonhouse assets, her earnings on income would likely be taxed at a much lower rate than yours. On the other hand, you might actually cut taxes more through your medical deductions, as you mention.
3) To render you eligible for Medicaid. But in most states you have to transfer assets at least 36 months before becoming eligible for this government program that assists the poor and elderly with their medical bills.
Some other factors also need consideration, says Schatsky. Retirement accounts cannot be transferred and remain in your name as long as you live. Also, you will lose direct control of any asset that you decide to transfer.
Finally, if you transfer ownership of the house, your daughter may be stuck with a large capital-gains tax, although there could be an exemption of $250,000, assuming she remains single and has lived in the house for a certain period of time, he says. On the other hand, if she inherits the house upon your demise, she assumes the appraised value of the house at that point, which would reduce much of the capital-gains tax owed when the property is sold.
Sit down with an attorney or financial planner and carefully walk through the options, Schatsky advises.
QI have $40,000 in a trust fund that my mother's brother willed to me. Where do I start in investing this money?
B.S., Ft. Stockton, Texas
ARead a solid book on finance, such as Eric Tyson's "Personal Finance For Dummies," (IDG Books). Tyson notes that a novice investor can always invest through a licensed financial house or mutual-fund company.
If you're uncomfortable with investing, contact a licensed financial planner. Just be certain not to lose control over your assets.