How Do I Cancel a Loved One’s Driver’s License?

In addition to canceling cards, insurance policies and automatic payments after a family member dies, it is important to cancel identification cards, like a loved one’s driver’s license. Bankrate’s recent article entitled “How to terminate a license after death” provides some valuable tips on closing out things for a loved one after they pass away.

Every state’s Department of Motor Vehicles (DMV) has rules about how it issues and cancels a driver’s license. In some states, you may not need to cancel a license because Vital Records will inform the DMV of the license holder’s death, and the license will be canceled automatically. If a state requires you to cancel the license, obtain the death certificate and contact the DMV for the specific procedure. Many states permit the canceling of a deceased’s driver’s license by mail. Typically, you need to send a letter saying you would like to cancel the deceased driver’s license; a notarized or certified copy of the death certificate; and the original driver’s license.

You can cancel a driver’s license to prevent identity theft. In addition, other items should be cancelled to make certain that personal information does not get into the wrong hands. Here are a few other vehicle-related items that should also be canceled or transferred.

Car title. Transfer the title, if you want to sell the car in the future or if you want to keep driving the vehicle. You will need to visit the DMV with the death certificate and the original title certificate to transfer the title. There may also be a state affidavit form certifying there is no probate before the vehicle title may be legally transferred.

Car registration. When the car title transfer is complete and the vehicle’s in your name, you can register it. Get car insurance before registering the vehicle.

License plates and handicap placards. The plates of the vehicle should be surrendered to the DMV with the driver’s license and a certified or notarized copy of the death certificate and a cover letter. If you return the deceased person’s driver’s license and the vehicle’s license plates, you could also send the handicap placard back to the DMV.

Car insurance. Call the insurance company to cancel auto insurance. The insurer may ask for a copy of the death certificate before canceling the policy.

Car loans or leases. A car loan is not forgiven upon death, and the balance will have to be settled from the estate’s funds. You might be able to take over the lease or loan, if you contact the lender with documentation showing you are the beneficiary, but this depends on the lender and state laws.

Reference: Bankrate (June 16, 2021) “How to terminate a license after death”

 

Comments Off on How Do I Cancel a Loved One’s Driver’s License?

Joint Account – Should You Add Someone to Your Bank Account?

Joint Account – Adding another person to your bank account provides both of you with complete access to the account. A person can be a power of attorney and a joint account holder, but the two are very different roles, explains the article “What are my rights when someone adds me to a bank account?” from Lehigh Valley Live.

A joint account is a bank or investment account shared by two individuals, although more than two people may be on an account. They have equal access to funds, as well as equal responsibilities for any fees or expenses associated with the account. If there are transactions, depending upon the rules of the institution, all owners may be required to sign documents. The key is how the account is titled. That’s the controlling factor in determining how the assets in the account are divided, if one of the owners dies. There are several different types of joint ownership.

One is “Joint Tenants with Rights of Survivorship,” or JTWROS. If one of the account owners should die, the assets in the account go directly to the surviving account holder. These assets do not go through probate.

Then there’s “Tenants in Common,” or TIC. With TIC, each individual account owner has the right to designate a beneficiary for their portion of the assets upon their death. The assets might not be split 50/50. How the account is titled lets the account owners divide ownership however they want.

Another one: “Joint Tenants by the Entirety.” This describes a married couple who own real estate or a financial account as a legal entity with equal ownership. Neither person may transfer their half of the property during their lifetime or through a will or a trust. When one spouse dies, the entire account goes to the surviving spouse and it transfers without passing through probate.

In the example given at the start of the article, the establishment of a joint account gives both the father and son equal access to the account. If the father is unable to handle the account at any time in the future, for whatever reason, the son will be able to step in.

Power of Attorney or POA is a completely different thing. A POA is a legal document giving a person the authority to act on behalf of another person for a specific transaction or general legal and financial matters. Just as there are numerous types of joint ownership, there are numerous types of POA.

A general POA gives a person the power to act on behalf of the principal for all legal, property and financial matters, as long as the principal’s mental capacity is sound. The Durable POA gives authority to a person to act on behalf of the principal, even after the principal becomes mentally incapacitated. Special or limited power of attorney gives authority to act only for specific matters or transactions. A Springing Durable POA provides authority to act only under certain events or levels of incapacitation, which is defined in detail in the document.

You can be both a joint owner of an account and a power of attorney. These are two different ways to help a parent with financial and legal activities. An estate planning attorney can help create the POA that best fits the situation.

Reference: Lehigh Valley Live (June 10, 2021) “What are my rights when someone adds me to a bank account?”

 

Comments Off on Joint Account – Should You Add Someone to Your Bank Account?

What Is the Required Minimum Distribution for 2021?

There have been a number of changes to the requirements for RMDs—Required Minimum Distributions—from traditional retirement accounts, says a recent article titled “2 Essential Strategies for Taking Your RMDs” from Kiplinger. In 2019, the age for RMDs was raised from 70½ to 72. In 2020, they were waived altogether because of the pandemic. Now they’re back, and you want to know how to make good decisions about them.

Most people take the default approach, taking a lump sum of cash at the start or the end of the year. This is not the best approach. Investment markets and your own need for income are better indicators for how and when to take your RMD. If you can at all avoid it, never take an RMD from a declining market.

You can take your Required Minimum Distributions anytime during the calendar year, from January 1 to December 31. If it’s the first time you’ve taken an RMD, you get a bonus: you can wait until April 1 of the year after your 72nd birthday. The RMD is calculated, by dividing the account balance on December 31 of the preceding year by your life expectancy factor, based on your age. You can find it in the IRS’s Uniform Lifetime Table.

2021 distributions will be bigger, and not just because of the market’s 2020 performance. Instead, distributions will be bigger because of how the accounts are designed, with RMDs becoming a larger percentage over time. It starts as a small percentage and eventually becomes the entire account, which is then depleted. Remember, the sole purpose of the RMD is to force retirees to take money out of their retirement accounts and pay taxes on the money.

Many retirees take Required Minimum Distributions because they need the money to live on. Here’s where money management gets tricky. It’s far easier to take smaller amounts of money at regular intervals, kind of like a paycheck, than taking a big amount once a year. We’re creatures of habit and are used to receiving income and managing it that way.

Distributions on a regular basis also fosters a better sense of how much money you have to live on, encouraging you to create and adhere to a budget.

If you don’t need the income, taking money through regular installments also has an advantage. It’s like the opposite of dollar-cost averaging. Instead of putting money into the market in small increments over time to even out market ups and downs, you’re taking money out of the market at regular intervals. You’re not cashing out at the market’s lowest point, or at the highest. And if you’re reinvesting RMDs in a taxable account, this strategy works especially well.

Reference: Kiplinger (June 10, 2021) “2 Essential Strategies for Taking Your RMDs”

 

Comments Off on What Is the Required Minimum Distribution for 2021?

What Happens to My Mortgage When I Die?

State and federal laws determine what happens to a home and the mortgage when the owner dies, explains Forbes’ recent article entitled “What Happens To Your Mortgage Debt When You Die?” The owner also has a say, provided they do some basic estate planning—like creating a will or trust, designating beneficiaries and perhaps purchasing life insurance.

When you pass away, all of your liabilities and assets—including your house—become part of your estate, which then must be settled. If you have a will, you’ve named an executor to handle this. Part of this responsibility is to take inventory of everything you own and determine who gets what among heirs and creditors. However, if you die without a will or trust, state probate court will direct the court to appoint someone to settle your estate. It’s typically a spouse, an adult child, or closest relative. Whoever this person is, he or she must determine who is named on the deed, who holds the title to your home and whether you have created a living trust or transfer-on-death deed to keep your home out of probate. This can save your heirs money and can expedite the property’s transfer.

If you’re the sole owner and don’t have a living trust or transfer-on-death deed, but you made a will and want to transfer your home to an heir, here’s what would happen next.

If your will names an heir to your home, that person will not have to take over your mortgage, provided they aren’t co-borrowers or co-signers on your loan. However, federal law does allow your heirs to take over the mortgage. If you leave your mortgaged home to your son, for example, the mortgage servicer must honor his request to become the new mortgagee (the borrower). He doesn’t have to qualify and demonstrate an ability to repay the loan. This rule covering the assumption of a mortgage also applies after the death of a spouse, although many spouses are often co-borrowers on a mortgage and co-owners of a home already. Despite the fact that most mortgages have a due-on-sale clause that normally requires the mortgage to be repaid in full when the property’s ownership changes, it doesn’t apply when an heir takes over.

However, the lender still can foreclose, if the assumed heir stops making payments. You can provide funds, by leaving your heir other assets or by naming them as a beneficiary on a life insurance policy.

If you die with other debts that can’t be repaid from your estate, state law may require the executor to sell your house to help repay those debts. If the proceeds from selling the home are more than the debts owed, the individual(s) who inherits your house will get the excess. Life insurance can help repay your debts at death, so your heir can inherit your home.

Note that your estate doesn’t have to pay off your mortgage. Since your mortgage is secured by your home, the mortgage servicer can foreclose and sell the home to get back the money owed.

If you’re an heir or an executor of an estate (or both), you’ll need to deal with the house and the mortgage when the homeowner dies. You can do any of the following:

  • Keep making mortgage payments
  • Pay off the mortgage
  • Refinance the mortgage
  • Sell the home; or
  • Let the lender foreclose.

Reference: Forbes (April 20, 2021) “What Happens To Your Mortgage Debt When You Die?”

 

Comments Off on What Happens to My Mortgage When I Die?

Seller’s Residency Certificate – Will My Children Pay Taxes, If I Give Them My Home?

Seller’s Residency Certificate – In a general warranty deed, a seller states that the transfer amount is one dollar and notarizes it. It is then sent to the county clerk. However, in this New Jersey example, the deed was sent back because a Seller’s Residency Certification form was required.

There is often confusion about the right method of transferring a deed and the potential consequences. When a home is transferred as a gift, property taxes may not be imposed, depending on state law. This is known as a homestead tax exemption for property taxes. The homestead exemption is generally a dollar amount or percentage of the property value that’s excluded, when calculating property taxes.

The amount or percentage depends on the state. Every state also has specific eligibility requirements for the exemption. In some states, every homeowner gets the tax exemption, while in other states, eligibility depends on income level, property value, age or if you’re disabled or a veteran.

Nj.com’s recent article entitled “Will changing this home’s deed cost us any money?” explains that in New Jersey, the Seller’s Residency Certificate addresses whether there should be income tax withheld, or whether an estimated tax payment should be made, in connection with the transfer.

In Georgia, to be granted a homestead exemption, an individual must occupy the home, and the home is considered their legal residence for all purposes. However, those away from their home because of health reasons will not be denied homestead exemption in the state.

When the transfer appears to be a gift in the New Jersey example, no withholding or estimated taxes should be required.

However, it’s important to understand that transfers of real property for consideration of less than $100 also shouldn’t trigger a realty transfer fee. If there’s a mortgage encumbering the property, and if you will assume that mortgage obligation, the amount of the outstanding mortgage balance would be treated as consideration.

However, if there is no mortgage encumbering the property and presuming that the transfer in the example above is from the mother-in-law to her daughter and her husband is a gift, there should be no realty transfer fee charged on the transfer.

Note in New Jersey, when the deed is re-record, it should include, in addition to the Seller’s Residency Certificate, an Affidavit of Consideration.

Reference: nj.com (April 24, 2021) “Will changing this home’s deed cost us any money?”

 

Comments Off on Seller’s Residency Certificate – Will My Children Pay Taxes, If I Give Them My Home?

Prescription Medications – How Do Seniors Get a Huge Discount?

Seniors can now join Walmart+ with a paid membership to receive a selection of free medications, plus thousands of other prescription medications at a discount of up to 85%.

Money Talk News’ recent article entitled “New Walmart+ Perk Can Save You Up to 85% on Drugs” explains that the prescription medications savings program — Walmart+ Rx for less — can save you money on “the most commonly prescribed medications across a variety of health needs, including heart health, mental health, antibiotics, allergies and diabetes management,” Walmart says.

Walmart says that free and discounted prescriptions are available at over 4,000 participating Walmart pharmacies around the country. However, they caution that the program isn’t insurance and isn’t available in all states.

Walmart+ Rx for less can’t be combined with insurance.

Seniors can sign up for a free trial. When it ends, as a Walmart+ member they can access their digital pharmacy savings card in their Walmart+ account on the Walmart website or app.

Next time a senior needs a prescription filled they can share the info on their digital pharmacy savings card with the pharmacist.

The new program is not the first time the nation’s largest retailer has tried to cut prescription drug costs.

Since 2006, Walmart has offered a $4 generics program that charges $4 for a 30-day supply of many generic drugs, or $10 for a 90-day supply. That program is still available to all Walmart shoppers, even those who are not Walmart+ members.

Walmart+ Rx for less is the latest perk added to the Walmart+ program

In December, the program rolled out free next-day and two-day shipping for members with no minimum purchase requirement, similar to Amazon’s Prime membership.

In a press release, Janey Whiteside, executive vice president and chief customer officer for Walmart U.S., says the newest prescription medications perks are part of an effort to make Walmart+ the “ultimate life hack” for customers:

“We know we can use our size and scale to help simplify things for our customers in a way only we can.”

Walmart ranks fifth in the top U.S. pharmacies ranked by prescription drugs market share in 2020 at 4.7%. CVS is first at 24.8%, and Walgreens is second at 19.1%.

Reference: Money Talk News (June 14, 2021) “New Walmart+ Perk Can Save You Up to 85% on Drugs”

 

Comments Off on Prescription Medications – How Do Seniors Get a Huge Discount?

What Inheritance Taxes are Due When Children Inherit Home?

The first issue to address is whether the will addresses how inheritance taxes will be paid, says nj.com recent article entitled “My adult kids inherited a home. What taxes are due?” The mortgage may say the estate itself will pay it before anything is paid out to beneficiaries, or it may not mention anything.

Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania are the only states that impose an inheritance tax, which is a tax on what you receive as the beneficiary of an estate.

Maryland is the one state that has both an inheritance tax and an estate tax. Its inheritance tax is up to 10%. As to the others, Nebraska’s tax can be as high as 18%. Kentucky and New Jersey both taxes inheritances at up to 16%. Iowa’s tax is up to 15%, as is Pennsylvania’s.

Spouses and certain other heirs are usually excluded by the state from paying inheritance taxes.

A child may have an issue if there’s not enough liquidity in the estate, separate from the house to pay the taxes. If the beneficiaries plan to keep the home, they’d need to take an additional mortgage.  They’d also need to find enough cash to pay the inheritance taxes due.

In the example above, if the deed is transferred to a niece and nephew, the executor should hire a licensed real estate appraiser and pay for a date of death appraisal on the property. That appraisal will determine how much capital gains was exempted at the sister’s passing. It will also establish a new basis for capital gains purposes for the niece and nephew.

If the heirs simply do nothing and move into the house, the inheritance tax will come due. In New Jersey, it’s due eight months from the date of death.

If the inheritance tax isn’t paid, liability for the unpaid tax will attach to the executor personally, often in the form of a certificate of debt attached to some asset belonging to the executor, like his or her house.

To make sure this is handled correctly, consider speaking to an experienced estate planning attorney, who can walk you through the process.

Reference: nj.com (June 14, 2021) “My adult kids inherited a home. What taxes are due?”

 

Comments Off on What Inheritance Taxes are Due When Children Inherit Home?

Elder Financial Abuse – Fraudsters Target Elderly

Elder Financial Abuse – The National Council on Aging reports that seniors lose an estimated $3 billion to financial scams, which is the worst possible time in life to lose money. There’s simply no time to replace the money. Elder Financial Abuse is easy to understand, as reported in the article “Scam Alert: 4 Types of Fraud That Target the Elderly (and How to Beat Them)” from Kiplinger. People who are 50 years and older hold 83% of the wealth in America, and households headed by people 70 years and up have the highest median net worth. That is where the money is.

The other factor: seniors were raised to mind their manners. An older American may feel it’s rude to hang up on a fast-talking scammer, who will take advantage of their hesitation. Lonely seniors are also happy to talk with someone. Scammers also target widows or divorced older women, thinking they are more vulnerable.

Here are the most common types of elder financial abuse scams today:

Imposter scams. The thief pretends to be someone you can trust to trick you into giving them your personal information like a password, access to a bank account or Social Security number. This category includes phone calls pretending to be from the Social Security Administration or the IRS. They often threaten arrest or legal action. Neither the IRS nor the SSA ever call people to ask for personal information. Hang up!

Medicare representative. A person calls claiming to be a representative from Medicare to get older people to provide personal information. Medicare won’t call to ask for your Social Security number or to obtain bank information to give you new benefits. Phone scammers are able to “spoof” their phone numbers—what may appear on your caller ID as a legitimate office is not actually a call coming from the agency. Before you give any information, hang up. If you have questions, call Medicare yourself.

Lottery and sweepstakes scams. These prey on the fear of running out of money during retirement. These scams happen by phone, email and snail mail, congratulating the recipient with news that they have won a huge lottery or sweepstakes, but the only way to access the prize is by paying a fee. The scammers might even send a paper check to cover the cost of the fee, but that check will bounce. Once you’ve sent the fee money, they’ll pocket it and be gone.

What can you do to protect yourself and your loved ones? Conversations between generations about money become even more important as we age. If an elderly parent talks up a new friend who is going to help them, a red flag should go up. If they are convinced that they are getting a great deal, or a windfall of money from a contest, talk with them about how realistic they are being. Make sure they know that the IRS, Medicare and Social Security does not call to ask for personal information.

For those who have not been able to see elderly parents because of the pandemic, this summer may reveal a lot of what has occurred in the last year. If you are concerned that they have been the victims of a scam, start by filing a report with their state’s attorney general office.

Reference: Kiplinger (June 10, 2021) “Scam Alert: 4 Types of Fraud That Target the Elderly (and How to Beat Them)”

 

Comments Off on Elder Financial Abuse – Fraudsters Target Elderly

Should I Consider a Reverse Mortgage ?

In the current real estate market around the country, property values continue to go up. Appraisals are also coming in higher. This means that seniors may be able to get more funds from a reverse mortgage.

If you already have a reverse mortgage, you may want to look into refinancing the loan.

Patch’s recent article entitled “Is A Reverse Mortgage Right for You?” explains that such mortgages permit homeowners who are at least 62 to borrow money on their house. The homeowner gets money from the lender based largely on the value of the house, the age of the borrower and current interest rates. The loan doesn’t need to be paid back until the last surviving homeowner dies, sells the house, or moves out permanently. Homeowners can use money from a reverse mortgage to pay for improvements to their home, to let them wait to claim Social Security, or to pay for home health care.

The most widely available reversable mortgage product is the Home Equity Conversion Mortgage (HECM). This is the only reverse mortgage program that’s insured by the Federal Housing Administration (FHA). The national limit on the amount a homeowner can borrow is $822,375.

Seniors with more expensive homes have an increased chance to get a jumbo reverse mortgage to raise cash for retirement. When the previous housing market improved, these jumbos were in high demand.

High end borrowers must look at a jumbo. This type of loan has no loan limits. Jumbos let a senior borrow millions of dollars. In fact, qualified borrowers can borrow up to $4 million in loan proceeds.

Reverse mortgages are “non-recourse” loans. This means that even if the house eventually sells at a price below the amount of the mortgage, the seller never owes more than the value of the home.

The amount of money seniors can qualify for, is based on their age and the home value. The older they are, the more money for which they can qualify.

A big reason to use a these mortgages are to pay for home care to stay out of a nursing home. By using this mortgage to pay for home care, a senior may not be required to use their own retirement accounts, which can jeopardize their ability to pay for future healthcare needs.

A reverse mortgage may not be best for everyone. Consult with an experienced elder law attorney about whether a reverse mortgage is right for you.

Reference: Patch (June 1, 2021) “Is A Reverse Mortgage Right For You?”

 

Comments Off on Should I Consider a Reverse Mortgage ?

Does a Prenup Make Sense?

PreNup – Take the time to think about your financial plans before you get married to help set you on the right path. chase.com’s recent article entitled “How to prepare your finances for marriage” explains that a prenuptial agreement sets out each prospective spouse’s rights and responsibilities, if one spouse dies or the couple gets divorced.

This is a guide for dividing and distributing assets. A prenuptial agreement can also be a valuable tool for planning since it will take priority over presumptions about what’s deemed community property, separate property, and marital property. A prenup can also prevent one spouse from being responsible for premarital debts of the other in the event of death or divorce.

A prenup is used frequently when one spouse or one spouse’s family is significantly wealthier than the other; or when one family owns a business and wants to make sure only family members can own and manage it.

Negotiate a prenuptial agreement early. If you know that you want to have your fiancé to sign a prenuptial agreement, do it ASAP because some courts have found a prenup invalid because it was entered into under duress and signed and negotiated right before the wedding.

Examine employee benefits. Make certain that you understand know how marriage will impact your employee benefits, especially if you and your spouse are working. See what would be less expensive, and if one offers significantly better coverage. Marriage almost always is a life event that permits you to modify your benefits elections outside of annual open enrollment.

Review beneficiary designations and estate planning documents. It’s common for young people prior to marriage to name their parents or siblings as beneficiary of accounts, like IRAs, 401(k)s, life insurance and transfer on death (TOD) and payable on death (POD) accounts. Review these designations and accounts and, if needed, change your beneficiary to your new spouse after the wedding. You should also be sure you to update your estate planning documents, including wills, health care designations, powers of attorneys and others, to reflect your new situation.

Communication is critical. Start your marriage with strong communication to help you better face future challenges together.

Reference: chase.com (May 25, 2021) “How to prepare your finances for marriage”

 

Comments Off on Does a Prenup Make Sense?