How young people can build their credit
Dear Liz: Our 23 year old daughter has a low limit credit card from her bank, mainly to establish her credit history. For the same purpose, we have also added it as an authorized user on one of our credit cards (yes, we can trust it). When she recently checked her credit reports at annualcreditreport.com, one of the agencies produced a report but another said they could not find it. Is this normal for a relatively new credit user? Could it be because she has a middle name made up of a hyphen? Should we be worried?
Responnse: It may take 30 days or more for the information to update at the credit bureaus, so she should try again and check the third credit bureau as well. If two offices cannot find it after 30 days, then it is possible that both credit cards fall under one office. In this case, she should consider obtaining a credit loan from a credit union under the three bureaus.
If not, the problem is probably with the credit bureau, and she should try ordering the missing credit report through the US Mail. The office that could not find it will have instructions for requesting a report this way on its site.
When retirement takes precedence over Social Security
Dear Liz: I am in my third marriage. My first two marriages lasted 10 years each. My spouses have worked in jobs requiring them to contribute to social security. I am currently retired (since 1999) and have worked for a municipal administration my entire career. I am currently receiving a city pension. Am I entitled to receive anything from Social Security during the time I was married to my previous spouses? It seems fair since I had to pay each of them spousal support.
Responnse: This is a new argument! Sadly, the Social Security system doesn’t care about the details of your divorce judgments.
You can call Social Security and ask if you are entitled to a benefit, but don’t be hopeful if your pension comes from a job that did not contribute to Social Security. A provision known as Government Pension Compensation would likely wipe out any Divorced Spouse or Divorced Survivor Benefit you might receive.
Add a sister to a property deed
Dear Liz: A reader recently asked about the possibility of giving a rental house to the sister who has lived there for 10 years. You mentioned that the reader should file a donation tax return since there is a maximum of $ 15,000 for a donation exemption. Couldn’t the owner just add the sister to the title so that when they pass the sister becomes the sole owner of the house without having to deal with taxes, probate etc. Likewise, if the sister dies first, the current owner will keep the property to give, sell, give as he sees fit.
Responnse: Adding the sister to the deed would be considered a donation, so the reader would still have to file an income tax return.
Owning the house together would avoid probate and give the surviving sister a tax break, and that half of the house would get what is known as an increase in the tax base upon the death of the first sister. Another option, if the reader wishes to retain ownership, would be a death transfer deed, available in many states. The reader was clear that she wanted to give an outright gift, but she could consult with a lawyer specializing in real estate or estate planning about other options.
Taxes on retirement account withdrawals
Dear Liz: I would like to give money to my grandchildren, but I don’t want to pay income tax on my IRA or 401 (k) withdrawals. Will they get it tax free when I die?
Responnse: Unfortunately no.
Withdrawals from retirement accounts are generally taxable whether the person making the withdrawals is the original contributor or an heir. In addition, non-spouses who are beneficiaries of retirement accounts generally have to withdraw the money within 10 years.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be directed to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.