Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
My parents recently offered me a piece of art that they’ve always had and I have always loved. My mother bought it when she was in college. The artist is now very well known (and dead). I started looking into this work and learned that it may be worth a significant amount of money—not millions, but perhaps a year or two of my salary.
Any advice on what I should do next, if I don’t think I want to sell it? Should I have it authenticated? Should I have it insured? Is there any downside to taking these steps—for example, might I have to pay taxes on it, or would it make my kid ineligible for need-based financial aid that they could otherwise access? (And even if not, would it be ethical for my kid to get financial aid that they wouldn’t need if I sold the art?) Is it possible to display nice art in a normal home without undue risk of damage?
Just getting it authenticated appears to cost more than a thousand dollars, and I imagine that insuring it and storing or displaying it properly would all be expensive. I guess my question is whether it is possible to responsibly own a valuable piece of art when I don’t have a huge amount of cash to protect it—and if so, what my next steps should be.
—Really Ties the Room Together
Dear Ties the Room,
You can own pretty much anything responsibly, if it’s done the correct way. Yes, that includes art. But first, you do need to have it authenticated. It is costly, but in order to treat your art as an investment, you need to make sure it is insured correctly and has a paper trail to back it up.
After you have your certification papers in order, you’ll want to consider a private art insurance company. As you likely know, if you have a home or renters insurance company, your belongings are only covered up to a certain dollar amount, should something happen. A company that specializes in the arts can make sure you have the right coverage and paperwork to ensure your investment is properly taken care of. They can also help you decide on the proper care of your art piece. You may decide it’s too valuable to leave around—or, once it’s insured, you may want to hang it in the living room.
Since art is considered collectible, you would not need to report it on your son’s FAFSA. Collectibles are a sheltered asset, so you do not need to disclose the fact that you have it in your possession, and the painting will not be used against your son when he is seeking financial aid.
I think it’s amazing you have a cool piece of art that you love, that can be an investment for you, and that will remind you of your parents when you look at it! So take care of it, put it on display, and enjoy your gift.
Dear Pay Dirt,
My grandfather and grandmother set up a trust a few years back, and then my grandmother passed and had her trust become irrevocable, but with a special power of appointment. Her trust was supposed to go in fourths, to the children/grandchildren. My grandfather passed a few months back and we found out he had a trust too, which he directed to his caretaker. He also used Grandma’s trust power to disinherit my mom and give more shares to my brother, at two-thirds. I get one-sixth now.
I told my mom that I hate this for her, and will give her half of my share, and asked my brother to pool his money and split with my mom. It’s my grandmother’s money, and she wanted my mom taken care of. My brother has since declined. We are in the process of getting a lawyer and trying to reclaim/undo the gift to my grandpa’s caretaker and undo the special power, but my brother doesn’t want to risk his inheritance. He’s started texting and inserting himself in our lawsuit, saying he wants to look out for Mom and make sure I do it right. I told him to butt out, and he replied with a You aren’t welcome at my house and I want nothing to do with you.
Should I try to reconcile, so as to not hurt my mom with a strained brother-sister relationship, or should I adhere to my belief that he’s taking advantage of a situation to keep as much money for himself as possible and isn’t interested in looking out for my mom? Was I fair to ask my brother to pool and split with my mom? Am I right to be mad he declined?
—This Is a Mess
Damn, your grandfather was savage. He really took advantage of his limited power of attorney. Does your mom know why he would disinherit her and make your brother the main heir? Did your brother know she would be disinherited, and if so, why? If he knew in advance what was going to happen, his defensiveness makes a lot of sense. Either way, it’s clear he doesn’t have your mother’s best interests in mind. It was obvious when he declined to pool the money together, and it’s even more obvious now that he is inserting himself into the lawsuit.
It’s hard when we feel we have to protect our parents, since they are supposed to be the ones who protect us. As much as I understand wanting to fake a relationship with your brother for your mother’s sake, don’t do it. For now, stay civil, but work with your mother privately to help her obtain the legal representation needed to contest the trust. Contesting a trust can be done, but it can also be quite difficult, especially when the person used their limited power of attorney to disinherit family members out of a dead person’s trust. Technically, what your grandfather did was legal, unless a lawyer can prove otherwise. I wish you the best of luck, and remember, don’t tell your brother anything.
Dear Pay Dirt,
I was first-generation to college and an immigrant to the United States. I am currently enrolled part time in an Ivy League university, for a master’s degree that I’m finding hard to afford and considering dropping out of, even though I only have six classes left. The reason is purely financial: Each course costs close to $10K. I’m hoping you can help me see if there’s a viable path to affording the degree, or if dropping out is in my best interests.
I work full time and, on the weekends, have some freelance opportunities that can bring some extra money. My wife is similarly enrolled part time for a postgraduate certificate and works part time. Our combined annual income, pretax, is around $90K. I have about $40K in a 401(k), $10K in a Roth IRA, $30K invested in mutual funds and stocks, $10K in a CD, and $10K in cash. We don’t have any other debt.
While some of those amounts are (hopefully) respectable, I was really hoping not to break into them and to use them towards a down payment. But housing seems farther and farther away when you don’t have any family support to fall back on. Being in our mid- to late 30s, we already feel behind. I know one can take loans out against one’s 401(k), but the thought of paying interest on something we worked hard to put away feels difficult.
I just recently learned about 529 plans. Can I/we use this towards my tuition? And my job is fully remote, but we are staying in this town purely so we can attend school. Would this rental payment be something that could come out of my 529?
Finally, there’s a lot of talk about student loan forgiveness. It’s not clear to me if it would cover graduate school tuition, but one question that comes to mind is if I should take out a student loan just in case forgiveness comes along. My concern, hopefully irrational, is that $10K or $50K would be forgiven for those with existing student loans, and I will miss out because I don’t already have one. Do these programs typically forgive you even if you take a loan out after they are announced?
—Will the Ivy League Pull Me Up or Drown Me?
Dear Ivy League,
DO NOT DROP OUT! Most master’s degrees require on average 30 to 40 credit hours, and if you only have six classes left, you are over halfway there. Plus, you are going to an Ivy League school. Do you know how many people tried to get your spot and missed out? You fought for it, so let’s finish it.
First of all, you have considerable assets for someone your age. At the time of you writing this letter, you had $100,000, so it’s probably safe for me to say you have more now. I would leave your 401(k) alone. You can touch your IRA for educational purposes, so that’s an idea of a source of money to draw from. I honestly would also withdraw the cash from your CD. CDs are a safe investment overall, but they don’t pay returns as well as the money you currently have invested in the mutual funds and stocks. If you pull from your IRA and withdraw from your CD, that’s $20,000 in cash, total, right there.
Definitely throw the 1099 money from your freelance work into the 529. 529s are not just for dependents, and you can also pay your rent through it. Or, I should say, you can pay your rent through this account with one caveat: You can’t spend more on rent than you would if you were boarding at the university. You said “Ivy League,” so I doubt this is a problem. You can contribute up to $18,000 per year to such an account without paying taxes on it, but there is no cap as to how much you can put into it. If for some reason you end up with an extra amount of money, you can pass it on to your wife for her schooling.
Finally, you should never take out a student loan “just in case” the loan is forgiven or canceled. The government can, at any time, cancel or change the current loan forgiveness programs it has, so no one should ever assume that their loans will one day be gone, until they have a paid-in-full notice in their hands. Of course, you can apply for student loan forgiveness that already does exist, if your job qualifies, so take a look at those options now to see if that might work for you—just don’t assume anything. You can also refinance your student loan to get a better interest rate later on down the road.
Dear Pay Dirt,
My husband and I have racked up a sizable amount of high-interest credit card debt. And while we have been planning and budgeting to pay it back, the high interest rates mean we don’t make much of a dent. (We’re already putting as much of our regular income as we can toward credit card payments.)
He’s getting a large (low-five-figure) check this year and we were hoping for advice about how to use it best, in a way that lowers the significant chunk of monthly income that goes to credit card debt. We have several credit cards, and one thought was that we could pay the largest one off and ask that credit card company for a balance transfer offer, to bring the balances on some of the other cards over. Is that still a thing? Our credit ratings aren’t great, so applying for new cards is not an option. Is this a stupid idea? Is it even possible? If so, do you have any advice on how to go about it? If not, do you have any suggestions on how best to use the funds to help us get out of debt?
—Is This a Light at the End of the Tunnel?
Dear End of Tunnel,
Balance transfers are still a thing, and it’s a great idea. You can ask one of your credit card providers to see if they are willing to transfer your other cards and allow you a consolidated payment, with a lower interest rate.
You could also look into getting an unsecured personal loan from a credit union. Credit unions are not-for-profit financial institutions that may be more willing to lend to you if your score is on the lower side. This option would allow you to pay off all your credit cards, which would look great on your credit report, and would be easier on you financially, as you’d have only one monthly payment.
As for your windfall, as much as you want to throw it at debt (which is admirable), make sure you also have an emergency fund. A lot of credit card debt is acquired because of emergencies, and an emergency fund can help you stop the cycle if this applies to you. People recommend anywhere from three to six months of expenses to go in the fund, but even a smaller amount like $1,000 would be a great start. Once you have something put aside, direct the remainder toward a down payment onto the unsecured personal loan at the credit union, or pay it to the credit card you plan on using for the consolidation. And good luck!
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