Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
A few years ago, an old friend’s wife died intestate. Struggling to settle her estate made my friend realize he’d better make a will, so he quickly got a form off the internet, filled it out, and got it witnessed and notarized. He left everything to me and made me his executor.
I was touched by the gesture, but always assumed he would eventually go to an estate lawyer and make a proper will dividing his assets more evenly among friends, family, and charities. He hasn’t. He insists he just wants me to have it all because he isn’t close to family, all his friends are well-off, and I was there for him when no one else was. All he asks is that when I die, I leave the remainder of his estate to his favorite charity.
I suppose this is a good problem to have, but it is a problem. First of all, this is much more money than I’ve ever needed or dreamed of having, and if I inherit it, I’ll also be inheriting many complications. Because the will is structured so simply (basically just “she gets it all”), I would expect it to be challenged by relatives who see millions in assets and don’t know me from Adam. Because everything would have to go through probate (no trusts and I am not joint on any bank accounts), I fear I’d end up trying to pay monthly bills on his estate that are larger than my present annual income.
I urged him to go to a lawyer, set up trusts, make provisions for his relatives, add a bequest for his favorite charity, make someone else the executor—anything to keep complications to a minimum. He says he sees my point, but never gets around to contacting an estate lawyer. He’s likely to die before I do. I’m a good money manager, but I’ve always been a modest earner; the sums and potential situations I’d be dealing with are far beyond my experience. How do I handle this?
—This Gift Is a Curse!
What a predicament. I consulted Patrick Hicks, head of legal and general counsel at Trust & Will, to give you some more insight on this matter.
“The concern is not the source of the documents—DIY estate plans are not inherently inferior—but rather the oversimplification of his plan. With millions at stake and relatives feeling aggrieved, a contest seems likely regardless of whether a lawyer prepares the documents or not,” said Hicks.
Hicks also said that a trust may be a better option than a will in this situation: “A trust would allow your friend to more effectively specify that assets belong to you for your lifetime, but then specify that they pass to the charity upon your death. Your friend should also consider providing more context to support his decisions. If he has reasons not to leave assets to his relatives, he can state that directly in his estate plan.” In this case, the more information provided, the less likely someone will have grounds to contest the trust.
You are right to be stressed about not having a proper plan in place, as it will eventually all fall on you. Another conversation about the reasons stated above may help change his mind. If he is still on the fence, offer that he can create a trust-based estate plan through a self-help system such as Trust & Will or LegalZoom, which is likely to produce a better result for him and for you than doing nothing.
Dear Pay Dirt,
My wife left her job in October 2021. She’s in her 40s and left her 403(b) where it was with them, and also had some pension benefits to be collected later, when she’s of appropriate age.
She began seeing monthly deposits in her checking account this year, of a couple hundred dollars (the two payments so far are not identical amounts). The deposit info looks like the old payroll/direct deposit account through which she previously received her salary. The bank can’t tell her why she is getting these payments, and suggested contacting her past employer, who hasn’t replied to several inquiries. I don’t see any distributions from her 403(b), but am worried about crossed wires with the pension or something else, and us getting hit with tax penalties.
She’s considering just closing the checking account and opening a new one to stop the mystery money from coming in. What kind of risk are we at here in terms of tax penalties or having to pay the funds back or anything else? I’m going to encourage her to keep copies of any correspondence about “the glitch” in the meantime. And of course, yes, part of me wants her to just keep accepting the money and thinks closing the account and opening a new one is not worth the hassle!
Dear Free Money,
I think we all wished for a money tree growing up, and it seems like it came true for your wife!
I can’t tell you what tax penalties you’d incur because we don’t know where the money is coming from. If it was her 403(b), it would be coming from the financial institution her old employer had contracted to manage their 403(b) benefits, not the employer. I am wondering if it is possible that the money is for pension benefits that she qualified for early on.
I think closing the account would be a hassle, but I also understand why she wants the “free” money to end. Continue to keep the correspondence and document everything on your end. I would give it a few more months and then feel free to spend it. But definitely do not spend more than you are willing to pay back.
Dear Pay Dirt,
My parents are in their 70s, and I just learned that they are not prepared for the retirement that they started two years ago. My father sold the family business for what I estimate to be $200K to $300K. Of that, $90K is left. They have $250K in mutual funds and owe $280K on their house. They get $3,600 per month from Social Security.
This info has sent me reeling (how in the world does someone retire with only $250K?!) and I’m trying to figure things out for them. Selling the house isn’t much of an option, as they aren’t physically able to excavate 20-plus years of stuff. Also, they would still need housing. My mom says that they need about $6,600 per month to live. With the mutual funds and money from the sale of the business, this gives them about 9.5 years to have the additional $3K per month that they need.
What direction can I steer them in? I haven’t had insight into their financial lives until now. I always assumed they planned responsibly since they ran a successful business for so long. I don’t know what to do here.
—Who Does That?
Dear Who Does That,
It sounds like you are really worried about your parents, and they are lucky to have you in their corner. The average baby boomer has saved up around $200,000 to live on in retirement, so your parents are actually not completely alone. I know it doesn’t make you feel entirely better, as that average number is not sufficient, but your parents are not outliers here. To help, I interviewed Kathy from Baby Boomer Super Saver. She’s an expert at helping those in your parents’ situation.
“Your parents are above average, with $250,000 in mutual funds and another $90,000 from the sale of their business. Plus, your parents receive $43,200 per year from Social Security. However, that does not change the fact that your parents are facing a gap between what they have saved, what they are currently spending, and how long their retirement will last,” says Kathy.
We can bridge the spending gap in two ways: bringing in more money and reducing expenses. Since you mentioned your parents are not physically able to clean out their home to sell it, they may not be able to work. “Could your parents sell things on eBay? Or could they partner with someone who will do the work of selling their ‘20-plus years of stuff’ for a percentage of the sales?” Kathy asks. Maybe, by decluttering their home now, at their own pace, your parents could earn extra cash. This will also help if they do decide to sell the house later.
If your parents aren’t already doing so, they need to track their spending by using a budget. But if they still can’t create financial space after they see what they’re spending on, they may want to sell their home, to purchase a smaller home outright and eliminate their heavy mortgage altogether. It’s a tough situation, but with you to guide them, I’m positive you’ll figure out a way to make it work, even if it doesn’t seem like it right now.
Dear Pay Dirt,
My town home association is looking to do much-needed updates to roofs and siding due to neglected maintenance and too-low homeowners’ association fees for years. I’ve been here 10 years and tried to get them to increase dues slowly to build the reserve, but no dice. Now a new property manager has the board convinced we need to take out a big loan to do all the work at once. This will raise monthly dues from $250 to $758.
I can afford it, but that just seems insane. If I stay and pay (dues will be like this for 10 years), it feels like I’ll be throwing money away. I’d rather spend that $50K on a single-family home that will actually appreciate in value. If I try to sell, I’ll have to drastically reduce my price or escrow dues cash to entice buyers wary of such high dues. What should I do?
—Trapped in This Town House!
It sounds like you’ve already made up your mind to sell and just need a friend to validate your decision. Lucky for you, I’m that friend!
High HOA fees are not uncommon—as a matter of fact, some HOA fees are higher than the owner’s actual mortgage payment. Depending on where you buy your next home, you still might be on the hook for HOA fees, but at least you know this time what you’re getting into.
It’s a seller’s market, and buyers may not blink at even the higher fee you mention, so find a real estate agent ASAP and clean up your home to put it on the market. There are a lot of things you can do to make your home nice for a showing, such as getting rid of excess belongings and having your floors professionally cleaned. Fresh paint and updated light fixtures can also help your town house look more inviting to potential buyers. You can still get full price, so don’t give up. Good luck!
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