MONEY Kids and Money

Why You Need to Give Your Kid an Allowance

A study identifies the best ways to teach children the money basics.

Want to teach your kids some basic understanding of financial basics? It’s time to stop stalling and set up an allowance.

Children who receive an allowance are more likely than those who do not to say they are knowledge about managing personal finances (32% vs. 16%), understand the value of a dollar (90% vs. 81%), and feel smart about money (40% vs. 25%), according to a new study by T. Rowe Price.

And once you’ve handed out the cash, resist the urge to micromanage your kids’ spending: The study found that it’s important to allow your kids to make mistakes and mishandle those funds. Children who’d made money blunders reported feeling two to three times more knowledgeable about managing finances (36% vs. 16%) and investing (26% vs. 8%) than those who had not.

Yet the survey also noted that communication remains vital. Kids who have frequent conversations about money with their parents — in addition to real-life experience, like getting an allowance and making money mistakes — are far more likely to think they are smart about money (70% vs. 15%). They also feel more empowered and confident than those who do not.

“It’s intuitive that talking to kids about money gives them financial knowledge,” says Judith Ward, a senior financial planner at T. Rowe Price, who was quoted in the company’s press statement. “But we were surprised to see the extent to which letting kids experience money may have an impact.

“If parents talk about money but don’t let their kids experience it, it’s like telling them how to play the piano without letting them touch one and expecting that they’ll be able to play a sonata.”

To find out exactly how much you should be giving your kid and what to reward, see The Right Way to Give Kids An Allowance.

MONEY Ask the Expert

How to Control How Heirs Spend Your Money

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: I’m 71 and my estate will be divided between my daughter and son; there are no grandchildren. My son and I differ radically on some political views. Is there any way to stipulate that none of my money will go to his causes? — Janet S.

A: The only way you can influence how heirs spend your assets from beyond the grave is with a trust, says CPA and financial planner Dina Lee, managing director of the Colony Group’s New York offices. This document goes beyond a will in that it not only outlines who will receive your property (and how much of it), but also helps guarantee your legacy and your intentions.

You can control the trust while you’re alive by drafting a living will with an estate planning attorney, but you will need to carefully appoint someone — be it a friend, family member, or third party like a bank — to manage the assets and distribute funds to beneficiaries after your death, following your instructions.

Beyond determining who inherits how much, a trust lets you include additional instructions to create hoops for heirs to jump through. An incentive trust, for instance, might force an heir to meet certain requirements — earning a degree, say, or passing a drug test — to receive funds. Staggered trust distributions allow your estate to pay out money incrementally over a certain timespan; such instructions are often aimed at allowing more money to be disbursed as heirs mature.

In theory, you can make the trust as restrictive as you like as long as those restrictions don’t break any laws — forbidding an heir from entering an interracial marriage, for instance.

But this is where your specific restriction may run into trouble. While you can specify that you don’t want heirs to give any of their trust funds to a specific political party, or certain political causes, your son could challenge that restriction in court — and the court could overturn it by finding it to be a violation of freedom of expression.

Alternate Strategy

A wiser tactic, suggests Washington estate planning attorney Bill Sanderson, would be to “only permit that which you want to permit.” Rather than trying to exclude certain activity, simply spell out which expenses you feel comfortable supporting, he suggests; the list could include such items as mortgage payments and rent, healthcare bills, insurance, and education costs.

This strategy is easier on the trustee, adds Sanderson, because he or she can simply ask beneficiaries to show proof of an expense and then issue a reimbursement — without having to play detective.

Understand, however, that such restrictive arrangements can cause resentment from heirs.

And there’s another issue. Lee points out that even if you craft the trust in a way that limits its use for political donations, simply giving your son money will increase his wealth, and thus free up more funds that he can give to those causes you disagree with.

Says Lee: “Indirectly, you are still enabling him to support his political beliefs — and accepting that the trust can’t change his behavior is part of letting go.”

Read next: I Paid Off $45,000 in Debt as a Stay-at-Home Dad

MONEY wage gap

The Truth Behind the Wage Gap

Workers at oil refinery
Getty Images—Getty Images Workers at an oil refinery. The natural resources extraction industry has the largest wage gap between men and women, after controlling for all other factors.

What if you could really compare apples to apples?

Women’s Equality Day, August 26, marks the day in 1920 when women gained the right to vote. But it also gives us an opportunity to reflect on issues of inequality that persist, 95 years after that historic moment.

One of those areas: Pay.

Last year, President Obama made headlines when he noted in his State of the Union address that women who worked full-time, year-round earn 77¢ for every dollar men earn across the country. (It’s 78¢ now, according to the U.S. Census Bureau.) The Bureau of Labor Statistics pegs that figure slightly higher, with median weekly earnings for women—$669 in 2012, the most recent year for which data is available—at 82% of men’s weekly wages.

“That is wrong, and in 2014, it’s an embarrassment,” the president said of the pay differential. “Women deserve equal pay for equal work.”

While Obama’s speech may give the impression that the entire 22¢ gap is the product of gender bias, that’s not exactly true. Both the Census and BLS take into account “occupational segregation,” or the tendency for women to enter lower-paying fields than men, according to the Institute for Women’s Policy Research, as well as the fact that women take more time off from work due to pregnancy and child care, as noted in a report prepared for the Department of Labor by CONSAD Research Corp.

But what if we eliminated those factors and controlled for things like years of experience, education, skills and responsibilities, time in the workforce—in short, everything but discrimination?

You still wouldn’t get to zero. CONSAD’s analysis suggests that the gap shrinks to between 93¢ and 95¢ cents, but that can vary considerably depending on the industry. Just look at Silicon Valley, where recent high-profile legal battles have prompted the California Legislature to create the California Fair Pay Act, a tougher equal pay law that will make it harder for employers to pay men more than women for substantially similar work and prohibit them from retaliating against women who ask about the pay of male colleagues.

Using data provided by salary research company PayScale, MONEY was able to put together an apples-to-apples look at just how much the median pay differs by industry, all else being, well, equal.

If you don’t want to wait for legal protections—or the year 2058—to see equal pay, here are 5 Ways Women Can Close the Pay Gap .

Industry (Census Definition) Controlled Difference in Pay Male Median Pay Female Median Pay
Mining, Quarrying, and Oil and Gas Extraction -5.4% $78,200 $74,000
Transportation, Warehousing, Delivery Services -4.7% $54,700 $52,100
Agriculture, Forestry, Fishing and Hunting -4.2% $50,800 $48,700
Finance and Insurance -4.0% $69,600 $66,800
Retail Trade -4.0% $41,900 $40,200
Accommodation and Food Services -3.7% $38,700 $37,300
Wholesale Trade -3.6% $53,200 $51,300
Information (Telecommunications, Publishing, Recording, Software) -3.4% $67,100 $64,800
Manufacturing -3.1% $63,800 $61,800
Management of Companies and Enterprises -2.8% $69,000 $67,100
Utilities -2.7% $72,100 $70,200
Public Administration -2.5% $67,400 $65,700
Arts, Entertainment, and Recreation (Performing Arts, Sports, Museums, Amusement Parks, Gambling) -2.5% $44,900 $43,800
Construction -2.4% $57,200 $55,800
Other Services (Repair/Maintenance, Laundry, Personal Care, Death Care, Religious/Professional Organizations) -2.1% $46,100 $45,100
Educational Services -1.9% $53,000 $52,000
Administrative and Business Support and Waste Management and Remediation Services -1.9% $42,900 $42,100
Health Care and Social Assistance -1.7% $56,400 $55,400
Professional, Scientific, and Technical Services (Legal Services, Accounting, Engineering, Advertising, Marketing, Computer Systems Design, Scientific Research) -1.6% $72,600 $71,400
Real Estate and Rental and Leasing -1.3% $48,500 $47,900
MONEY ID Theft

What to Do if You’re a Victim of the IRS Refund Hack

U.S. Internal Revenue Service (IRS) building in Washington May 27, 2015
Jonathan Ernst—Reuters IRS building in Washington

The agency's data breach just got bigger. Here's what to do if you're a victim.

The Internal Revenue Service announced Monday that the data breach of its “Get Transcript” web program allowed hackers to access the tax returns of more than 300,000 people — far more than the agency initially reported in May.

Back then, the agency said hackers had used stolen personal information to access past tax returns for 114,000 people through the Get Transcript web application, and then used that data to file fraudulent returns, collecting nearly $50 million in refunds.

Over the next few days, the IRS says it will be sending 220,000 letters to affected taxpayers whose returns were likely viewed by hackers and offering them free credit monitoring.

If you receive such a letter, here’s what you need to do:

Pick Up More Protection

Once the IRS names you as an identity theft victim, the agency should issue you a personal identification number to use in addition to your Social Security number when submitting future tax forms. This will give you another layer of security, as the IRS will automatically reject any returns filed with an incorrect or missing PIN. You’ll get a new PIN every December.

To get the PIN, respond to the IRS’s letter or complete form 14039, the identity theft affidavit.

Alert the Credit Bureaus

“If a thief had enough information about you to file a false tax return, he could have also opened new credit card accounts or taken out a loan in your name,” says CPA Troy Lewis, chairman of the American Institute of CPAs’ tax executive committee.

Set up free fraud alerts with the three major credit reporting bureaus: Equifax, Experian, and TransUnion. These alerts, which last 90 days but can be renewed, warn potential creditors or lenders that you are an identity theft victim and that they must verify your identity before issuing credit.

You can go a step further by placing an indefinite credit freeze on your files, which instructs the credit agencies to prevent new creditors from viewing your credit score and report. It’s free if you file a police report detailing the identity theft; without one, it can cost as much $10, depending on your state.

Bear in mind that a freeze will also keep you from accessing instant credit. If you need to apply for a loan, you will need to give the agency permission to thaw your data — and in some cases you’ll pay a fee to lift the freeze, which can take a few days.

Check Your Credit Report

You are entitled to a free copy of your credit report from each of the three agencies. Check these reports carefully for unauthorized activity, and look at your history as well as recent activity. (Those tax returns may not be your only ID theft problem.)

If you see errors in your report — such as the wrong personal information, accounts you didn’t open, or debts you didn’t incur — dispute those errors with each credit agency and the fraud department of the businesses reporting that inaccurate information.

Change Your Passwords

Thieves hacked into the IRS website with enough personal information about their victims that they were able to trump the system’s multistep authentication process. That means that before they viewed your return, they already knew a lot about you — probably because of previous data breaches that exposed your information.

These criminals also know people like to use the same password at multiple websites, so it’s a good precaution to change the passwords for your email, online bank accounts, and other sites that contain your personal information. (This holds true any time you’ve been a hacking victim.) Follow this guide to make your passwords as secure as possible.

Be Patient

The IRS says a typical case of ID theft can take 180 days to resolve. And even after you’ve cleared up this year’s tax mess, tax and credit fraud can be a recurring problem.

If your tax fraud case hasn’t been resolved and you’re experiencing financial difficulties because of a holdup with your refund, contact the agency’s taxpayer advocate service at 877-777-4778.

MONEY

23 Ways to Slash Your Car Expenses

car on long straight desert road
Ruth Eastham & Max Paoli—Getty Images/Lonely Planet Images

These smart moves will help you save on gas, insurance, and upkeep.

After a home, a car is the second-largest purchase most consumers make. But the costs don’t stop when you drive off the dealer’s lot.

Owning and operating a vehicle also accounts for the second-largest household expense, according to the Bureau of Labor Statistics; continuing upkeep costs roughly $8,700 a year, according to AAA’s Your Driving Costs study. That breaks down to $725 a month and 58 cents, on average, for each mile driven.

Want to know in advance what kind of outlay to expect? Before you purchase a new vehicle, run your options through Kelley Blue Book’s cost-of-ownership calculator. This tool will estimate the out-of-pocket costs — like fuel, state fees, maintenance, financing and insurance — and depreciation of a car for the first five years you own it, allowing you to compare vehicles beyond initial sticker price.

Once the car is parked in your driveway, however, there are a variety of strategies that can help you save thousands of dollars over its life. (Scroll down to the bottom for the set of assumptions we used for these calculations.) These tips fall into three main areas: fuel costs, insurance, and repairs/maintenance.

Save on Fuel

1. Drive sensibly: Speeding, rapid acceleration, and hard braking are the quickest ways to waste gas. Such aggressive driving can lower your gas mileage by 33% at highway speeds and by 5% around town, according to research prepared for Oak Ridge National Laboratory, which developed and maintains the U.S. Department of Energy and EPA’s website on fuel economy.
Savings: Up to $477 a year, or between 13 cents and 89 cents a gallon, depending on how aggressively you drive and the number of highway miles you rack up.

2. Cruise at 50 mph. Gas mileage typically decreases once your speed exceeds 50 mph, so set your cruise control. “You can think of it like this: Every 5 mph you drive above 50 mph is like paying an additional 20 cents per gallon of gas,” says Bo Saulsbury, senior researcher at the Oak Ridge National Laboratory.
Savings: $198 a year, if you normally drive 60 mph on the freeway.

3. Stop idling. If you’re parked and waiting, turn the engine off. Idling can use a quarter to a half-gallon of fuel per hour; restarting your vehicle, by contrast, only takes about 10 seconds worth of fuel, according to research from Argonne National Laboratory. And don’t leave it to warm up in the winter: Most manufacturers recommend driving your car slowly 30 seconds after starting it. “You’ll get warm quicker by doing it this way, since the engine warm ups faster by being driven, and thus allows the heater to turn on sooner,” says Saulsbury.
Savings: $140 a year if you usually idle for two hours during the course of a week.

4. Embrace the heat. Try setting the air conditioning for a higher temperature or, if you’re really bold, go without it. Running the air conditioning can reduce a vehicle’s fuel economy by more than 25%, according to Oak Ridge National Laboratory. Saulsbury recommends “driving with the windows open for a short time before using the A/C to let hot air out first, and putting the windows down at low speeds and using A/C at high speeds.”
Savings: Up to $120 a year in extra fuel costs, if you would otherwise run the air conditioning four months out of the year.

5. Get the right motor oil. Using something other than the manufacturer’s recommended grade of motor oil will lower your gas mileage by about 1%-2% because of increased friction in the engine; the correct oil can prevent the metal surfaces in the engine from grinding together. The Oak Ridge National Laboratory also recommends looking for oil that says “energy conserving” on the API performance symbol — an indication that it contains friction-reducing additives.
Savings: $27 a year.

6. Keep your tires inflated. Making sure you’ve got proper pressure can improve your gas mileage by 3.3%, according to Saulsbury. Do not go by the maximum pressure level printed on the tire’s sidewall, experts say: You can usually find the correct tire pressure level for your car printed on a sticker in the driver’s side doorjamb or glove box. (It will be in your owner’s manual as well.) Abilio Toledo, Los Angeles area manager for Firestone Complete Auto Care, recommends buying a tire gauge and checking your pressure about once a month, as tires lose an average of about two pounds of pressure per month. “Even if you have a tire pressure monitoring system, these systems usually only alert you once the tire has lost about five pounds of pressure and that causes your fuel mileage to go down.” (The other upside of properly inflating your tires: less chance of a blowout, which could be both costly and dangerous.)
Savings: About $112 a year, according to a study conducted by Edmunds, though it says savings can top $800 for drivers with severely underinflated tires.

7. Check the apps. To find the lowest gas price in your area, consider using the GasBuddy app or website, says Philip Reed, senior consumer advice editor for Edmunds.com — “but remember not to drive out of your way to save. Instead look for the cheapest station along your commute.”
Savings: Using the MONEY office’s zip code, we were able to find a 50-cent price difference per gallon between the five nearest gas stations. If that differential held, it would yield almost $270 in annual savings.

8. Spend smarter. To save even more when you’re at the pump, sign up for a credit card that offers cash back on gas purchases. MONEY recommends the American Express Blue Cash Preferred, which offers 3% cash back on gas (as well as 6% on groceries). It comes with a $75 annual fee, though the $150 signing bonus can offset that in your first year.
Savings: If you buy $500 worth of groceries and $120 of gas each month, you’ll get $478 back the first year, counting the fee and bonus.

Save on Insurance

9. Shop around. Only 39% of Americans looked for new auto insurance last year, according to a study by J.D. Power. But shopping around can yield big savings, the study found. The next time you need to renew, get annual quotes from at least four companies that have low complaint ratios with the National Association of Insurance Commissioners.
Savings: Shoppers who did switch reported average savings of $388.

10. Cut coverage on older vehicles. Once your car is 10 years old or worth less than 10 times the premium, the cost of repairing it could be more than the car is worth, says Reed. Ditching collision coverage could save you up to 40%.
Savings: As much as $440 a year by scaling down to just injury and property damage coverage.

11. Bundle insurance policies. Insuring your home and auto with a single company could bring your rates down by about 10% a year, says Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book.
Savings: A study of 2 billion price quotes from more than 700 companies nationwide by Consumer Reports found that bundling home and car insurance would save the average customer $97 a year. But you may get an even bigger payoff, depending on your location: Michigan residents, for instance, would save $240 by uniting the two.

12. Take your insurer for a spin. Many insurance companies now offer drivers a discount if you install a device that lets them monitor your driving habits. Progressive, for example, gives discounts of up to 30% for drivers who do not display any alarming tendencies. (Those with poor habits are not penalized. Yet.)
Savings: Up to $330 if you’re well behaved.

13. Ask for a mileage discount. Work from home? Bike to the office? Some companies will offer you a discount if you drive less than the average number of miles per year, says Jeanne Salvatore of the Insurance Information Institute. A study commissioned by insuranceQuotes.com found that a person who drives 5,000 miles a year pays 8.4% less for auto insurance than someone who drives 15,000 miles a year.
Savings: $92 a year if your car travels less than 5,000 miles annually.

14. Mind your credit score. There are any number of good reasons to pay off your credit cards in full each month, but here’s one more: Your credit score could also be factoring into your insurance rate. There is a 49% difference in the cost of auto insurance premiums for someone with excellent credit and someone with no credit history, a WalletHub study found. So any time your score improves, you want to ask your insurer for a discount or shop around for another policy.
Savings: $214 was the average difference paid by drivers with good credit scores and similar drivers with the best credit scores, according to a Consumer Reports study. In some states, drivers with merely good scores paid as much as $526 more a year.

15. Say no to your teenager … A married couple can expect to pay 80% more on average for car insurance after adding a teen driver, according to an insuranceQuotes.com report. You can lessen that impact by having your teen wait to drive; 16-year-olds cause the highest spike (96%) but 19-year-olds raise your premium by only 60%. Or you can make him pay for his own insurance, though he’ll end up paying 18% more as a single policy-holder than he would under your insurance plan, according to insuranceQuotes.com.
Savings: You’d pay $396 more in the first year of insuring your teen if you add him at age 16, rather than at 19.

16. … Or brag about your teenager. Make sure your insurer knows if your child gets good grades; a NerdWallet study found that teens with a “good student” discount paid an average of 6%-20% less than their fellow teens did on insurance.
Savings: $263 is the average national savings a family will see, a Consumer Reports study found. But depending on your location, the benefits can be much greater. In Los Angeles, a 16-year-old “good student” who buys his own insurance can expect to pay $5,864 on auto insurance, while the average costs are $7,098, meaning good grades can save families there as much as $1,234, according to NerdWallet.

17. Know when not to claim. Filing a single claim following an accident can raise your premium by an average of 41% if you are at fault, according to InsuranceQuotes.com. So if you’re involved in a minor collision, carefully consider whether the money you’ll get back will exceed the premium hike. For small accidents that do not involve someone else or cause bodily harm to yourself, you’re better off paying out of pocket for the repairs if you can afford it. (If you are unsure, use this “When to Make an Insurance Claim” calculator to help you decide.)
Savings: $451 a year, if you have a small accident you can skip reporting.

Save on Repairs/Maintenance

The days when you could wrench around on your car in the driveway are mostly gone, but experts say there are still several steps an ordinary driver can take to cut the cost of upkeep.

18. Know what your car needs and when. Checking the owner’s manual will save you from being up charged when you take it in for maintenance. “Often dealerships will give you a list of things they recommend you also have done,” says Reed. “These are additional things they will profit from that your car may not actually need at that time. A common one is offering to drain and replace transmission fluid and also flush the transmission — but most modern car can go to 100,000 miles before they need this.”
Savings: Resisting the pitch could save you up to $120 on an unnecessary service like a transmission flushing.

19. Cut out the hard braking. Remember how aggressive driving hurt your gas mileage? Easing into a stop, rather than slamming on the pedal, also offers a maintenance payoff. “You’ll extend the life of your brakes and get the appropriate 20,000-30,000 miles rather than 10,000,” says Gutierrez. “If you drive a higher-end car, the wear will be even quicker.”
Savings: “If you’re able to save changing brake pads three or four times, it could equal between $600 and $1,000 in savings over the life of the car,” Gutierrez says.

20. Rotate your own tires. Front tires wear more quickly than rear tires. By switching them, you help ensure both sets wear evenly and that you won’t have to prematurely replace them. To know when to switch them, look in your owner’s manual.
Savings: Doing it yourself could save you up to $120 annually, Edmunds.com found, assuming a person drove 12,000 miles a year and needed two tire rotations.

21. Replace your air filter: To keep dirt out of the engine and improve fuel economy, you should replace this every 30,000 miles or so; check your owner’s manual for the exact timetable. You can make this fix yourself in fewer than five minutes.
Savings: $19-$60 in labor charges roughly every two years.

22. Handle other easy repairs. If you are handy, try replacing wiper blades, fuses and lights by yourself. “These are easy to do and you can go online and watch how-to-videos to learn,” says Rich White, executive director of Car Care Council.
Savings: Replacing your own wipers could save you as much as $70 in labor costs each time, says Reed. And replacing your own lights and fuses could net you $17-$132, depending on the make and model of your vehicle, according to Edmunds.com.

23. Don’t over oil: Your mechanic may tell you to change your oil every 3,000 miles, but newer cars using synthetic oils can easily reach the 10,000-mile mark before needing a change, says Reed. Be sure to look over your manual and keep to your car’s specified timetable.
Savings: Roughly $40 for each unnecessary professional oil change you don’t get (but only $15 or so if you do it yourself).

Unless otherwise stated, we assumed: a fuel price of $2.69 a gallon; 15,000 miles driven annually, the average driven by U.S. workers in their career prime, according to the Federal Highway Administration; 28 miles traveled per gallon, the typical fuel economy of a midsize sedan; and $1,100 a year spent on car insurance, the national average, according to according to NerdWallet research.

MONEY Small Business

How to Make Sure Your Small Business Outlives You

mother and son in deli patisserie store
Getty Images

Ensure your business's future with these estate planning tools.

If you’re a small business owner, you’re probably focused on day-to-day needs. But looking ahead to what will happen when you retire or pass away should be a top priority.

If you pass away without a plan in place, you’ll leave heirs without clears instructions, potentially jeopardizing the business you’ve worked so hard to build.

“Small business owners need to plan for their estate even more than the average person does,” says CPA Kelley Long. “Not doing so can destroy your family and business. And a good estate plan can take years to put in place, so this is not a conversation you want to procrastinate on.”

Add in the fact that your business likely accounts for the largest component of your net worth, and it’s easy to see why you should take some time to work on the future of your business—by meeting with an estate planning attorney to talk about these six key components of a solid estate plan.

Will

At the very least, your estate plan should include a will. This document allows you to specify how you want your assets to be transferred, and to whom, after you die. It also lets you identify an executor who will take charge of those assets and manage their disbursement according to your instructions.

You’ll also want to include a provision that gives your executor or another trusted individual access to a list of all online bank accounts, email accounts, file sharing sites, social networking sites, and their corresponding passwords. If you’re the only person running the business, important information will be inaccessible to heirs if you don’t provide this access. In some states, not even family members or appointed fiduciaries can get into these accounts if they don’t already have the information. Nor can they force companies to give them access, says estate planning attorney William Sanderson, co-chair of the American Bar Association’s real property, trust and estate law business planning committee.

This is why you’ll want to keep a document detailing all your accounts and passwords in a secure place that you can also easily access to update as needed.

“My most prepared client keeps a notebook filed with all his important papers locked away in a safe. He updates this list and his notebook regularly,” says Sanderson. “I recommend other small business owners try and implement the same strategy and let a spouse or trusted person know how to access them.”

Trusts

Like a will, a trust allows you to control what happens to your assets after you die. But this legal entity has several advantages over a will. Any items you place under the ownership of the trust will bypass the probate process. Thus assets owned by the trust can be transferred to heirs much more quickly; your estate will remain private; and, depending on the kind of trust you set up, it could dramatically reduce the legal fees and estate taxes your estate or heirs will have to pay. And with a revocable or living trust, the terms and assets can be easily changed if your decisions change.

Power of Attorney

When you have payroll obligations, you should consider creating a durable general power of attorney document, which allows you to name an individual to carry out your business affairs should you become incapacitated, says Sanderson. If you don’t have this in place and something happens to you, the court will appoint a guardian to handle your affairs. “It can add a lot of stress to a business owner’s life at a time when they don’t need any added stress,” says Sanderson. “This little bit of extra work upfront could save a lot of headache should it ever be needed.”

Buy-Sell Agreement

If your business has multiple owners, a buy-sell agreement is a must. This contract establishes an agreed upon plan for the business’s future should one owner die or become incapacitated, says financial planner Paul Pagnato, who specializes in advising business owners. It defines a sale price for the business and your share, and allows you to document whether or not you want your partners to buy out your share, whether you want to block certain people from stepping into the business, or if you’d prefer family members to sell your portion. Since the price has already been determined, your family will have piece of mind that they are receiving a fair price.

Without one, your beneficiaries may be stuck running a business they have no interest in, don’t want, and can’t sell—and your partners may end up with a partner they never anticipated and don’t wish to work with.

Negotiate this agreement when the business is still young and all the owners—as well as the business itself—are healthy. “You want everyone to approach this decision with clear eyes and reasonable thoughts,” says Sanderson. Pagnato recommends drafting the agreement as soon as the business has value and cash flow is positive.

Insurance

To raise the funds necessary to buy out a deceased partner’s share under a buy-sell agreement, the living partners often need life insurance. Each partner should purchase a term life insurance policy and name the other partners as beneficiaries. Or you could set up an irrevocable life insurance trust to avoid having the insurance proceeds count as part of your taxable estate. This will ensure that surviving owners receive tax-free capital to purchase the other’s portion of the business from the estate. “This does not have to come out of your pocket. It is a business expense and you should have the business pay those insurance premiums,” says Pagnato.

Whether you co-own the businesses or are the sole owner, you should also buy a separate term life insurance policy that names your spouse and children as beneficiaries. This will give your family time to adjust to life without your income and avoid financial hardship. Especially since a buy-sell agreement will take some time to complete and insurance can provide funds if there aren’t other sizable resources. For help determining how much life insurance coverage you should purchase, use this guide.

Succession Plan

If you’re a sole proprietor, you need a clear plan for what should happen to the businesses when you die. If you want to pass on the business, you need to begin delegating and preparing a successor. Be certain first that this person wants the role. If you’d prefer that the business be sold, help your heirs by doing research ahead of time that will make selling easy and inexpensive. Plus, your family won’t need to worry about whether they got a fair price for the businesses.

To prevent disagreements and ensure that things happen as you want them to, Sanderson recommends creating a document that outlines your wishes for the business’s future. You should clearly lay out important information about what the business owns and owes, and include a detailed list of of accounts and passwords. In addition to your family, Sanderson recommends involving professional advisers (like your financial planner or lawyer) as well as key employees and managers.

MONEY College

Will a Trust Fund Mess Up Our Financial Aid?

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: My father has put money into a trust for my daughter; she gets access to it in November 2015, when she will be a senior in high school. How will this affect her financial aid for college in 2016? Should we put the money into our name? — Sheila B., Maryland

A: Trust funds must be reported as an asset on the FAFSA; as a result, this will likely hurt your daughter’s financial aid eligibility.

That’s because financial assets belonging to a student have a far greater impact on financial aid than parent-owned assets do, says financial adviser Fred Amrein, author of Financial Aid and Beyond: Secrets to College Affordability. Colleges expect a family to use 20% of a dependent child’s funds each year to pay for college, Amreim says, while parents are only expected to use 5.6% of their own assets to pay for college expenses. So for example: If your daughter is the sole beneficiary and the total amount held in the trust is $25,000, her aid eligibility would be reduced by $5,000.

And there’s a double whammy: Annual income from the account must also be reported as part of your daughter’s income on the FASFA form. This could reduce her aid eligibility by as much as 50% of the amount of income.

If your daughter cannot access the funds within the trust until a later date — when she is 30, for instance, or after her grandfather passes away — Amrein says you can make an argument to the financial aid office that those unavailable trust assets should not be factored into the aid equation. But there is no guarantee this will work, because each college’s aid office uses its own discretion.

As for whether to move the funds into your name: It may not even be possible, depending on the type of trust and the wording of the documents. But even before you go through the hassle of attempting it, Amreim suggests, calculate your Expected Family Contribution to see if your income and assets as a parent are already too great to qualify for financial need. (You’ll also need to know the cost of the schools your daughter will be applying to.)

If so, it won’t matter what assets are in the child’s name, he says.

For more information on how your assets will impact your financial aid, see our Saving for College guide.

MONEY Credit

This City Has the Highest Debt Burden

Market Square in San Antonio, Texas
Jim West—Alamy Market Square in San Antonio, Texas

A new survey identifies the spots where credit card debt causes the most (and least) pain.

Locals like to brag that everything’s bigger in Texas. But they might not be boasting about a new ranking that places three Lone Star metro areas among the U.S. cities with the highest credit card debt burden.

San Antonio residents face the greatest credit card debt pain in the nation, according to a new analysis by CreditCards.com; Dallas/Fort Worth and Houston take the No. 2 and 5 spots, respectively. (Atlanta and Miami rounded out the top five spots.)

Using data from credit bureau Experian, the U.S. Census Bureau and the Federal Reserve, the study compared the average credit card debt total in the 25 largest U.S. metro areas with each area’s median income. It assumed that 15% of that median income would go toward credit card debt repayment each month, then calculated how long it would take an average resident to pay off his cards — and how much interest they’d pay while doing so — with a 13% APR, which the company says is the average rate for people who carry a balance.

That meant that high-income cities had an edge. The affluent San Francisco Bay Area had the lowest debt burden, with residents needing only nine months to pay off the average credit card debt. San Antonio residents, by contrast, would need 16 months to do the same, and would end up paying $214 more in interest.

Below are the top five metro areas with both the highest and lowest debt burdens:

Highest Credit Card Debt Burdens

1. San Antonio (16 months, $448 interest)

2. Dallas/Fort Worth (14 months, $382 interest)

3. Atlanta (14 months, $376 interest)

4. Miami/Fort Lauderdale (14 months, $351 interest)

5. Houston (13 months, $363 interest)

Lowest Credit Card Debt Burdens

25. San Francisco/Oakland/San Jose (9 months, $234 interest)

24. Boston (10 months, $267 interest)

23. Washington, D.C. (10 months, $286 interest)

22. Minneapolis/St. Paul (11 months, $266 interest)

21. New York City (11 months, $293 interest)

For help managing your own debt, see our credit guide.

MONEY Ask the Expert

Can You Write Off Your Vacation Home?

Ask the Expert – Everyday Money illustration pulling cash out of wallet
Robert A. Di Ieso, Jr.

Q: I own a vacation home on the beach. I want to rent it out for part of the year and use it myself the rest of the time. Can I write off my expenses?

A: The answer depends on how much you use the home yourself. If your property is rented most or all of the time, you should be able to deduct your rental expenses, although you’ll also be declaring the rental income. But when you also use a rental property as a home, deductions may be limited.

One key thing to know: The IRS defines personal-use days broadly, including days a property is being used by relatives — even if they pay market-rate rent — as well as time the property is being used by non-family members who do not pay market-rate rent. Any days you fully devote to repairing or maintaining the property are not counted as personal use days, however — no matter how relaxing you find rewiring the bathroom.

Taxpayers tend to fall into three different categories, say CPAs, depending on how often they rent the space and their level of personal use.

Limited Rental Use

If the property is rented for fewer than 15 days a year, or less than 10% of the total number of days you could rent it to others at a fair rental price — whichever is greater — you do not have to report or pay taxes on any of the rental income you receive, says Jerry Love, a CPA in Abilene, Texas.

Love calls this the Masters Golf loophole, as it can be a huge boon for owners of properties located near events like the Masters Golf Tournament, the Super Bowl or Mardi Gras that tend to drive up rental rates for a short period of time.

You will not be eligible for a Schedule E deduction for any expenses associated with renting the property. You can, however, deduct qualified residential interest expense and real estate taxes as itemized expenses on Schedule A, as you would with your primary residence or other property used for personal needs.

Hybrid Rental and Personal Use

When you both occupy the property and rent it out for 15 days or more per year, you must report the rental income you receive to the IRS, and you can deduct part of your rental expenses and depreciation.

To determine your deduction, you would need to divide your expenses between personal use days and rental days, says Love. If you plan on renting out the home half the year, for instance, 50% of the property use is rental, meaning you can allocate 50% of your maintenance, utilities and insurance costs to the rental, as well as 50% of your depreciation allowance, interest, and taxes for the property.

Note that your deductions cannot exceed the amount of income you received. “You can’t claim a loss, but you can offset the rental income,” says CPA and financial planner Ted Sarenski in Syracuse, N.Y.

The IRS recommends that for the rental portion of expenses, you use the deduction for interest and taxes first, followed by operating costs and then depreciation. Any expenses you were unable to deduct because of the limit can be carried forward for possible future use against rental income.

You can also take separate deductions — although not the depreciation — against the portion of personal use days. So in the example above, the remaining 50% of the interest you paid could be deducted on Schedule A.

Limited Personal Use

Use your rental property fewer than 15 days a year, or less than 10% of possible rental days? In that case, the property won’t be considered a residence and so your rental expense deductions are not limited to the property’s rental income, meaning you can claim the loss.

However, you still must prorate expenses to eliminate any period of personal use. Let’s say you stayed in your beach house 10 days a year, and rented it out the other 355 days. In that case, 10/365 (or 2.7%) of each expense you incurred could not be taken as a deduction on Schedule E as a rental property expense.

You do not have to prorate deductions that are directly related to renting it out, such as advertising or listing fees, says Love. You can still deduct any property taxes attributable to the personal portion on Schedule A, but not your mortgage interest, since the property isn’t a residence.

You can also deduct travel costs to your vacation home as a business deduction, says Love, as long as the reason for the trip is related to maintenance needs — like winterizing a ski condo in Colorado before renters arrive — and is not for your own family vacation.

MONEY Love and Money

How We Paid Off $10,000 in Debt in 20 Months

150629_LOV_OutofDebt
Lisa Dell and Cory Tiffin No wonder Lisa Dell and Cory Tiffin are smiling

Think there's no way to get out from under your credit card debt? This couple proves it's possible.

When Chicago couple Lisa Dell and Cory Tiffin tied the knot three years ago, they had $10,000 in credit card debt spread across four cards—a common problem among their peers in debt-ridden Gen Y.

But the newlyweds, who had already been practicing frugal tactics for months to pay for their wedding, decided to apply their methods to a new goal: erasing their debt. The move is likely to offer emotional as well as financial dividends: MONEY’s survey of 1,000 millennials and boomers found that 70% of millennials and 77% of boomers say properly managing debt repayment makes for a healthy relationship.

To tackle the problem, the couple took a systematic approach.

“Once we got to the point where we could afford to pay more than the minimum on our credit card balances, we made paying off that debt our top priority,” says Tiffin. Initially the couple, now 31 and 29, started paying the minimum on their lowest-rate cards and double the minimum on the highest-APR ones. “But we kept feeling we weren’t making progress,” he says.

That feeling of stress and frustration is why many financial experts recommend starting with the smallest balance. Enjoying an early success can be a big motivator to stay on track with your payment plan.

Consolidation Play

But Dell and Tiffin took another approach. The two moved their remaining credit card balances onto a single card with a 0% APR for balance transfers and agreed to pay $900 a month to vanquish the debt in just 20 months.

Making such large monthly payments did have its drawbacks. “Money was so tight it caused some stress and bickering between us,” says Tiffin. To end the money disagreements while keeping focused, the couple kept detailed spreadsheets and analyzed their spending regularly.

“The numbers don’t lie, so that makes it easier to have an objective conversation” advises Tiffin. “It is always more stressful when there is less money, but if you communicate regularly and keep good records, it keeps you from having a major falling out.”

Indeed, credit card debt is tied for third among the most common sources of conflict for both boomers and millennials, the MONEY survey found. And debt not only increases the frequency of money arguments, but can also affect couples’ feelings about the union. Utah State professor Jeffrey Dew found that marital satisfaction is tied to assets, so that as debt increases, happiness wanes.

The good news? Paying it off can bring a couple closer together and instill smart money habits going forward.

“The good thing about that experience was we got accustomed to living without that money,” says Tiffin. “So now we just put that same amount in savings.”

Read next: How to Deal With Your Boyfriend’s $50,000 Debt

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