MONEY selling a home

What’s the Best Way to Sell My Home to a Relative?

Q: I want to sell my home to my sister for $1. What’s the cheapest way? Do I need a lawyer? — Stacy C. Bouknight, Glenside, Pa.

A: No, you don’t need a lawyer to unload your home in most states, including Pennsylvania. To transfer the home cheaply, don’t sell it; that would require a title search and insurance to do cleanly, costing several hundred dollars at least. Instead, use what’s known as a quitclaim deed, which transfers your ownership but makes no guarantee the home is unencumbered, says Nolo legal editor Mary Randolph. Fill out the document ($14.99 at nolo .com), have it notarized, and record the transaction with your county land records office.

Have a mortgage? No matter how you turn the home over to your sister, you are still responsible for paying off the note; until you do, your lender has a claim on the house.

MONEY

Closing Out Your Old 401(k)

Q: I got a check closing out my old 401(k). Can I add it to my new 401(k) without penalty? — Matt Gould, New Cumberland, Pa.

A: Yes, and act fast.

Unless you put the money in another retirement account within 60 days of receiving the check, you’ll owe taxes on the sum, plus a 10% early-withdrawal penalty if you’re not yet 59½, says John Piershale, a financial planner in Crystal Lake, III.

Related: Will you have enough to retire?

One hitch: The old plan usually withholds 20% of your account for taxes, so when you make the deposit you’ll have to use other cash to cover that 20% shortfall.

Assuming you get this done within 60 days, you’ll get the withheld money back at tax time.

If your new 401(k) plan doesn’t accept rollovers or will make you wait too long to deposit the funds, put the money in an IRA, advises Lancaster, Pa., planner Rick Rodgers. You can always move it into a 401(k) later.

MONEY Ask the Expert

What’s the Best Way to Pay Bills Automatically?

You have more control paying your bills with your bank's online bill payment service. Photo: Shutterstock

Q: How should I pay bills: have creditors pull funds from my bank account or use my bank’s bill-pay service? — Emmett McAuliffe, St. Louis

A: The answer depends on whether you care more about convenience or control. If it’s control, pay your bills via your bank. That makes it far easier to stop, change, or delay a payment, says Hoboken, N.J., planner Victoria Fillet.

What you gain in control, though, you may lose in convenience, notes Lauren Prince, a planner in New York City.

Related: 7 ways to improve your credit

Though bank auto payments may work well for recurring fixed amounts, you still have to stay on top of bills that vary from month to month — say, from credit card companies or utilities.

If you travel frequently or are forgetful, authorizing reputable creditors to initiate electronic fund transfers for amounts due is better than being delinquent, adds Prince.

MONEY Ask the Expert

Should I Buy Life Insurance for My Child?

Q: Does it make sense to buy a whole life insurance policy for a child? — Michael C., Coatesville, Pa.

A: Hardly ever. Most kids don’t need life insurance, since its chief purpose is to replace income, says Jason Brooks, a financial planner in Berthoud, Colo.

And while whole and variable life policies have a cash value that rises, high fees slow that growth. Breaking even on premiums can take decades.

The only reason to buy is to guarantee insurability later in life, says Cleveland adviser Joe Heider.

Related: Which Comes First: Student Loans or 401(k)?

You can, he notes, lock in a policy — helpful if your child later has an illness, such as cancer or diabetes, that makes insurance expensive or unobtainable.

But such misfortune is rare; only one in 400 children has diabetes before age 20, for example. And the size of most kiddie policies ($50,000 or less) is usually too small to be useful for adults.

A better idea is to save for a more likely need: higher education.

MONEY Ask the Expert

If You’re on Medicare, Do You Also Need Medigap?

If you're considering getting supplement insurance, or Medigap, sign up within six months of enrolling in Medicare.

My father just went on Medicare. Should he buy Medigap insurance? Which policy is best? — Joe, Houston.

If your dad isn’t insured by a former employer, he should buy supplement insurance, or Medigap, which pays for some costs not covered by Medicare.

And, says Bonnie Burns, a policy specialist with California Health Advocates, he should sign up within six months of enrolling in Medicare, when he can’t be rejected for health reasons (some states let you qualify later on for a similar six-month window if your employer plan is canceled).

Since switching policies later may involve a physical, your dad’s best plan is one that suits him over time, not just one that meets his needs cheaply now.

Related: What is Medicare?

All policies must match one of Medicare’s 10 standardized plans — from basic coinsurance to coverage of skilled nursing. Learn more at Medicare.gov.

MONEY

Budgeting for a New Home, and a Disability

The Crosbys, with son Owen, are eager to move to a bigger home. Kinzie+Riehm

Tim and Jennifer Crosby are ready to trade up from their 2,000-square-foot suburban Orlando home. They’d like more space — maybe even a pool — in a district with better schools for their son, Owen, 7.

Expected cost: $450,000.

With real estate in the area recovering, the Crosbys’ house is worth close to their 2004 purchase price of $268,000.

Between equity of more than 20% and savings, they can foot a bigger down payment; plus, they have $2,000 a month after savings and bills for higher carrying costs. (Combined, they earn $147,000 from his job as a network administrator and hers as a business analyst.) But they’d like to be sure it all pencils out.

“We want to enjoy what we have now without blowing it for later,” says Jennifer, 42.

Related: Baby on the way? Time to make a budget

They’re also dealing with a major unknown: Tim, 43, has Charcot-Marie-Tooth disease, a neurological disorder that could one day affect his mobility.

“I’d like to work into my sixties,” he says, “but don’t know what my condition will bring into play.”

WHERE THEY STAND

Real estate value: $243,000
Retirement savings: $189,500
Cash: $80,000
Cash value of life insurance: $23,000
Stocks/other investments: $15,500
TOTAL ASSETS: $551,000

Student loan: $50,000
Mortgage: $180,000
TOTAL LIABILITIES: $230,000

THREE FIXES

Fix retirement first. The Crosbys save $16,000 a year for retirement. At that rate, they’ll have around $1 million in today’s dollars by their mid-sixties, estimates Jacksonville financial planner Carolyn McClanahan.

A great start, but not enough to maintain their lifestyle in the best of circumstances — and definitely not if Tim has to leave the workforce before 67. (The disability insurance he has through work will replace only 60% of his income.

McClanahan wants them to stash $8,000 more a year, preferably in Roth IRAs.

Related: Don’t let divorce wreck your finances

Downscale the dream. Figuring a 20% down payment, a 30-year mortgage on a $450,000 house adds $650 to their monthly nut, not including higher taxes, insurance, utilities, and maintenance. Adding the higher retirement contributions, along with $3,000 a year that McClanahan would like them to save for Owen’s college, the Crosbys will nearly erase their monthly surplus.

McClanahan would rather they dial back their budget to, say, $350,000, so that they can …

Speed-pay the debt. McClanahan wants the Crosbys to get a 30-year mortgage, but put their leftover funds each month toward the debt. Erasing the loan early will reduce their retirement income needs and give them leeway if Tim is forced to retire early.

Plus, it’s a “backdoor college savings plan,” she says. “If you can’t fund tuition through cash flow, you can use a HELOC to help.”

MONEY Ask the Expert

Do I Owe Taxes on Fantasy Sports Winnings?

Q: I occasionally win money playing fantasy sports. Do I owe any taxes? If I do, how can I lower them? — Erik, Saratoga Springs, N.Y.

A: You owe taxes on all your winnings, though gaming organizations aren’t required to report that income to the IRS or send you a 1099 unless your net income — your total winnings minus your entry fees — reaches $600.

The good news, says Douglas Mueller, a CPA in St. Louis, is that if you itemize deductions, you can write off any expenses or other gambling losses incurred in the same year.

Deductions can’t exceed the amount of your winnings, however. And expenses must be directly related to your gambling.

Related: Should I Take Out a 401(k) Loan to Pay Off Debt?

The cost of a book on fantasy baseball strategy might be fair game, says Mueller, but a satellite-TV subscription to NFL games is out of bounds, since the benefit to you goes far beyond research.

MONEY Ask the Expert

Should I Take Out a 401(k) Loan to Pay Off Debt?

Q: I have $7,300 in high-interest debt. Should I take out a 401(k) loan to pay it off? — Joanne, Columbus, Ga.

A: Only if you can keep saving for retirement. Yes, a 401(k) loan looks like a good deal initially since the interest you pay (now about 4% to 5%) goes into your account.

One danger, though, is that you just rack up more debt.

“Moving money around is not becoming debt-free,” says Gail Cunningham, a vice president of the National Foundation for Credit Counseling.

And if you make 401(k) loan payments in lieu of contributions, the tab can be steep.

Not only do you miss out on potential returns, but you also forgo an employer match, says Vienna, Va., financial planner Michael J. Rebibo.

Plus, saving less in your 401(k) means a higher income tax bill.

And if you quit or get laid off and can’t repay the loan within 60 days, you’ll owe a 10% early-withdrawal penalty (assuming you’re under 59½) as well as taxes.

MONEY Ask the Expert

When Do I Stop Paying Social Security Taxes?

Any earnings greater than $117,000 are not subject to Social Security taxes. Photo: Josh Randall/Shutterstock

Q: If you earn more than $117,000, do you keep paying Social Security taxes on wages above that amount? — Patrick, Houston

A: No, you don’t. The maximum amount of earnings subject to Social Security tax this year is $117,000, up from $113,700 in 2013.

Beyond the new limit, you’re done with the 6.2% Social Security tax (12.4% if you’re self-employed) for the year.

You’re not done with all wage taxes, though. You’ll owe a 1.45% Medicare tax (again, double that if you’re self-employed) on total earnings, no matter how much you make.

Quiz: Road to Wealth: Are you on track?

And there’s one more tax, points out Michael Eisenberg, a certified public accountant in Los Angeles. Starting with 2013, couples making more than $250,000 and singles earning at least $200,000 also owe a 0.9% Medicare tax on any earned income above those thresholds.

MONEY Ask the Expert

Should I Hold Stocks Longer to Lower My Taxes?

If you own a stock for more than a year and sell it, your profits are taxed as capital gains. Photo: Kathy Burns-Millyard/Shutterstock

Q: I’m selling stock to buy a home in two years. Should I spread out the sale to cut taxes? — Angie, Berkeley

A: Go ahead and sell.

Yes, you could possibly save on taxes by waiting: If you’ve owned the shares for a year or less, your profits, treated as ordinary income, would be taxed at 28% — the bracket you report you’re in.

Gains on shares held for over a year, however, would be taxed at 15%, says Stephen Horan, managing director of the CFA Institute.

Related: How to Lower Your Tax Bill

Were gains to push your adjusted gross income up a bracket, past $250,000 ($200,000 for singles), you’d be subject to an extra 3.8% tax on some of the profit — a levy you might avoid by selling the shares over two years.

Delay, though, risks a price drop.

“Trying to save a few dollars in taxes might cost you way more in investment losses,” says David Walters, a financial planner with Palisades Hudson in Portland, Ore.

Cash you need so soon should not be in the stock market.

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