Dear Liz: My divorce was final in 2016. My ex and I split our credit cards as part of the settlement. I have several joint credit cards with high credit limits and zero balances. I used them once a year to keep them in working condition. Am I considering canceling them or will I risk lowering my credit rating if I do?
To respond: If it really is joint credit cards, your ex could potentially run into a balance and default, damaging your credit. Obviously, this is not ideal. With community cards, neither party can be removed by the other, so the best option may be to close the account.
But joint credit cards are increasingly rare. Most cards used by couples have a primary cardholder and an authorized user. The authorized user is not responsible for payment of the invoice and can be withdrawn at any time.
Contact the issuers to find out your status on each card: Are you a joint holder? Main or authorized user?
If you are the primary cardholder and your ex is still an authorized user, request that your ex be removed. If the account is truly joint or you are the authorized user, consider opening a card or two in your name before taking any further action.
Your credit scores can still be affected when you close accounts or are removed as an authorized user, but additional lines of credit can limit the damage and ensure you still have access to credit.
Update of old trusts, estate plans
Dear Liz: I am 97 years old, have two sons and established a trust in 1991, shortly before my husband passed away. You warned that there may be issues with bypass trusts created in older estate plans. I guess that’s what I have. The lawyer who set up my trust died years ago, so I asked my son to do some research. He found a lawyer near me who told us that we should terminate my existing trust. We are told this would avoid capital gains and my sons would benefit from an enhanced asset base. The costs would amount to nearly $5,000. If I do nothing, the assets transferred to my sons will not have a gross-up basis and will incur capital gains taxes. I’m thinking of a second opinion.
To respond: A second opinion might be a good idea, but please don’t delay. Your sons could end up paying a potentially large and unnecessary tax bill if you don’t act quickly.
As mentioned in previous columns, bypass trusts were a common feature of estate plans back when the exemption limit was much lower. While trusts still have their uses, they are often unnecessary and cause problems for survivors and heirs.
Estate plans should be reviewed after a major life change, a review of inheritance tax laws or five years, whichever comes first.
Widow’s social security income problem
Dear Liz: My dear friend lost her husband a few years ago. Husband did something wrong working and collecting Social Security, so they are now withholding his $2,000 monthly Social Security check, which is devastating for her. Can she be punished for what he did without her knowledge? She’s stuck and doesn’t know what to do.
To respond: People who start receiving Social Security before full retirement age are subject to the earnings test, which reduces benefits by $1 for every $2 earned above a certain amount (in 2022 , the amount is $19,560).
It seems that the husband did not properly inform social security of his income and that the overpayment was not discovered until after his death. Whenever Social Security is unable to recover an overpayment from someone, the agency can collect from anyone else receiving benefits from that person’s earnings, said William Meyer, founder. of Social security solutions, a benefit application site.
The letter informing him of the overpayment reportedly included a section on his appeal rights. If the income information was incorrect, for example, she would have 60 days to appeal and provide the correct amount of her income.
She can also call the agency’s toll-free number, (800) 772-1213, and request that less be taken from each check. As long as the total due is paid within 36 months, the agency will comply, Meyer says. If she cannot afford to have the overpayment refunded within 36 months, she can apply for longer but will need to provide proof of her income, resources and expenses, he said. .
If she’s in dire straits and can’t afford to repay some of the money—in other words, if she can’t meet her “ordinary and necessary living expenses”— she should submit an SSA-632“Request for waiver of overpayment recovery,” Meyer said.
Liz Weston, Certified Financial Planner, is a personal finance columnist for Nerd Wallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.