Money Management

Managing an estate may not be the labor of love you think it is. Read on to learn why. 

Thoughtful estate planning is a key part of managing one’s personal finances. And for many Americans, picking an estate executor from among one’s family or close friends seems like a natural move. Not only might a close relative know how to contact heirs, they may have a better idea of your wishes and family dynamics. However, pressing the “easy button” when choosing an executor may have some negative consequences for both your estate and your executor.

Emotional whiplash

Losing someone close to you is a jarring experience. Adding estate administration on top of that experience can be downright painful.

The work of an executor begins almost immediately following one’s death. Even before assets can be distributed, death certificates must be collected to arrange a funeral, collect life insurance proceeds, grant access to retirement and bank accounts, and even to ensure a surviving spouse keeps their access to Medicaid. This can be a lot of work for an executor who just lost a close friend or relative, and can add a great deal of stress during an already difficult time.

Every family has its quirks, and an executor who is familiar with the politics at play in a family may not be the blessing you think. Estranged relationships and mismatched expectations around bequests are just some of the complications of estate management. As an executor, especially an executor who is also an heir to the estate, balancing the wishes of a decedent with the continuing relationships between surviving family members can be nearly impossible.

A many month process

From start to finish, settling an estate typically takes between nine months and two years. That time can increase substantially depending on the state or states that property was owned in, and the overall complexity of the estate.

One time-intensive part of the estate execution process is tracking down and receiving access to a decedent’s assets. A decedent may have life insurance policies, retirement accounts, real estate properties, pension plans and more scattered across many financial institutions. Not only does an executor need to find these assets, but they also must apply for access to manage the assets in order to eventually distribute them. As those who commonly deal with financial institutions will tell you, this requires some patience.

Executors can also expect to manage debts owed by the decedent and taxes owed by their estate. Settling debt can be a lengthy process, as creditors have a window, six months in many states, to come forward and collect what they are owed. Additionally, valuing the estate and figuring out estate taxes, if any, can take time, and often the assistance of an accountant. These steps can take even longer in the case of assets and debts in multiple states, or when dealing with hard-to-value property.

Working with a professional

For many Americans, engaging a professional to manage their estate may make sense. An attorney or trust company can offer experienced and impartial estate management services, relieving loved ones of the time and emotion that come with settling a friend or family member’s estate. An estate attorney can help you understand the pros and cons of designating an executor and help you make the right choice of executor for your situation.

When choosing an executor of their estate, many opt for a close family member or friend. However, it may be difficult for an appointee to manage the emotionally-complex and time-intensive process of settling an estate. Having an informed discussion with both your estate attorney and any potential executors can help set your loved ones up for success, even if you aren’t around to see it.

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When I recently sold my home, I was surprised to pay a transfer fee to the homeowners association, as well as a fee for a remote notary. Find out more. 

Recently, I sold my home. My goal is to buy a new property. But I had to sell my old one first so I could use the proceeds for a down payment to qualify for a mortgage loan.

I was able to sell the house for a good price, and the property sold quickly so I was pretty happy. But, although I ended up walking away with the money I wanted from the sale, I also incurred some added closing costs that I wasn’t expecting.

In particular, there were three surprise costs I had to pay upon the sale of my house.

1. Transfer fees to the HOA

One of the costs I did not expect was a transfer fee paid to my homeowners association. Basically, my HOA charged me $400 to transfer the account to the new owner of the property. This fee is apparently a common one charged by associations because of the paperwork involved in switching the account to a new owner. But, since I have never owned a house in an HOA neighborhood before, I wasn’t aware of it.

Since the HOA also had to prepare a report about the current state of the account, I also had to pay a fee for an estoppel letter from them. This cost me another $200. So, I basically ended up paying $600 to my HOA just for the privilege of being able to sell my house. If you plan on selling your home soon and live in an HOA, check to see if there is a transfer fee and how much it is so you’re prepared.

2. Stamp taxes

When I reviewed my closing cost statement, I was also surprised to find something called a “Documentary Stamp Tax,” on it. This, apparently, is a tax the state Department of Revenue charges when interest in real property is transferred. In the state where I was selling my property, the tax comes at a cost of $0.70 per $100 or part thereof of the amount the buyer pays.

While that may not seem like a big fee, it added up to quite a lot of money in my case — and in most situations, since properties usually cost hundreds of thousands of dollars. I had no choice but to pay this amount out of my bank account since the local government requires it, but it was a big added expense that I wasn’t aware I was going to incur as a seller.

3. Notary fees

Finally, we needed to do a remote closing on the home, because we were out of town at the time the sale went through. This meant we needed a notary to witness the signing of the documents. We ended up having to pay a $125 fee to the notary to take care of this part of the home sale process for us.

While none of these fees were ridiculously expensive by themselves, they did add up and they reduced the profits I was able to walk away with when my home sold. I was not prepared for them, but fortunately I had sold for enough money that we were easily able to cover them with the proceeds so it didn’t turn into a crisis. Anyone who is selling a house needs to be prepared for this kind of unexpected cost, though, as there may be many unpleasant surprises during the closing process.

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As a busy writer, it’s important to find ways to save time while meeting my responsibilities. Read on for an easy trick to avoid penalties from the IRS. 

One of my favorite things about being self-employed is getting to set my own working hours. As a mom of three young kids, that’s crucial. But it also sometimes means having to work at 6:00 in the morning or 10:00 at night to make sure I’m meeting my deadlines and keeping up with my income and savings goals.

Clearly, my schedule is busy, and I don’t always have time to do things like sit down and pay bills. That’s why I try to automate as many of mine as possible.

Meanwhile, because I’m self-employed, I owe the IRS money four times a year in the form of estimated taxes. And I’m well aware that being late with an estimated tax payment could result in interest and penalties, which I don’t want. That’s why I employ one easy trick — with my accountant’s help — to make sure my estimated quarterly tax payments go out on time.

It pays to set up your tax payments in advance

Estimated tax payments for self-employed individuals are due four times a year: in April, June, September, and January. Usually, they’re due on the 15th of the month, or whatever the next business day is after the 15th if it falls on a weekend or holiday.

This year’s estimated taxes are due as follows:

April 18June 15Sept. 15Jan. 16, 2024

And if you’re wondering why that final tax payment isn’t due on Dec. 31, it’s because many people get paid at the very last minute, and the IRS recognizes that making a same-day tax payment may not be feasible for everyone. As such, they give people who are self-employed a couple of weeks to reconcile those December earnings and figure out their final quarterly tax payment for the year.

I could send the IRS money every few months on or around these deadlines, but that would require me to remember to do so and actually have the time. Since I’ve learned that my schedule is hectic, a much better solution for me is to have my accountant try to figure out how much money I should pay the IRS on a quarterly basis, and then set those payments to go out automatically in conjunction with finishing up my tax return.

In fact, what I’ll usually do is work with my accountant in the spring to complete my tax return, and in conjunction, we’ll set up my four estimated quarterly tax payments for the year. That way, the money is debited from my bank account every few months and I don’t have to think about it.

A move worth making

It’s not always easy to calculate your estimated quarterly tax payments in advance, so if you’re going to do what I do, I highly recommend enlisting the help of a seasoned accountant to help with those numbers. But all told, automating my quarterly tax payments is instrumental in helping me avoid penalties. And since I don’t believe in paying the IRS a dollar more than I have to, that’s a good thing.

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A new car can be expensive, but you might save money on it in other ways. Read on to learn more. 

Some people get attached to their cars and have a hard time saying goodbye. But if you have an older car that’s starting to not drive well, then it may be time to replace it with a new model.

Of course, these days, buying a new car can be an expensive prospect, so your vehicle ownership costs might rise when you replace an older car with a new one. But while some of your expenses might increase, others might go down.

Prepare for certain costs to rise

During the first quarter of 2023, the average monthly new car payment rose to $730, says Edmunds. This doesn’t necessarily mean that a new car of yours will result in an auto loan payment of $730 a month. But if you were still paying off your older car, you’re likely to see that your monthly loan payments are higher with a new one.

The same is likely to hold true for your auto insurance. The cost of insurance hinges heavily on the value of your vehicle. So if your old car had a value of $10,000 and your new car has a value of $40,000, it stands to reason that your auto insurance company might jack up your premium rates to account for the higher payout it might have to hand over should your new vehicle get totaled.

Of course, you can always shop around for new insurance should you choose. The point, however, is that it’s generally more expensive to insure a new vehicle than an old one.

Some of your expenses might fall

While you might end up with higher car payments and auto insurance costs upon getting a new car, you might end up saving in other ways. First, a new car is unlikely to need major repairs that aren’t covered by a warranty for at least a few years. With an older car, you might spend a lot more money on repairs because you’re out of warranty, and also, because components are more likely to wear out.

Also, a brand-new car might cost less to maintain than an older one. However, in some cases, you might end up spending more, such as if your vehicle is a higher-end model. In that case, things like a basic oil change might result in a higher credit card tab. (For example, Kelley Blue Book says the average cost of an oil change is $35 to $75, but for a BMW, you might pay between $135 and $175.)

All told, replacing an old car with a new one will, for the most part, mean spending more money to own a vehicle. But you might also gain peace of mind, and that’s important.

If you rely on your vehicle to get to work, for example, you don’t need the daily stress of wondering if today’s going to be the day that your older car refuses to start. And if your car doesn’t accelerate well or has other drivability issues due to its age, that could actually make for an unsafe situation. So if your older car really has seen better days, it may be time to swap it for a newer model, even if it means bearing higher costs in the process.

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A home equity loan could be a useful borrowing tool — and you’re not limited to home improvements. Read on to learn more. 

When you have a need to borrow money, there are different options you can explore. One might be a personal loan, which allows you to borrow a lump sum for any purpose. And that could be a great option if you have a strong credit score.

Another option you may be inclined to look at is a home equity loan. Granted, this isn’t an option if you rent a home and therefore don’t have equity in one. But if you do own a home, you may find that you have plenty of equity to tap these days.

Home prices soared during the pandemic when the demand for U.S. properties increased, and that led to an uptick in home equity on a national level. In fact, as of the first quarter of 2023, the average U.S. homeowner with a mortgage had an impressive $274,070 worth of equity, according to data from CoreLogic.

If a home equity loan is an option for you, you may find that you’re able to snag an even more competitive borrowing rate on one than with a personal loan. That’s because personal loans are unsecured, whereas a home equity loan is secured by the home whose equity is being tapped.

But if you’re going to sign a home equity loan, be sure to do so for a good reason. That’s because you’re taking a risk in signing one of these loans.

You can use a home equity loan for just about anything

One big misconception about home equity loans is that you can only use the proceeds to improve or repair your home. But just because this borrowing tool has the word “home” in it doesn’t mean you can only use your loan proceeds for something related to your home. You can take out a home equity loan to fix your car, take a vacation, or start a business.

That said, when you sign a home equity loan, you effectively put your home on the line. That’s because falling behind on home equity loan payments could put you at risk of losing your home. So if you’re going to take out one of these loans, make sure it’s to address a need or to do something that will vastly improve your quality of life on a long-term basis, like getting a certification that allows you to pursue a new career or finishing your basement to increase your usable living space.

You generally should not sign a home equity loan for something that gives you near-term gratification, like a vacation, but won’t do a lot for you on a long-term basis. It’s just not worth the risk of signing one of these loans, and it’s not worth paying what could be a fair amount of interest.

Is a home equity loan the best way to finance home improvements?

You’re not limited to using a home equity loan for home improvements. But if you have some to make, you may find that a home equity loan is your most cost-effective borrowing option.

Just remember that no matter your reason for taking out a home equity loan, it’s a loan nonetheless. And you’ll need to keep up with your payments. So before you commit to anything, run the numbers to make sure the monthly payments you’re looking at are ones you can comfortably afford.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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