My recent columns have sparked several follow up questions from readers.
Reader Question: In a recent article you recommend www.Mint.com. I logged on and started through the steps until it asked for all my credit card information, bank account numbers, etc. How safe is giving out all that information online so they can access my accounts? M.L.
Answer: It allows you to set up a budget; automatically pay bills; track your checking accounts, credit card accounts, investment accounts, etc. It automatically brings all this information together in an easy to use system with nifty charts and graphs. It even has email ‘alerts’ if you begin to go over budget on any particular area such as gasoline. All of your data is secured by a very high level of encryption software so you should feel comfortable that your data is well protected. Obviously, you should take precautions to protect your log in and password information. If you are researching for a new POS system and want to compare the most popular point of sales systems within your given market or industry, visit POS USA and learn more. Final note: hackers have breached the Pentagon, so nothing is 100% foolproof!
Reader Question: Please settle a discussion between my husband and me! We have a 30-year mortgage at 5.875%. He wants to refinance for 15 years and has a quote of 3.125%. Our payments will increase only about $100 per month and we’ll save a lot of money under the new loan. My concern is in 15 years we’ll be eighty years old. By that time we may need to sell our home and move to assisted living. What good would it do us to refinance at our current age?
Answer: Well, Mrs. H, this is really a math problem where you want to figure out how long it takes before the closing costs, lower interest rate and higher payments create a financial advantage for you as well as how much money that’ll mean to you over the 15 years. I asked mortgage specialist, Jacob Cohen, to run the calculations. Assuming $3,000 in closing costs on the new loan, the break-even point is about 9 months. During the first twelve months, you’d save about $3,000 in interest which rises to over $75,000 over the life of the new loan! The short answer, Mrs. H? Mr. H is right! I would suggest a home-made apple pie is in order!
The following question relates to two previous articles on the estate tax law changes scheduled to occur in January 2013. As you may remember, this year you may gift or pass to heirs up to $5,120,000 ($10,240,000 for married couples) free of gift or estate taxes. That amount drops to $1 million ($2 million for married couples) January 1, 2013 unless Congress changes the law. In our case example, a 93-year-old father gifted $2 million to his two daughters this year leaving him a $1 million estate. If he died next year, I stated his entire $1 million estate would be subject to a 55% estate tax.
Reader Question: If this year, the father gave away $2 million of his $5 million total allowed tax free gift, therefore still having $3 million of unused gifts remaining, why would his $1 million estate be subject to the new 55% tax? I thought the $1 million exemption would apply. J.P.
Answer: It does seem logical that if he had $3 million of exemption remaining…reduced to $1 million next year, that there would be no tax but the IRS looks at this from the other side of the coin. They’ll ask, “Has any exemption already been reported on prior tax returns?” The answer of course is, ‘Yes, $2 million was reported in 2012’. The IRS then says no exemption is allowed and they tax the entire estate at 55%!