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Archive for Friday, October 9, 2009

‘Spendthrift trust’ can help manage legacy

October 9, 2009

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I am a widow and would like to form a trust so my only son could inherent my home, bank accounts and other assets quickly after I die. The problem is that my son’s spending is out of control, and I am afraid he would squander all my savings and sell my longtime home just to support his lavish lifestyle. Can a trust be arranged so that it would only provide him with, say, $500 or $1,000 per month? If so, he would have enough money to last him for several years.

Yes, you could arrange the trust so that your son would get a set amount of cash each month instead of a lump sum upon your death. These so-called spendthrift trusts often are used by parents who want to make sure their heirs don’t squander their inheritance.

It takes a little more work to create a spendthrift trust rather than a basic living trust, in part because you’ll have to specify someone — your banker, estate planner, lawyer or the like — to dole out the cash.

One elderly couple I knew who set up a spendthrift trust included a provision that required their free-spending daughter to rent their home to tenants for at least five years after their death, with the rental income to pay her annual college tuition and related costs. Contact an attorney or planner for details.

I am getting ready to refinance my house, and I am planning to follow your recent advice by contacting several lenders and mortgage brokers to get the best deal. But if each of those lenders and brokers order a copy of my credit report, won’t all of those inquiries hurt my credit score?

Multiple queries over a period of several weeks or months can negatively impact your score. But if you do all of your mortgage hunting within a 14-day span, the inquiries will be combined and treated as only one because credit bureaus and lenders alike understand that most prospective borrowers do lots of comparative shopping to find the best financing package. This policy will help keep your score from sinking as your search for the perfect loan progresses.

I do a lot of my own home improvements and repairs. How did my most handy tool, the monkey wrench, get its name?

There is some disagreement, but most historians say the adjustable wrench got its name after London blacksmith Charles Moncky, who is believed to have invented it around 1858. His last name was pronounced “MUN-kee,” but the spelling of the tool supposedly transformed to “monkey” as its popularity spread.

We have lived in the same apartment for several years, and the building’s owner has always paid the gas, water and electric bills. Now he has sent us a 30-day notice stating that, because utility costs are rising, we will become responsible for paying the monthly charges beginning in December. Can this change be legally enforced?

Yes, the change can be legally enforced — sooner or later. The timeframe mostly depends on your current rental status.

If you rent on a month-to-month basis, the landlord can start forcing you to begin paying for utilities after providing you with advance notice (usually 30 to 90 days, depending on where you live).

But if you have a long-term lease, the landlord can’t make you pay the bills until the term of the lease expires and the contract can be rewritten. Call your local rent board or similar agency for details.

I recently received a $10,000 bonus from my employer. Would it make sense to apply the money in a lump sum directly toward the outstanding balance of my mortgage?

Yes, but only if you have all of your higher-rate credit cards and personal loans paid off and you have enough cash socked away to meet at least six months of expenses should you lose your job or get hurt and cannot work for an extended period of time.

Many consumers today are paying 20 percent or more in interest on their credit cards. It’s better to pay such high-cost debt off before making additional payments toward a low-rate mortgage, because you will save more money faster.

Paying the cards off first also will provide additional savings at tax time: Mortgage-interest payments almost always are fully deductible, while finance charges levied by a card issuer are not.

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