June 01, 2023
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On this Ask Suze and KT Anything episode, Suze answers your questions about trusts, winning the lottery, 529 plans, pre-nups and more.
Music: Music (In).
Suze: June 1st 2023. Welcome everybody...
KT: Especially the Geminis.
Suze: Oh, here we go. We go to the Women and Money podcast as well as everybody smart enough to listen. This is the Ask KT and and Suze Anything edition.
KT: It's Suze's birthday month,
KT: June 5th. Everybody if you want, if you want to write a message on the wall, wishing her happy birthday, June...
Suze: Well, let me tell you why I'm so excited about this birthday. Do you know why I'm so excited?
Suze: Come on. No, no. Come on.
KT: Because we're going out to a romantic dinner together?
Suze: Besides that...
KT: No, I really don't.
Suze: I'm gonna be 72...
KT: Oh, because 7 and 2.. because it adds up to nine. Oh, all right.
Suze: All right. So tell everybody
KT: She's gonna be 72 it adds up to nine,
KT: and 9 is her lucky number.
Suze: So, you know, if you ever...
KT: This year is my lucky number eight, you should be equally happy. Sad. You're leaving eight but going to nine.
Suze: I was not happy I was in eight.
KT: It's my lucky number.
Suze: Yes, but it's your lucky number. Not my lucky number. My lucky number is nine. And I just want to say this, if you really was kind of like a detective, a book detective, you would find that every book I've written has something to do with the number nine. Whether it's the nine steps to financial freedom
Suze: or the road to wealth that had 2052 questions and answers in them, which added up to nine. Somewhere, there's a secret in every book that adds up to nine because nine is the number of spiritual and material abundance. Yeah,
KT: And longevity too.
KT: All right. OK. I'm ready first. Everyone. Thank you for sending such great questions. I have a really nice mixed assortment here. Almost like a box of chocolates. I'm very happy about today. Box of chocolates. First is from Jennifer. Hi, Suze and KT. It's because of you. I became interested in finance and years later decided to pursue a career in it. Thank you.
KT: And then Jennifer's asking, Suze, would you help me and other listeners understand how trusts work
KT: my mom is considering one to start the five year look back. But I'm wondering if my sister and I would lose this step up and cost basis on her home when she passes any guidance you provide is greatly appreciated.
Suze: So you just picked a really simple question, right? To start this podcast,
KT: I picked the most important one, I felt. Everyone needs a will and a trust.
Suze: So, Jennifer here's what's very important for you to understand
Suze: that. When you say my mom is considering a trust to start the five year look back. Everybody do not get confused between what a five year look back is and a five year holding period for your Roth retirement accounts very, very different. When you get older. If you need to on any level,
Suze: possibly think that you're going to have to apply for Medicaid. And Medicaid is when you go into, let's say a nursing home and you want Medicaid to pay for it versus your own money.
Suze: What happens is whenever you apply for Medicaid, they will look back for five years
Suze: to see what money have you given away within that five year period of time. That then disqualifies you from Medicaid. Money that you've given away before five years of a look back, that money is included. So if mommy was to give you money, Jennifer, if mommy was to do something else with money to get it out of her estate,
Suze: and then five years pass from that time, then Medicaid cannot go back on the money that she gave away. But there's a five year look back. Now, will a trust make it so that you no longer get a step up in cost bases on her home
Suze: when she passes? No, it won't. You will be fine that way. Next question, KT.
KT: Ok, next question, Suze is from Clay. Clay. We're going to send a little luck your way. Clay said Hi, Suze and KT. I won the lottery
KT: and then they then, ok, maybe I didn't. The question is this, is there ever a scenario, Suze where you should take the annuity over the cash amount?
Suze: Actually, there is my dear Clay. Do you know that I have a friend who had won the lottery twice. Right KT is looking at me, Annie.
Suze: Right. Right. She won it twice and the first time she got quite a bit of money for her anyway, it was like three or $4 million I believe and blew it
Suze: and then she won it again and I think may have blown it. But the point of the matter is that if it's a really large sum, I mean, image it, everybody here you are and all of a sudden after taxes you are going to have 300, 400, 500 million dollars possibly.
Suze: That is all of a sudden, yours. Would you know what to do with it, really?
Suze: If you don't think that is a tremendous responsibility, I'm here to tell you. It absolutely is. So, depending on your sophistication and the amount of money that you're winning in the lottery, in that case, you might be better off just taking the annuity and knowing that you're gonna have income coming in every single year for a long period of time.
Suze: However, if somebody like me truthfully was to win the lottery, I would take it in a lump sum. But all the people that have come to me who have won the lottery and taken it in a lump sum. I'm here to tell you that money is totally gone.
Suze: Your family comes out of the woodwork. You want to do this, you want to do that be very, very careful. So that's the type of situation that can get you in trouble, believe it or not. Go on KT.
Suze: Would you take it in a lump sum without me?
KT: At this age? Absolutely.
Suze: Would you know what to do with it? Let's say it was a large one.
KT: I would probably sit down
Suze: and call John. All right. Go on, give me. All right. Go on.
KT: Hi, Suze and KT. Suze, you saved our butts big time in 2008.
KT: Didn't make money but didn't lose our principle. That's a, that's a big deal. Does everyone know about 2000?
Suze: They know.
KT: All right. Listen to you religiously now, educating myself. I've taken over everything. My husband is 80 and assisted living permanently have long term care though. It was a huge fight to get them to pay. I am now 76 an avid Zumba dancer.
Suze: I need to take that up.
KT: We have no children, dependents or pets. So here's the question. It says question and problem. I must make decisions regarding his IRA in a brokerage firm. Presently, money's in cash. A government money market fund 500,000 is covered by SIPIC, but the
KT: account is over that. So the question is, please help. How do I pick CDs and trusts, reliabe, hopefully stable banks or other offerings with problematic banking environment and concerns about FDIC's ability to cover the future failures while she's assuming future failures? Do we do a CD ladder? That's something you've been recommending for future years or go short term.
KT: So, so what should she do?
Suze: You know, it's very difficult because we're still in the middle of all of this? Yes, I know that last weekend they said they think they came to a, you know, conclusion or agreement on how they can do this with the debt ceiling. Now, it's got to go and I'm sure it'll take a little bit because remember the deadline is June 5th now, however, here's what I would say to you
Suze: is that probably at the brokerage firm that you're at, they have CDs at different kinds of banks. And if you just stick with really large banks, JP Morgan, things like that, your certificate of deposit should be just fine. However, I'm a tremendous advocate as you may know,
Suze: if you're going to do CDs, a great interest rate right now within a retirement account I would so take up to $200,000 let's say because again, you never really want to go over the 250 limit with insurance unless you know how to do it.
Suze: But I would take that money and I would so open up, believe it or not, an IRA rollover at Alliant Credit Union where you could do in 18 19 20 21 22 23 month CD any of those months and lock in 5.15%.
Suze: So that is something that I would think about because again, I would feel more secure in a credit union with N C U A insurance where I knew that it was safe and sound than in banks where I didn't exactly know what they were invested in. If you're interested in that, go to my alliant dot com.
KT: Ready. This next one's from Maryann now, Maryanne's 37. Her husband's 47. They are first time parents and they live in New Jersey. They have a daughter who is now five months old and Maryann said, Suze, I'm lost as to what to set up for her savings. Checking, CDs. I've never been a particularly good saver but I want to do it for her.
KT: She should do it, mommy. You should do it for you first. All right, ready. We opened a 529 in New York and we'll try to max out the contribution for the year and So she's asking you, Suze, wha do you recommend? What do they do? Now, the little girl is getting gifts for birthdays. Um all kinds of events...
Suze: That's simple. Put it all in the 529 you know, be very careful about opening up, you know, uniform gift to minors
Suze: account for her and things like that because that will count even more so against financial aid. So just take all of her gifts and add it into her 529 plan. Not a big deal.
KT: Yes. Ok. Next question is from Jubilee Love that name.
KT: Can you explain why you did not want us to take advantage of the one month T bills when they were almost at 6.5 to 7%? Is that a long answer?
Suze: That's not a long answer, but it's an interesting one in that
Suze: I am not somebody
Suze: who likes to take big risks with money that is meant to be safe and sound and money that is meant to be safe and sound is usually money that is put into a treasury. That's where it's usually put. And so otherwise, why would it be there? Otherwise it would be in the stock market or someplace like that. When I see interest rates go up that high, that is not a good sign.
Suze: That is a sign that in my opinion, the government needs this money. They're running short, they need you to invest, they're enticing you. I am not enticed by an interest rate.
Suze: I am enticed by a situation that I know is safe and sound and just because everybody said, oh, they're gonna sign at the last moment. Don't worry about it. I do worry about it and I wait to see what happens. And so I'm just somebody who looks at the risk versus the reward. All right. Now, let's just look at this for a second.
Suze: You put in, let's just say $10,000 into a one month T bill. We're talking about that in that one month, maybe you would have made $58 in interest. So was $58 in interest for that one month worth, who knows what would have happened if there really was a default and everything really did collapse.
Suze: So I think the unthinkable, so I wouldn't be adding to that situation. I would just stick with what I have because there was really nothing else to do with it, but I wouldn't be putting more money towards it. Also. I just want to say this, the reason that you keep hearing me talk about the 18 month CD at Alliant Credit Union at 5.15% is because once you want to lock in
Suze: or have the ability to lock in at least 5.15% for 18 to 23 months. And I'll explain that this coming Sunday to you because you need to understand how this CD really works. Versus locking in 6.5 or 7% maybe for the one month interest rates then start to go down because I don't know how long they're gonna keep the 5.15% at all.
Suze: So I'm taking advantage of something that is long term and is the highest interest rate in a CD for that term right now that you can find. That's the reason why.
KT: Ok, Suze question is a good story...
Suze: But KT, don't you want to tell everybody how they can write in and ask a question so that if you choose it, it'll be on the podcast. Tell them, KT, how do they do it?
KT: You can do it two ways. Actually, you can go to Suze's app
KT: and you can go to the wall and you can post a question there.
Suze: Yeah, that's right. No. Go on.
KT: Or you can go to
KT: Women and Money Podcast...
Suze: I knew it. I knew it. Everybody you would go to ask Suze podcast...
KT: Oh right, I forgot that. Ask Suze Podcast...
Suze: Are you kidding me after all these years? Are you telling me You have just now realized that's what the email... come on...
KT: Women and Money podcast Ask Suze, ok. Ask Suze Podcast.
KT: You better tell them, don't listen to me. Anybody don't listen. Tell them one time.
Suze: Ask Suze S U Z E podcast at gmail dot com. Send it in there or you can go to the Women and Money app and there is a place there to send in a question. And also if you happen to ask a question on the wall in the women and Money App, KT tends to scroll through those and maybe she'll take it from there and we will answer it as well.
KT: Next question is from Kim.
KT: Hi, Suze. I am 53 years old and engaged. My fiance was burned financially by an ex-wife and is asking me for a prenup. His main concern is that he doesn't want to pay me alimony ever if we were to get a divorce.
KT: Well, that's romantic. Right, Suze. He makes almost three times as much as me.
Suze: Are you kidding me?
KT: He is, his big concern with. This is honest. He's a big concern with putting two kids through college and also saving for retirement. And then Kim goes on to say my kids are grown and married.
KT: He wants a joint account when we're married. I asked for separate accounts for both of us. He, he agreed. He said, ok, we would both put 10 to 15% in based on our income and that would be our personal account. But Suze this whole prenup and no alimony is getting to me. I just don't know. So can I just say something, Kim has doubt, what should she do?
KT: Tell everyone your first thought?
Suze: Tell everybody what my face looks like right now.
KT: I know what her face looks like. Don't marry him. Don't get married. Kim.
Suze: Kim. Here's the problem. I get that he was burned financially by an ex-wife.
Suze: Kim, I was burned by an ex as well girlfriend. Right. She wasn't even my wife, spouse. Right. And I got burned by her big time. Right. However, that did not affect how I felt when I met KT.
Suze: When I met KT I wanted to make sure that absolutely, she was 100% protected and I still feel that same way to this day.
Suze: So I just always get like does past experience mean that the future that I want to create with somebody is somehow tied to the past if that just made any sense. So here's a few things that you need to know. Number one, you could do a prenup
Suze: where he puts in that he doesn't want to pay you alimony. But what you need to know is that if these documents are not drawn up incredibly accurately with a family law attorney,
Suze: then it is possible or probable that if you ever did get divorced and it went to a judge depending on the jurisdiction where you're doing this and everything. It is very possible that the judge would just throw it out. It would depend on your financial situation at the time, what's going on in your life at the time. So it may be that it won't even stand up in court. However,
Suze: if this whole prenup and no alimony is getting to me that is a quote from you. You said, I just don't know what is one of the major laws of money.
Suze: It is better to do nothing than something you do not understand and not knowing something is something that you don't understand and it just doesn't feel right for you.
Suze: So, the truth of the matter is why even bother getting married truthfully just live together. Have a great life. You keep all your money separate, let him keep all his money separate. However, if you're together and he's making three times the amount of money as you, he should be paying for everything every time you go out, every time you do everything, let him pay for it, he can afford it.
Suze: But there's something about this that I just don't like. Now I understand it from his point of view. But again, I'm just gonna say I have a hard time when the past is affecting the future that he wants to create. I want you to be with somebody who cares enough about you that if you need something after you've gotten divorced that it will be there for you.
Suze: That when he is in a state of love, he wants to take care of you. He's already saying you can't have this or that. If in fact, we get divorced, I don't like it. And you know what? Neither do you?
Suze: All right, KT, you know what she could do right. Here's a little secret. Want to know a secret? Right. So, for the prenup, in most cases, to be absolutely legal,
Suze: she has to have her own attorney. He has to have his own attorney. If she just signed whatever it was that was created by his attorney, she didn't really read it, she just signed it. She didn't even look at it.
Suze: Chances are, it won't hold up just so, you know, and usually a prenup has to be changed by each party because the judge most likely will ask. Well, did you look at this, did you know what you were signing? Did you do it on the way to the altar? Were you under pressure to do? So all those questions will be asked and so there's always a way, but then
Suze: it's not a very nice thing to be living with. Right?
KT: Do you like prenups? You're a believer in totally Suze really likes...
Suze: I like prenups because you should plan for the what ifs like I said, when you're in a state of love, not when you are in a state of hate and given that one out of two marriages end up in divorce. The number one reason for divorce is arguments over money.
Suze: You decide why you absolutely love one another. KT knows exactly what KT will get if I was ever stupid enough. Right? She knows which house is hers, the things that are in her individual name, she knows her income continues because the contracts that we have with everybody, they pay her directly. It doesn't have to go through me. So I have so taken care of her. Now, why did I do that?
Suze: Because she loves me!
Suze: I love her so much.
KT: Suze gets the boat.
Suze: That's about it. Everybody, she gets the island, she gets everything on this island and you have no idea how valuable that is. But if she wants it, she can have it. So she didn't even ask for it.
Suze: No, I didn't.
Suze: Right. But I want her to be fine no matter what.
KT: Where's my quizzie? Do I have a quizzie?
Suze: I have had a quizzie for you. I had a little bit longer...
KT: So, Suze wanted to eliminate quizzies everybody. But I said, no, don't do it. They love it. Right. Do you, do you all like the quizzies?
Suze: Yes. They like them, but you weren't liking them, were you?
KT: No, I'd never get them. Right. But sometimes they get it right. Let's see if I can get this one. Right. All right. But I like the game.
Suze: You like the game?
KT: Yea, I do. I like trying to get it right.
Suze: All right then. This one is from Sandra. Good afternoon, Suze. I have a question.
Suze: Is it a good time to apply for a home equity loan? I want to pay for my daughter's education with this loan. The equity loan will be for my second home in Florida, which is already paid for. Thank you so much. So to make that clear, Sandra is simply asking, right, she wants to pay for her daughter's college education,
Suze: right? Everybody think about this because you need to know how to answer this question. That's why this is a quizzie for all of you. Sandra wants to pay for her daughter's college education.
Suze: And the way that she wants to pay for it is by taking out either an equity loan or a home equity line of credit. Either one doesn't matter on her second home that she owns in Florida that is currently paid for. So, rather than taking out student loans or other things like that, she wants to take out the equity in her second home,
Suze: should she or shouldn't she?
KT: I don't think she should.
Suze: And why is that?
KT: Because I think there's probably better ways to get the money to pay for the daughter's college. And why wouldn't she
KT: consider doing some kind of a student loan with her daughter?
Suze: Because student loans aren't dischargeable in bankruptcy. Maybe she's a mother that just is so protective of her daughter. She just doesn't want her daughter to have to worry about anything. It's a second home. She feels like, ok, it's already paid for, I'll just take out 100 200,000, whatever it is from there and pay it off monthly. What's that look for?
KT: Is that like the best way to get the money...
Suze: The question is, should she or should she?
KT: No, I don't like that idea.
Suze: Right. But you have to know why. My love.
KT: Ok. I don't really know why, but it seems like if you have a house that's paid for and you don't have to, you know, owe any more mortgage or money on the home. Why would you start there? I just go get a bank loan or something.
Suze: But you definitely won't do it that way.
KT: No, no, I don't think I would do it that way at all, I would think. Or, you know? No, I, I wouldn't do it. Why would you do that.
Suze: Ding Ding Ding Ding! She loves the quizzies again. Everybody listen to me, my dear Sandra.
Suze: Right now, home equity lines of credit or home equity loans are sky high in interest rates. Ok?
Suze: And if it's a home equity line of credit, for instance, and now you've taken it out and interest rates continue to go up, then your interest rate will go up as well. But even a home equity loan is going to be at 6.5, 7, 7.5% or more, maybe even higher because it is your second home. That is number one. You are in Florida.
Suze: Florida. And that is where KT and I primarily live. The home of Hurricane- Ville. And all of a sudden you have this home
Suze: that now is absolutely destroyed by a hurricane. It is no longer there, but yet you still owe that money to the bank, even though that home has gone away, does your insurance cover it? You better check that out. Also. Something happens to you and obviously you don't have enough liquid cash
Suze: to just pay for your daughter's college education because otherwise you would be doing that right now versus taking out an equity loan on a home that's already paid for. Now, something happens to you. Who knows what that is? You get injured, you get sick. I don't know how old you are, but you're not that old if your daughter is now just going to college
Suze: and now you can't afford to pay back the equity loan. That is now a secured loan. You could end up losing that house. Would you be better off taking out a parent plus loan to pay for your daughter's college education? Yeah, you would then a equity loan. However,
Suze: why are you paying for your daughter's college education when you obviously don't have the money to do? So what is the lesson that you are passing down to your daughter? First of all, your daughter should be going to a college that she can afford.
Suze: Number one. Number two, your daughter should be applying for her own loans and see how much she can get on that. And if there isn't enough to cover it, then maybe you can step in. However, maybe if there's not enough money,
Suze: your daughter should consider a community college. No, on every single level, you should not be doing what you are thinking about doing. And if you really want to give your daughter an education that will make her a seriously successful woman in life,
Suze: teach her how to do things her own and gifts like that should just not come her way when it could cause hardship on her mother.
Suze: Ok. KT.
KT: I was waiting for that. Suzie is a big believer in financing college by the student. That's a big lesson in finances. You know, it just, it helps them really learn quick
Suze: And understand the value of money and not live in this world of where... now the daughter grows up has a child. Now, the daughter isn't in a very good financial situation
Suze: and now we have a guilt syndrome coming up. Well, my mother put me through college, I need to put my child through college at all expense. And no, that's not true.
Suze: I don't know of one loan that will help you through retirement. There are plenty of ways to go to college and have the student get a loan and, or a community college. All right KT, Sunday.
Suze: One day before my birthday.
KT: What do you got going on?
Suze: So I want to explain to everybody
Suze: if they should cash in their Series I bonds early because now this is all going around. I have an I bond from 2001, 2002, whatever it may be. And people are saying, should I cash them in Suze? And I also really want to explain
Suze: how all the CDs work at Alliant Credit Union because I think if you understood it, you would be and you will be blown away because I didn't understand it to tell you the truth. And I said, wait, are you telling me that you could do this, this, this, this and that
Suze: and Dennis Devine, the CEO went, yeah, I said, wait, are you telling me I...
KT: She asked Dennis like three times. Are you sure you can do that? Because this is a great deal. I bought another one, Suze.
Suze: Ok KT, but...
Suze: this is what we're gonna do on Sunday. OK, So
Suze: until Sunday, the day before my birthday, you have any surprises for me?
KT: I do a little one. No, it's something I made. All right. So you have to wait. But I do want to say to you, Suze that today wherever I go, I will create
KT: a more peaceful, joyful and loving world with you.
Suze: All right, everybody. If you do that, I promise you. If you say it as well, you will be unstoppable.
Music: Music (out).
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