Yes, child can be left out of will

DEAR BRUCE: My stepfather recently passed away. He left a trust (not a will) for my two sisters. My one sister wants to include me in and give me a third share. The other sister has sent me part of the money and refuses to give me more. Can a stepchild be cut out of an equal share of the estate?— H.S., via e-mail

DEAR H.S.: The law doesn't place any obligation for a decedent to leave money to anyone other than a spouse. Any child, adopted or natural, can be left out of a will, trust or other documents. This is a choice of the decedent for whatever reasons. The sisters, once again, have no obligation to share. I don't see where you have any legal rights to any of this money unless you can demonstrate that undo pressure was placed on the decedent shortly before his demise or loss of faculty, which you have not implied. It's unlikely that this is the case.

DEAR BRUCE: My husband and I are both 57 and have no credit-card or auto debt. We own our 33-year-old home and three investment lots. We have about $300,000 in savings/investment accounts. We don't know if we should buy a newer home and rent our current home until the market goes up, or stay in our current home and plan on making repairs and/or improvements as we get closer to retirement. Any suggestions? — Gail in Florida

DEAR GAIL: You haven't addressed the fundamental question. Why are you considering buying a newer home? You own your 33-year-old home, but are you comfortable there? Does it provide the type of living environment that you want? In the event that it does not, now may be a very good time to consider buying, since the Florida market is seriously depressed. I am not enthusiastic over renting your current home. While the same depression is going to affect the price of your current home, I would be more comfortable if that was sold, not contracted for but actually sold, before you even consider another home. If that means renting for a few months, so be it. On balance, your finances are in good shape. If you buy a new home you'll have to dip into your savings (I'm assuming you'll want something more expensive) or start mortgage payments again. Why would you want to do that? All bets are off if your neighborhood is going down and you're not comfortable there. If you are comfortable and you're only considering selling because of some improvements that need to be made, I would gradually effectuate the improvements and preserve your solid financial footing.

DEAR BRUCE: I am a full-time freelance writer, and my income just about covers my expenses. I took out a home-equity line of credit on my house last year to pay for some medical expenses. I took out a line that was quite a bit more than I needed because I was advised that the rate would be better that way. I used a little more than $40,000 of the $139,000 equity line. It was $150,000, but recently was reduced based on the theoretically reduced value of my house. The rate is now 2.9 percent (down from 4.8 percent when I got it). I'm thinking it might make sense to pay off some of my higher-rate credit cards as long as I chop them up and don't use them anymore. My student loan is already at 2.5 percent, and my original mortgage is $82,000 at 5.75 percent. I have been thinking about refinancing, but I have been told that I would have to refinance my equity line, too, which doesn't make any sense. Should I pay off my charges with the equity line? The interest is tax-deductible, and it would give me some flexibility in having one payment instead of many. — C.M. New Jersey

DEAR C.M.: Cutting through most of the detail, there is one area that is often overlooked. You mention that you can borrow the money at a lower interest rate on your home-equity line. I have no problem with that as long as you are paying it off in a relatively modest period of time. What I am not comfortable with is having you pay off a credit card and then take 10 or 15 years to pay off clothing, hamburgers, etc., that were charged on this credit card. That is analogous to making the minimum payments, which is nonsense. You also go on to say that as long as you chop up your credit cards and don't use them anymore. I wouldn't do that, either. First of all, canceling the credit cards has a deleterious affect on your credit. Keeping the cards and occasionally charging something and then paying it on time that month is a far better course of action. The only time chopping up the cards may be a desirable course of action is if you are so out of control and not able to resist buying things that you cannot afford, then and only then, would I cut up the cards. At the risk of redundancy, if you have the discipline to pay off the home-equity loan that was used to retire credit card debt in a reasonable period of time, certainly no more then three years, I would go ahead. Otherwise, even though it is more costly, I would continue to pay the credit cards as contracted.

DEAR BRUCE: I should be receiving a large amount of money from a pending lawsuit. I'm up in the air as to how I should invest. I currently have $42,000 in a 401(k) stable fund. I lost more than $10,000 before I moved it. My question is, since the lawsuit money is non-taxable, I don't want to put it in my 401(k) because I may need some of it, and I don't want to pay taxes. I'm 49 years old. What do you suggest as a good investment? The lawsuit money should be between $75,000 and $100,000. — C.L., via e-mail

DEAR C.L.: You observation is completely accurate. There is no reason to put money into your 401(k) since these are after-tax dollars. At 49, you have a long way to go. However, you have not addressed your tolerance for risk. Many people, including this writer, believe there are some very attractive bargains available in the marketplace, if purchased with the idea that they will be held for some reasonable period of time. I'm talking about many large, well-funded and successful companies that, in this writer's opinion, will be here well after I leave this veil of tears. You mentioned that you may need the money, and securities are always redeemable at a flick of a switch; however, not all times are good times to sell. Given that condition, you might wish to vary the industries that you choose to invest in. For example, the industrials, drugs, services, etc. When one market is suffering another may be doing considerably better. Unless you are so disposed as not to take any risk, in today's incredibly low-interest environment, 2-1/2 percent is considered respectable. Without the ability to take some risk, you are condemned to just treading water, which is a shame. You are relatively young, and time will be your ally. Make use of it.

Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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