Dear Liz: You often recommend in your column to seek the advice of a fee-only financial planner. Where would I find such a financial planner? Our understanding is that a person has to have at least $1 million of savings to invest before a “fee-only” financial planner will consult with you. Can you be more specific?
Answer: Once upon a time, it was difficult to find fee-only financial planners if you didn’t have a lot of money to invest. Many required you to invest at least $250,000 and charged 1% of those assets annually.
Today you have many more options.
There are now fee-only planners who work on an hourly basis (such as those affiliated with Garrett Planning Network) or who charge monthly retainer fees (the XY Planning Network).
There are also accredited financial counselors and accredited financial coaches (Assn. for Financial Counseling & Planning Education) who often work on a sliding scale. The National Assn. of Personal Financial Advisors and the Alliance of Comprehensive Planners are two other organizations that represent fee-only planners.
One positive outcome of the pandemic is that many more planners now work virtually, which widens your potential options.
Also, many discount brokerages and robo-advisors now offer more affordable ways to get fiduciary advice. (“Fiduciary” means that the advisor is required to put your best interests first.)
Many use a hybrid model, with computer algorithms directing your investments plus access to a human advisor by phone, email or video call. The cost is typically 0.3% to 0.5% of the assets you have invested with the company, which is significantly cheaper than the 1% traditionally charged by financial planners.
The traditional approach could still be a good fit if you meet the planner’s minimums and need a lot of ongoing services. If your needs aren’t extensive or you just need an occasional second opinion, one of the other approaches could make more sense.
House transfer in a trust
Dear Liz: My dad set up a living trust that included his house, which has a mortgage on it. The lender accepted the transfer of the home to the trust. Dad recently passed away so the house should transfer to my sister and myself. Can the lender trigger the due-on-sale clause? Or make me or my sister qualify for the mortgage?
Answer: A federal law known as the Garn-St. Germain Depository Institutions Act of 1982 details several situations in which lenders can’t enforce due-on-sale clauses, including when a home passes to a relative or joint tenant, said Jennifer Sawday, an estate planning attorney in Long Beach. The law applies to residential properties with four or fewer dwelling units.
You and your sister won’t have to qualify for a new loan but can continue making payments under the current mortgage terms. If you can’t afford the payments, you’ll need to consider other options, such as refinancing or selling the home.
IRA intricacies when one spouse isn’t working
Dear Liz: Due to the pandemic, I did not work during 2020. Can I contribute to a spousal IRA for 2020 since my husband still has an income and will be contributing to his Roth IRA? Does it need to be a separate account from my existing IRAs?
Answer: As long as your husband has earned income, you can contribute to your IRA. You don’t need to set up a separate account to make this spousal contribution.
Whether or not your contribution is deductible will depend on your income and whether your husband is covered by a workplace retirement plan such as a 401(k). If he’s not, your spousal contribution is fully deductible. If he is covered, then your ability to deduct your contribution phases out for a modified adjusted gross income of $196,000 to $206,000.
Liz Weston, a certified financial planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.