Money Talk with Carl Stuart

Carl Stuart takes your questions including why fees for advisors are set the way they are. He chats with someone over a question he’s never received in 30 years regarding the sale of a rental property years after the woman’s husband died. Plus questions about individual retirement accounts, college savings, and more.

The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.

KUT Announcer Laurie Gallardo [00:00:01] This is Money Talk with Carl Stuart . Carl Stuart  is an investment advisor representative of Stuart  Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:00:20] Good afternoon and welcome to Money Talk, I’m Carl Stuart  and you’re listening to KUT News 90.5 and on our KUT app. As you just heard, Money Talk is a broadcast about the world of financial and investment planning where you determine our agenda by calling or texting 512-921-5888.

It’s always a terrific idea to call or text early in the broadcast. I take today’s calls first, then today’s texts, and then any previous texts that I have failed to answer. I got through almost all of them last week. It was very interesting to me last week, we had one call and lots of texts, which is terrific. But if you call, you and I can have a conversation. I think I can maybe even do a better job of answering your question. But in any case, call or text 512-921-5888.

I will take this text, and you will hear a binging noise. That’s new text coming in. And then, of course, for those of you who are long-term listeners, you know what happens after that. I bloviate.

[Text] Hi, Carl. I’ve been fortunate to have a little extra disposable income. How can I figure out if I should use it to pay down my mortgage or put money into my retirement account? Thanks. I will tell you this is a really interesting question, and it’s one that I’ve heard for many years. Of Money Talk and it’s an important one. So back in the day when mortgage rates were 3%, the answer was pretty straightforward. And that is you can probably over time have a better return by investing the money prudently than 3%. Today, mortgage interest rates hover around 7%. So the first part of my answer is it partly depends upon what is the interest rate you’re paying. And also how much time until your mortgage is paid off. Because the way mortgage interest is computed, you pay a lot more interest in the early years and a lot less interest in later years. So it’s possible, say you have a 15-year mortgage and you’re 11 years into it, it may be that even with a higher interest rate, you may not be paying that much interest. So you need to check with your mortgage lender. The other thing is, it’s good to have several pillars your financial plan on the asset side for your financial independence. In other words, if you don’t have enough savings for retirement and you have paid off your mortgage, you still may not be able to retire because you don’t have other sources of income. So you don’t wanna put all your money into your mortgage. Is it great to have no debt when you retire? The answer is yes, it is. But you also have to have money in retirement savings, whether that’s an employer-sponsored plan, like a 401k, an IRA, Roth IRA, or your own taxable account. But paying all your money in your mortgage and not having enough money to retire would be a bad idea. Thanks for the text.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888.

Once a month, I get the most recent data for the Austin metro area residential real estate market. This week, I got the data for last month, May, and I’ll share that with you. The median sales price in May was $450,000. That’s down about 3% on a year-over-year basis. I just got a text, so I’m gonna stop and take that. Here we go.

[Text] Hi Carl, can you explain the pro rata law? I think it’s a rate, R-A-W. Can you explain the pro-rater rate and how it affects a mixed 401k that has pre-tax, company match, 401k, Roth, and after-taxt contributions all mixed in the same account?

I’m gonna do my best. It’s complicated, and I actually came across this because I was about to make a mistake. So people are looking at the possibility of putting money in an IRA that’s not tax deductible, and then immediately converting it to a Roth IRA. Now, why would someone do this? Because many people are unable to put money in a Roth IRA, new money, because their income exceeds the limit established by the IRS and the statute. So they put money into an IRA that’s not tax deductable, cuz they also make too much money to do a pre-tax IRA, or they have money in an employer sponsored plan. So let’s say they put $7,000 in an IRA and then immediately convert that to a Roth. Since there’s been no growth in the value of the IRA, they’re not gonna pay any tax when they convert that over to the Roth and then they start the Roth. The challenge is that many people have other pre-tax contributions in IRAs, not 401ks, but IRAs because 401ks are employer-sponsored plans. IRAs are individual. Plans, individual retirement account. So if you have money in an IRA and the money you put in was tax deductible, and now you want to do a backdoor Roth, you’re going to have to add up all of your contributions, both pre-tax and after-tax, and then you have to take the percentage. So, if you put $7,000 in this after-tax IRA, but you $63,000 in pre-tax contributions. Now that’s $70,000. So when you convert that 7,000 to a Roth IRA, only 10% of that will be considered after tax, and 90% will be consider pre-tax, and you’ll have to pay income taxes. And obviously, if you do this prior to age 59 and a half, you’re also gonna have a penalty. It’s pretty complicated, and I would just say to you that as a consequence of that, I would not do that without talking to a tax expert if I were in your shoes.

You’re listening to Money Talk on KUT News 90.5, and on the KUT app. Call or text me at 512-921-5888. Here is a text. Let’s just see.

[Text] How to make money. Ha ha, from AJ.

Well, how to make, AJ. In the context of this broadcast, as opposed to get a job, how to Make Money. Is there’s always a relationship between risk and return. And so when you’re thinking about your money, what is it you want to do? You’ve got money to buy groceries, pay the rent, pay your mortgage, buy gasoline. That’s not money that you can afford to put at risk, right? That’s money that want to make sure is there so it’s in your checking account. Then there’s the next bucket of money. And this depends on the nature of your income situation. So if you have a job, and your income exceeds your expenses, and you have a job that’s solid, meaning you’re not likely to get laid off in the foreseeable future, then you wanna keep some money in savings. There’s kind of a thought out there in the atmosphere that you’re supposed to keep six months’ worth of expenses in savings, and I’ve come to disagree with that. I think it really depends. I’m gonna give you two extreme examples. So we have lots of people in central Texas who are working for the state of Texas. The University of Texas, Travis County, the city, independent school district, and these are jobs that they’re in, they’ve been in for some considerable time, they’re getting benefits, they’re participating in the teacher’s retirement system, the employee’s retirement systems of Texas. Whatever, and the odds of them losing their job are really, really low. As a consequence, keeping a lot of money and savings in, say, CDs is really harmful because Their after-tax return on those, based on history, is a negative number. They can afford to keep less money there and put more money in some type of investment program. On the other hand, let’s take someone with really volatile income. Let’s say someone who’s in commission sales, let’s say automobile sales. That person can have a great month and make $10,000, and then she can have two months where she makes $1,000. When she has a volatile income, Her expenses aren’t volatile, she still has the same operating expenses, if you will, and so she needs to keep more money in cash. So you have to decide based on your personal situation how much you want to keep in cash, and in today’s world, you can put that money in something called a money market mutual fund or what we call a money-market fund, and it will give you daily access, what we called daily liquidity, but you will have a higher interest rate than you typically get in a money market account. That’s because right now, because of Federal Reserve policy, short-term interest rates are relatively high, and you can probably earn over 4% in something called a government money market fund. How you make money after that is a function of how much risk you’re going to take. Because the more risk you take, the greater the return, and also when things go south in the stock market, the great the decline. That’s a situation where you’re going to have to do some thinking, do some reading. Decide whether you want to do it on your own or whether you wanna hire an advisor. Thanks for the question.

You’re listening to Money Talk on News Radio, on KUT News 90.5, and on the KUT app. Call or text 512-921-5888. Back to the Austin metro area residential real estate market. So the median sales price last month was $450,000. That’s down 3% from a year ago. And there’s a pattern here. These declines have been running in that 3% to 4% range. And so it’s not surprising the median sales price per square foot at $225 was down 3%. Here, though, I got a couple of interesting statistics. The total home sold was 2,504 last month. And that’s down 14.6% over a year over year basis. That’s a significant number. And the median days on the market were up 14.9%. That’s also a significant number. The supply of inventory on a year-over-year basis is up a really big number, 39%. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Here we go. Carl, my husband and I are expecting a baby around December 1st, congratulations. We’re both high earners. And have everything we need except time. Well, then when you have the baby, you’re gonna have even less time. How would you recommend we prepare for the arrival of our child later this year? Well, all right, first thing I would do is make sure that you decide who’s responsible for what. That’s not a financial answer though. So I think good for you for being high earners, congratulations. The sooner you start to put money away, for your newborn’s education, the less money you’re gonna have to put away. You know, and we all know, that the cost of education is high and it’s not likely to go down. So, and also we know that this data show that the more education you have, probably the higher your income’s, not guaranteed of just using data from across the country. And of course, you don’t know whether this child is going to want to go to college or not. Or go to some other form of post-secondary education. But you’re gonna wanna begin to save for that. Because you’re going to have to assume that that cost of that education is probably gonna rise. Let’s just be conservative and say 6% a year. So you’re wanna have your investments have the potential to earn more than that. Now, the first decision you’re going to make is what type of account shall we select? And this is pretty fundamental. Back in the old days, before what I call 529 plans, you could put it in a custodial account under what’s called the Uniform Transfer to Minors Act in Texas, but that has some drawbacks. I see, by the way, that it’s 19 minutes after the hour. This is a good question with a possibly long answer.

So I’m gonna take a break and remind you that you’re listening to Money Talk on KUT News 90.5. Call or text 512. 921-5888. I’ll be back.

KUT Announcer Jimmy Maas [00:13:40] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTX Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a non-profit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

KUT Announcer Laurie Gallardo [00:14:10] This is Money Talk with Carl Stuart . Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:14:23] Welcome back to Money Talk. I’m Carl Stuart  and you’re listening to KUT News 90.5 and the KUT app. And by the way, you can catch past shows of Money Talk, go to kut.org slash money talk. Give me a call or send me a text. I’ll read this again.

[Text] Carl, my husband and I are expecting a baby around December 1st. We’re both high earners and have everything we need except time. How would you recommend we prepare for the arrival of our child later this year. From a financial planning and investment planning standpoint, probably the least attractive is a custodial account because what happens then is any taxable income is taxed at your rate, but when the child obtains age 21, it’s the child’s asset. So let’s put that one aside. The next two, the next one is the 529 college savings plan. Now, there are lots of benefits to this, and there are some significant drawbacks. You select a state plan, you put the money in, you’re given a menu of investment options, the money grows over time, and provided you take the money out for a long list of educational purposes, you don’t pay income tax on it. It used to be, when they were first started, that those expenses had to do with post-secondary education. That is no longer the case. You can also pay for independent schools out of that, say an elementary or a middle or a high school, and in the new tax bill that’s come out of the House, according to today’s Wall Street Journal, and with bipartisan support on this particular issue, there are some additional purposes for which you can take the money in a K through 12 area, so you’d have to keep track of that. So, 529 college savings plan. Probably not gonna call them college savings plans any longer, probably 529 plans. However, my thoughts, shall we say, have evolved. That is, I also like the idea of just setting up another account. You can call it your name, your family name, whatever, education account. Why do I like this? Probably because I wanna focus on the investment side. You then can build a portfolio on your own or with your advisor. You can use exchange traded funds and tax-efficient mutual funds. So there’s very little in the way of taxes as you go. And you have complete control. So let’s say you wanna buy your child and when she turns 16, a used car, you can take the money and do that. Let’s suppose that your child either chooses not to go to post-secondary education or gets a scholarship. Uh… Because she’s a terrific uh… Soccer player and doesn’t need the money this is your money not hers and you can use it to build for your own financial independence and when you take money out you take it at the favorable long-term capital gains rate i would tell you i would look at just setting up a regular account a taxable account you’re married to join account would be fine uh… And invest the money that way You want to consider that when you consider the pros and cons. Of the pros and cons of having the 529 plan.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Let’s go to the text.

[Text] Thanks for continuing your show on a new station.

You’re welcome. You’re a regular listener, great.

[Text] I recently inherited an IRA from a parent who was already taking required minimum distributions. I know that I have 10 years to deplete the count. Do I have to continue taking RMDs from the count? And if the answer is yes, do I use my decreased parent’s life expectancy table or a table based on my age? Boy, that’s really a great question. And I think what happens is… That you have to take required minimum distributions. You have to do it over 10 years. The part that you’re asking is, what amount do you take out? It’s my understanding that you don’t use your parents’ age, but what I’m confused about is, do you have full flexibility where you could say take out nothing for the first five years and then take out the balance in the sixth year, or do you to take money out every year? It’s understanding that you have take money every year. But I will tell you this, unless we have a listener today who’s a tax expert, I just don’t want to say that and then give you bad information. So I’ll look into that and get back to you next week. Because I know it got really tricky depending on when you inherited it, but you’ve just inherited it recently. Those are called beneficiary IRAs by the way. Now it’s your IRA and you establish your new beneficiaries for that as well. Thanks for the question.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 9512-921-5888.

[Text] Hi Carl, are there any downsides to setting up a transfer on death deed to ensure that the ownership of our home be seamlessly transferred to our adult children, avoiding probate when we pass away? Is there a better way to achieve this?

I think setting it up on a transfer on death a good way to avoid probate. If your other assets, say your financial assets, are also styled as transfer on death, then you would avoid probates. I will say this. I have been told by estate planning attorneys that Texas has among the fastest and least expensive probate processes in the country. We have something called independent administration. So if you have a simple situation where you own your home, you have the bank account, you have securities accounts. If you have IRAs, Roth IRAs they already have beneficiaries set up anyway, then doing transfer on death would avoid probate. Now I don’t see any downside to that. Thanks for your question.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Let’s just see.

[Text] Hi Carl. How did the 1% cost of hiring a financial advisor get determined? Do you think this amount will be lower in the years ahead? Why is the amount not based on the amount made per year? In comparison, I pay a manager for my rental property based on the rent, not on the value of the property.

Thanks, what a terrific question. Okay, here we go. When you decide that you’re going to engage a financial advisor, there are two models of compensation. There’s the transaction model, which is the oldest one, where you pay this person a commission, sometimes it’s called a sales charge, when you buy or sell a security. There’s nothing wrong with that. And a vast amount of money is still managed that way through advisors. The other way is what we call the investment advisor.

Typically, this person is under the auspices of either the Texas State Security Commission or the Securities and Exchange Commission, or if you’re working with a large firm, Merrill Lynch, UBS, Wells Fargo, et cetera, they may also be under the SEC. These people charge an asset-based fee. In other words, when you buy or sell a security, they earn nothing, they’re paid on the value of the asset. How did the 1% get determined? Supply and demand, it’s just that’s the marketplace. And it’s not arbitrary, it is not regulated. And in many cases, people who offer this type of arrangement are paid based on the value of their portfolio. So, the smaller the portfolio, the higher the percentage fee, not the dollar fee, the larger the portfolio, the smaller the percentage fees. So, if you had a million dollars, you would pay a lower percentage number, still more money, as opposed to if you say $100,000. But it’s not determined by any statutory situation, it’s just supply and demand.

Do I think that this amount will be lower in years ahead? Terrific question. I would say that’s plausible, certainly in the case of asset management at the mutual fund level, we’ve seen a large decline across the board in expenses that mutual funds charge. And with the advent of exchange-traded funds, there’s more and more downward pressure, which of course is a good thing for the investor. I will say this. If you have an advisor, or you’re thinking of engaging an advisor… Who has this advisory fee-based relationship, there’s a significant difference between that and the transaction-based. It’s my understanding that any person can call themselves a financial advisor, but the term of investment advisor is the term of law, and these people have what’s called a fiduciary responsibility, and that means, under law, that they have to put your interests. Above there, you have to put your interest above theirs. As I said, they receive no transaction compensation and they have what’s called a duty of care. And if your money grows, their fee grows if the money shrinks or the street shrinks. So, it eliminates any appearance of conflict of interest.

Now, what about being paid on the amount that they make? That’s called performance-based fees, it’s not allowed. Now, it’s not your asset manager if you’re in a… Say a private equity deal, they get paid 2% plus 20% of the gains, that could be considered a performance-based fee. But an investment advisor is not charged a performance based fee. That’s my experience. So it is different than paying your property manager. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512- 921-5888. There we go. Eric, you’re on the air. How may I help?

Eric [00:25:06] Good afternoon, Carl. Yes, I wanted to call reference to the text you answered earlier about preparing for a child.

Carl  Yes.

Eric It’s something that I’m fortunate enough to have gone through somewhat recently. And I just wanted to put a little bit of more information out there that you know, even if you’re, they said they were high income, high earners, whatever That means… You know, daycare is an expense.

Carl  [00:25:41] It sure is.

Eric [00:25:41] And I can tell you, you know, that’s something to keep in mind as well as, um, all those other costs associated with birth, um preparing, so, you know, before you put a lot of money, maybe not, you know, I wouldn’t recommend putting a significant amount of savings away into something that, that, you know, you’re not going to be able to access. I want it to be pretty liquid, because you just… You’re going to have a lot of copy of that yeah

Carl [00:26:12] Yeah, you bet. Of course, that’s very good advice. That’s terrific. Great. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Chad, you’re on the air. How may I help?

Chad [00:26:36] I have, I’m 65 and I have about $300,000 in an IRA, $75,000 is in an income bond fund where I’m getting about $500 a month after taxes. So considering my age and the volatility of the market, I am wondering if it’s a good Bond fund and just get the income going forward.

Carl [00:27:10] Probably not. Let me ask you a few questions. Are you retired or are you still working?

Chad [00:27:17] Uh, still working.

Carl [00:27:19] Okay, and when you are you are going to if we had this conversation five years and now you’re 70 would you still be working do you think because you enjoy working or would you plan on retiring?

Chad [00:27:31] I may be working part-time. I’m a therapist, so I could do that kind of part- time for retail income.

Carl [00:27:38] And other than this $300,000 in stocks and bonds, do you have SEP, IRA, IRA other investment assets besides these?

Chad [00:27:50] Uh, I have a small federal pension.

Carl [00:27:58] And when you turn 70 or whenever you choose full retirement age, because you’ve been paying into Social Security, you’ll be getting that when you turn that on as well, is that correct? So here’s my thinking, I learned a long time ago that you have to plan on living a long-time. You may not, but you don’t know that. And the thing about this is three things you don’t know. One, you don’t know how long you’re gonna live. And number two, you dont’ know what the rate of return is gonna be on your investment portfolio. And number three, you Don’t know what’s gonna happen to the cost of living. But the one thing you know pretty good, pretty well about the one of those three is the cost of living is going to keep going up. And so if you put your money too soon into bonds, bonds are not designed to keep up with the cost of living. They’re designed to provide income.

And also when things go badly in the stock market, while they don’t always do this frequently, they will hold value. So they offset some of the risk of the stock market. And you, I, you need to plan a living to 95. So if you’re 65 and you have a 30 year horizon, I would not put more money into bonds. I would say to you, the stock market’s gonna go down, probably go down this year for all I know, but you look at the last three years, it went down a lot in 2022, it went up a lot and 23 and 24, and it’s more or less flat this year. I would see if I were in your shoes to the extent that I wanted to keep working. I would postpone turning on Social Security until I’m 70, because it grows at 8% a year from full retirement age to 70.

And I would stay with stocks, because you’re betting on human ingenuity. The one thing about stocks, I would say this. If you look at that stock portion of the portfolio, make sure you have some international funds in there. Because I think international is so inexpensive when compared to US stocks. And for the first time in a long time, international stocks are starting to outperform. So make sure you have. You know, maybe 15, 20% of the money in international stocks in the stock portion of your portfolio, Chad.

Chad [00:30:14] Okay, that sounds good.

Carl [00:30:16] Okay, thanks for calling you bet. Thanks for calling. You’re listening to money talk on KUT KUT 90.5 KUT news after 30 years on another station. I still stumble around on this. I’m sorry. Call or text 512-921-5888. Dan you’re on the air. How may I help? I didn’t click it, that’s my fault. Dan, you’re on the air, how may I help?

Dan [00:30:48] About your 529 questions. Yes. I have I’ve done stuff for my nieces and nephews and my grandchildren on a 529 about 12 years ago Yes, and you know, you never know whether they’re going to actually use it all or not unless they don’t use it I understand that I am liable for a 50% tax On all the proceeds that aren’t used. Is there any better way to move that? Somewhere charitable or some way I can avoid paying all these taxes on stuff i really don’t need

Carl [00:31:22] Well, I would say this, you cannot transfer the 529 money to a charity, but you bring up a very good idea. You could help offset, I mean money is money, you could take the money out, that’s a taxable event and you could turn around and contribute it to a charity and provided that you’re deductible because it’s over the standard deduction, and you would offset the income tax. On the withdrawal of the 529. But you can’t, there’s nothing in the statute, my understanding, that allows you to take money out of the five 29 for non-educational purposes and avoid the taxes. I think you just have to, you have to plan on paying the taxes, but you could, provided you’d have to talk to a CPA or your own tax advisor about the tax, the consequences of contributions. But if you’re philanthropically inclined, I think that that’s probably the best idea in my opinion, Dan.

Dan [00:32:25] Because you know honestly if i take the money out for whatever reason right are just left there i’d pay a 50% tax on it and i can i can then donate that to whatever yes you know be really uh you know i think it would be on the government’s uh i think the government should allow me to be able to support another student from a low income you know and just turn it over to someone else Yes, that would be

Carl [00:32:52] It would be terrific, and you know, there’s a long list of beneficiaries, you’ve already mentioned them, nephews and nieces, but that’s a great idea to allow you to use that to help some other young person get an education that’s not a blood relative of yours. That’s a terrific idea, but you’re right, I think that’s, that’s mistake or a liability of the way the plan’s drawn. I agree with you.

Dan [00:33:15] Along the same along the same line. I have I have an IRA. Yeah, you know $900,000 or whatever Right. The point is I don’t need it and and if I could Fight I know I can I can move it towards charitable organizations, right? I’ll take the required amount put it that way Yes, but if I can actually support other people that don’t have that amount of money to retire on that would be even better

Carl [00:33:42] That would be terrific. It would be terrific. Now I’m not, I want to be clear, I’m not an attorney, but since you have, since you had charitable intent, you might want to look at something called a charitable remainder trust, where you give the money from your IRA, okay? You get, depending on your age, you get a tax deduction, and they give you, not that you need it, but they give you income for life, and then upon your demise. Whatever’s left goes to the charity. You might take a look. Just Google charitable remainder trust and take a at that then, because you might be in a unique situation where that’s something for you to consider.

Dan [00:34:22] All right, thank you very much, Carl.

Carl [00:34:24] You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. It’s time for me to take a break. A good time for you to call or text 512-921-5888. I’ll be back.

KUT Announcer Laurie Gallardo [00:34:49] This is Money Talk with Carl Stuart . Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:35:03] Welcome back, you’re listening to Money Talk on KUT News 90.5 and on the KUT app. You can listen to previous broadcasts by going to KUT.org slash Money Talk. Call or text 512-921-5888. Here’s the text.

[Text] Hi Carl, my spouse and I want to buy a house, but I also want to change jobs. Is there any length of time I should be in my new position and it not affect the (loan)?

That’s a policy of the lender. And so that’s unique to the lender, I don’t think there’s any statute or rule, I’m sure there are rules of thumb, but I would think that you would want to, you can’t pre-qualify because you want to change jobs, but I will talk to a lender.

I mean, I would just absolutely say I’m thinking of, we’re thinking of purchasing a home, but I’m also making a job change. How does that affect my ability to get a mortgage? My common sense tells me that if I’m the mortgage lender, I’m gonna have complete understanding of what the new job looks like and the certainty of it, and also the volatility of the job market that you’re going into, because that’s what they’re looking for, is your future ability to pay. I’ve never seen a statute or heard that there’s any kind of rule. There may be a rule of thumb, but what I would do is I would go to a mortgage lender because they do want to, after all, they do wanna lend you money. And if you’re qualified today, I suspect that the new job is gonna keep you qualified as well, but that’s how I would go about it if I were in your shoes. Thanks for the question.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Okay.

[Text] Nice cover on the news, KUT news. Glad to hear you again on the radio. Thank you. I’ve been listening to you since we were on in San Antonio when I was listening after completing Army Reserve duty. Thanks for continuing a great and informative broadcast.

Well, you’re very welcome. A nice thing for you to say. Thank you, 512-921-5888.

Yuri, you are on the air. How may I help?

Yuri [00:37:24] Hi Carl, followed you over from KLBJ.

Carl [00:37:29] Thank you.

Yuri [00:37:31] And I’ve got a question here, my wife died within the last couple of years, and my house basis, does that go to her death, or does it remain the same?

Carl [00:37:45] No, it does go to her death, and I would guess you would just use, I mean, there’s no reason to pay an appraiser, and you would use the appraisal value that you got from the tax district, that’s what I would do if I were in your shoes, when it comes time to sell the house. Obviously, if you pass away while owning the house, then your heirs are gonna get the basis based on the value at the time of your death, but if you sell it. Before you pass away, then, yeah, I would use the appraised value of the year in which she died. That’s what I would do if I were in your shoes, Gary.

Yuri [00:38:20] Okay, so I should use the 19 or 2023 appraisal. Okay. Thank you very much, Carl. I appreciate the info.

Carl [00:38:30] You bet. Okay, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Kushal, you’re on the air. How may I help?

Kushal [00:38:47] Yeah, hi, I have a question. So what’s the best way to transfer property, transfer ownership of a property upon death of the owner?

Carl [00:38:57] There’s a couple of ways you can set up the ownership of the property in your name with the phrase transfer on death, T-O-D, transfer on debt. You can have the deal done that way if it’s real estate property. If they’re financial assets and they’re in your names, you can say your name, transfer-on-death, or if it is financial assets and they are in a retirement account, you’re required to have a beneficiary designation already, they will go that way. Those are very easy ways to do it. The other way is, of course, in your will, you simply put in your well who the beneficiaries are of the real property or of your financial assets. You can go to probate, which is not terribly expensive, or if you have a simple situation and there’s not gonna be any disagreement among your beneficiaries. You don’t have to have transfer on death because what will occur is it will go according to your will. So if you have financial assets in your name and your executor probates the will, then what will happen is your executer will go to Vanguard or Charles Schwab or UBS or wherever, deliver a copy of the will and they will distribute the assets per the will. And if it’s real property and you designate in your will to beneficiaries. Then your executor will take care of that as well. So either way, transfer on death or have it delineated in your will, kushal. Either way would work.

Kushal [00:40:35] Okay, so my question about that is they also assume the loan after upon death.

Carl [00:40:41] They had to assume the loan. If they inherit real estate, and the real estate has a mortgage, the answer is yes. They’re going to own the asset along with any debt associated with the asset. That’s correct. OK.

Kushal [00:41:00] Okay, thank you very much.

Carl [00:41:01] You’re welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-588. Cynthia, you’re on the air, how may I help?

Cynthia [00:41:19] Hi, thanks for taking my call. You bet. Here’s my question, it’s probate related. So my husband died without a will and I was named the administrator of the will. And we lived in, or I live in Hays County.

Carl Yes.

Cynthia Before he passed about 12 years ago, we bought a fixer-upper in Bexar County. And since his death, I have renovated that. We’re getting ready to go to sale. I was surprised that the title company has said, I have to go back and get permission from the probate lawyer to sell the property. Really? Can you help me understand? Yeah. Can you help me understand what’s going on here? I know. Yeah, I’m going to call the lawyer in Hayes County that handled

Carl [00:42:13] Yeah.

Cynthia [00:42:13] Uh… You know probate proceeding here uh…

Carl Yes

Cynthia …this is in Bexar county and that title company saying well you’ve got to go back and get like you have your the permission and all of that i think i don’t understand it

Carl [00:42:28] That’s that the first time in 30 plus years on the air that someone’s brought this question to me Cynthia. Obviously is it’s it seems to me not obvious at all It seems to be that this is a straightforward situation and that the lawyer will go to their probate court directly, I suppose you could to get the necessary document. I’m surprised a title company— Is there is there a mortgage on this property?

Cynthia [00:42:57] No, no, I own it free and clear, or actually, you know, I pay cash for it, so, I mean, this was literally like a $25,000 acquisition that’s probably worth $350 now after all the renovations.

Carl [00:43:12] Yeah, well, I’m really surprised since you have clean title, there’s no lien against any of the property that you have to do that. I’m sorry, but yeah, I’d go back and ask that lawyer to go to the court and take care of it. But yeah, that’s a mess. I share your befuddlement with that.

Cynthia [00:43:35] Oh my god

Carl [00:43:36] I would, I would tell you…

Cynthia [00:43:40] You know every time I go to my lawyer, then it’s another charge again, of course Right yes, I don’t know if I should challenge the title company push back on them

Carl [00:43:56] I mean, what’s the downside from challenging them? I agree with you. I think that’s a great, you’re a strong person, I can tell from the way you’re talking. I would just challenge them because you may be dealing with some pencil pusher who doesn’t really understand the situation. So, I challenge them to help me understand, show me the rationale, help me in a document, show me why this has to happen. I agree, I would do that. And oh, by the way, when this is finally settled, call me back on the air and tell me what the heck happened. Would you do that for me please?

Cynthia [00:44:33] Yeah, I will. I didn’t know if it’s, you know, because the probate and where we live is Hays County, and this property is located in Bear County, if there’s something different in the two counties.

Carl [00:44:46] Yeah, you wouldn’t think so, I mean you think that as it regards title that would be a state, at least a state issue, not a county-by-county issue.

Cynthia [00:44:58] Yeah. Yeah. Okay. All right. Well, thanks, Kurt. I appreciate it.

Carl [00:45:01] Okay, good luck. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Curtis, you’re on the air. How may I help?

Curtis [00:45:16] Yes, yes, thanks for taking the call you bet I have a problem

Carl [00:45:26] Curtis, I’m sorry, you’re breaking up on us. I couldn’t understand you, please.

Curtis [00:45:32] Okay. Can you? Yes. Yes. Now go ahead. Okay. Um, property tax problems. Um my sister was the executor of our property, uh, our estate and she, she contracted COVID and died, uh, say four, four years ago. And I’ve been paying, I’ve been paying the taxes on this property and yeah, I had to make up a payment arrangement installment or whatever. And it’s not going down at any anyway anyway uh did uh are there was there any kind of problems for people that uh contracted COVID in that era in the COVID era there were a lot of different programs and a lot of, you know.

Carl [00:46:23] Well, let me ask you this, she was the executor on the property, but who owns the property? Who’s the property owner? Is it your sister? Who owns it now?

Curtis [00:46:33] Well, actually all of us, all of the family members, she was just paying the taxes, right?

Carl [00:46:41] So you all, the family owns the property, she’s passed away from COVID, but the family still owns the property. Is that correct?

Curtis Right, right, right.

Carl Yeah, there’s, I, there were other programs, there were special loan programs and things for during COVID, but I’ve never seen or heard anything about property taxes being, you know, rebated or being changed because of that. So my best understanding is unfortunately there was nothing having to do with COVID. That would be helpful to you, Curtis. I’m sorry.

Curtis [00:47:12] Okay, as far as a lawyer, are there any free lawyers or lawyers that could help low income people with a problem like this?

Carl [00:47:25] Yes, yes there are legal services. I would ask for, if you’re good with the computer, I would go to Google and ask for free legal services in Travis County, because there are groups of lawyers who will work on what the fancy term is pro bono, which means for free, and they will help you Curtis. Yes sir, there are people that help.

Curtis [00:47:50] Okay, thank you.

Carl [00:47:51] You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. You might have a chance to get in it. What time have we got here? No, let’s just see. No, I’m going to do this.

[Text] Should I still contribute to my Roth IRA throughout the year when I will most likely will make more than the modified adjusted gross income limit? Also, how do you know how much you can contribute if you fall into the partial category, contribution category?

Okay, I don’t know if I can get this quickly. I’ve got, by the way, if you put the money in and you know you’re gonna have to take the money out then no, there’s really no benefit to doing that. I was just looking here, I keep a copy of the tax situations and let’s just see if I can find out here quickly for you how much Roth IRAs maximum contribution, $7,000 contribution limit. Let’s just assume that you were married, filing jointly.

You have modified adjusted gross income of less than $236,000 married filing jointly, here’s the answer to your question. The phased out supply if the modified adjusted gross income for married is $236,000 to $245,999. So apparently, you can get some phase out from there. You might get to be able to put a little bit in there, but I’m not sure on an amount like $7,000 that it’s really going to be worthwhile for you. So I don’t know that that’s something that I would do if I were you. We’re down to our last couple of minutes. I’m gonna finish up on this real estate thing by saying that the supply of Austin metro area residential real estate on a year-over-year basis for sale is up 39%. The number of houses sold above list price is up 15%. That’s down 11.7% from last year, listen to this. New listings $5,343, 5,344 houses. That’s up 8.7%, since last month. I think. The takeaway from this is that we now have, if it is more of a buyer’s market, I don’t think we have to be geniuses to figure out why that is. It’s with 7% or more or less mortgage rates, fewer people qualify for new mortgages, and so people are putting their houses on the market, and I think my experience is that we’re all happy when we wanna sell our house that the price has gone up, but they’re pretty sticky. In terms of expectations, and when the prices come back down, we don’t quickly adjust to the reality of that. I just notice anecdotally as I go around the Austin area, lots of for sale signs, so I think if you’re a buyer and you are qualified, either because you’re a cash buyer or you have access to the mortgage, that the current rate, that this is a good time, and if you are a seller, I think you have to have realistic expectations. A lot of fun this afternoon, great broadcast. I wanna thank Marc (V. Marc Fort) for doing his usual great job and to remind you next Saturday after the news at five to tune in to Money Talk.

KUT Announcer Laurie Gallardo [00:51:27] You’ve been listening to Money Talk with Carl Stuart . Carl Stuart  is an investment advisor representative of Stuart  Investment Advisors. And this is KUT and KUT HD1 Austin.

This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.