Dear Liz: My wife recently received from the Social Security Administration a notice of “Potential Private Retirement Benefit Information.” It cites a 401(k) account with a previous employer with a relatively small balance and states the “year reported” as 1992. My wife does not have any recollection of ever cashing out this account. Should the account still be accessible or are 401(k) accounts subject to abandoned property laws?
Answer: Keep in mind that many small accounts in that era were simply cashed out. The company sent the departing worker a check with a certain amount withheld for taxes, and that was that.
Still, even a small account could have grown substantially in the meantime, so it’s worth trying to find out if it might still exist somewhere. A couple of places to check first would be the National Registry of Unclaimed Retirement Benefits, which allows you to search using your Social Security number. Another site to check for missing money of all sorts is the National Assn. of Unclaimed Property Administrators.
If nothing turns up, your wife should try to find the plan’s administrator. If she has any old statements or paperwork from the plan, the administrator or plan provider would be listed. If not, and her former employer is still in business, she can call the human resources department to find out what company administered the plan.
If that doesn’t work, her next stop would be the Department of Labor’s efast system to look for the plan’s Form 5500. Employee benefit plans have to file these annual reports and include contact information. FreeErisa is another site to check for Forms 5500.
Options for transferring condo to heirs
Dear Liz: I would like to get advice on how to transfer my condo to my son and grandchildren. It looks like I don’t have too much living left and need to get a clear understanding of what would be better for me and for them. All the articles are very confusing. Can you advise me on what is better, transfer on death or some other form of transfer that avoids probate?
Answer: Transferring your condo while you’re still alive probably isn’t a good idea, since the property wouldn’t get the favorable step up in tax basis when you die. Without that step up, your heirs could owe capital gains taxes on the appreciation that occurred during your lifetime.
You could leave the property to your heirs in your will, but that would involve your estate going through the court process known as probate. In many states, probate isn’t a big deal. In other states, including California, probate can be lengthy, expensive and worth avoiding.
A living trust is often the best way to transfer an estate to heirs without probate, although the cost can be significant — $2,000 or more.
If the condo is your only asset, a transfer-on-death deed may be a simpler, cheaper way to get the property to your heirs. Many states now offer this option, and you can often find the form by searching “transfer on death deed” and the name of your state. Your county clerk’s office may have downloadable forms as well. You’ll typically need to get the form notarized and then file it with the county property records office for the deed to be effective.
Finding an affordable fee-only financial advisor
Dear Liz: You always advocate hiring a fee-only financial advisor. But where do you really find one? I found those who say they are fee-only are really “assets under management” advisors when you dig down deep, and the cheapest fee-only advisor I’ve found costs $6,000. I just want them to look over my financial plan and help craft a retirement investment portfolio.
Answer: The “assets under management” model — where the advisor charges 1% or so of your portfolio in exchange for financial advice — is probably the most common fee-only arrangement. But there are others. The Garrett Planning Network, for example, represents planners who charge by the hour. XY Planning Network and Alliance for Comprehensive Planners offer referrals to planners who charge retainer fees.
You also might consider talking to an accredited financial counselor. These fee-only, fiduciary professionals typically charge less than a comprehensive financial planner does and could be a good fit for those with simpler needs. You can get referrals from the Assn. for Financial Counseling & Planning Education.
Liz Weston, 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.