Dear Liz: I have less than $5,000 in my savings account, a 12-year-old car and a mortgage with a $200,000 balance. I am 67 and can’t decide whether to make a will. I live alone and have no children. I have three siblings, but am only close to one. I hate to spend money on an attorney when I can use that money to cover funeral expenses. I’m leery of using an online will service. Can you recommend an inexpensive way to get my affairs in order?
Answer: Anyone who can afford to pay for estate planning help probably should. This is a complicated area, and it’s easy to make mistakes that can make settling your estate unnecessarily costly or difficult.
If you can’t afford to pay for help, though, there are low-cost and free options you can explore.
Start by creating an advanced directive, which details what kind of care you want should you become incapacitated and can’t speak for yourself. You can create one for free at PrepareForYourCare.org. Every adult should have an advance directive, also known as a health care power of attorney.
Another document every adult should have is a financial power of attorney, which allows another person to manage your finances if you’re incapacitated. You can create one at FreeWill.com, a site supported by nonprofit organizations. The site will also help you create a simple will for free.
LegalZoom, Rocket Lawyer and Quicken Willmaker are other options that can help you create estate documents, typically for less than $100.
Dear Liz: A reader mentioned recently their credit score dropped only four points after closing a credit card they had since 1981. Three years ago I closed a credit card that was over 30 years old and my credit score dropped 20 to 35 points, depending on the credit reporting bureau. My score hasn’t gone up since despite good credit and no late payments. Please remind readers that many factors go into a credit score when closing a credit card.
Answer: As mentioned in the previous column, the impact of a card closure varies depending on other information in your credit reports. If your scores are high and you have several other open credit cards in good standing, the impact is likely to be minimal. If your scores aren’t great, you have few accounts or you’re closing one of your highest-limit cards, the impact may be greater.
Also keep in mind that there are many different credit scoring formulas in use today, so you don’t have just one credit score: you have dozens. FICO and VantageScore are the two main providers, but lenders use different versions of these scores and, as you’ve noted, the results also vary according to the credit bureau they use.
Your scores constantly change because the underlying information in your credit reports changes. Even if you aren’t actively adding or closing accounts, the balances on your accounts typically change from month to month. Higher balances on credit cards can hurt your scores, while lower balances can help. Each month your accounts get a little older (which is a good thing) and more time has passed since your last account opening (also a good thing).
You can offset the impact of a closure by continuing to handle your accounts responsibly. You also might consider adding a new account to the mix if the point drop is significant enough to affect your financial life. If the score drop took you from the 800s to the high 700s, though, it probably isn’t worth the bother of trying to “fix” it since your scores will typically get you the best rates and terms on any credit you may need.
Liz Weston, Certified Financial Planner®, is a personal finance columnist. 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.
The post Do I need a will if I don’t have much money? appeared first on Los Angeles Times.
