Dear Liz: My wife of 34 years died five years ago. Her father is 94. He has accumulated a large amount of wealth over the last 40 years. I always made a point of staying out of financial discussions between my father-in-law and his daughters. He told us for years that upon his death all his wealth is to be divided between us (my wife and me) and her sister. Recently, a gold digger reappeared on the scene. My father-in-law and his late wife took her in at a young age when her parents died. I don't know if she was ever formally adopted or not, or how that affects the situation. My question is, do I have any legal rights, upon my father-in-law's death, to any distribution of his estate if I am not listed in the actual trust or will?
Answers: Your chances of inheriting from your father-in-law may have died along with your wife.
Sons-in-law don't really have inheritance rights. If your father-in-law dies without an estate plan, state law would dictate who his heirs would be: typically his surviving spouse (if he has one) and any living children. Even his kids would have no legal right to inherit if he has a will or trust that disinherits them.
Estate plans sometimes make provisions for a child's spouse, particularly if the money eventually will be inherited by the grandchildren. Such a trust might give you the right to income from assets that on your death would go to your wife's children, for example. If there aren't grandchildren, though, the money your wife would have inherited may simply go to her sister (and possibly the "gold digger," as you describe her, if she's included in the estate plan).
Of course, if the old man likes you, he could make a bequest to you in his will. But you have no legal right to demand that he do so, and any attempt to pressure him could raise the question of who is the actual gold digger here.
Moving student loan debt
Dear Liz: My daughter has $30,000 in student loans from obtaining her masters degree. The loans have about a 7% interest rate. She will be eligible to have $5,000 forgiven if she works five years in a low-income school. Although she is currently so employed, she does not know whether she will stay there for five years. I have a line of credit available with a 4.8% interest rate. It seems to me that she will pay less overall if she uses my line of credit to pay off her student loans and makes the monthly payment on the line of credit. Does she miss out on developing a good credit score by using my credit? Is it worth paying the higher interest rate to develop that credit history?
Answer: There are several reasons not to use your credit line, and they don't have to do with her credit scores.
The student loans are helping her scores now and will continue to do so even after they're paid off, since most lenders continue to report closed accounts for years.
If she uses your line of credit, though, she won't be able to deduct the interest she pays. Student loans provide a valuable "above the line" income adjustment for most borrowers. They don't have to itemize to take advantage of this adjustment, which is the smaller of $2,500 or the interest actually paid. The ability to take this tax break is phased out in 2013 when modified adjusted gross income is between $60,000 and $75,000 for singles and $125,000 to $155,000 for married couples filing jointly.
Also, your line of credit carries an adjustable rate that can (and likely will) go higher. The rate would have to rise only two percentage points before it equals the fixed rate on her federal student loans. Federal student loans offer a number of other protections, including income-based repayment options, forgiveness after 10 years in public service jobs (after 25 years otherwise) and forbearance or deferral should she experience an economic setback. She can learn more about these options at studentaid.ed.gov.
Finally, if she failed to make payments on your line of credit, your credit scores would be on the line — as would your home, if the account is secured by your home equity.
It's commendable that you want to help your daughter, but in this case you both may be better off keeping the debt in her name rather than putting it in yours.