This Year, Resolve to Save More and Improve Your Credit Score

· Pay yourself first and last. This little bit of common sense is particularly helpful if you're trying to save for a down payment or another major purchase. Each month, make out an invoice to yourself for the amount you wish you were saving. It could be $50 or $500. When you pull out your checkbook to pay your bills each month, take out the invoice and literally pay it first. Then, if you have any cash left in your checking account when bills are paid, pay yourself again.

The high-tech way to do this, of course, is to have your bank electronically pull the money out of your checking account each month and send it to a different account. The thinking is, if you don't have the cash in your pocket, you won't spend it. (Remember to write this down, however, or you could wind up bouncing checks and wasting money on bank fees.)

Once the money is out of your checkbook, you won't spend it thoughtlessly. It doesn't matter where you put the money, although if you write the check to your Roth IRA account, you will get a bonus: The money will grow tax-free forever. Looking for another good idea? Send the second check to your child's 529 college savings plan. The money will also grow free of state and federal taxes (depending on the plan you choose), and you may get a state tax deduction for your contribution. If you're saving for a large purchase, such as a house, put it into an interest-bearing account somewhere relatively inaccessible.

Q My father owns a mortgage-free "summer" home in Virginia. Until recently, he spent most of his summers and occasional winter weekends at the house. The home is maintained by neighbors, whom my father pays for their services.

The original intent was to sell the house at the time of his death and divide the proceeds between me and my sister.

But my father is now 94 and no longer wants the responsibility of being a homeowner. My sister and I suggested he keep the house in his name and let us assume responsibility for all costs to avoid any tax implications. He insists on not having any responsibilities for the home, including having it in his name.

Is transferring the house to me and my sister an option, and if it is, what are the tax implications?

A If your father sells his summer home today, he will have to pay taxes on any of the gains from the sale of the home. If his profits are large and he has owned the home for quite some time (long enough to qualify for long-term capital gains treatment for the profits), he will have to pay up to 15 percent federal tax on those profits, plus any applicable state tax.

If his profit is small, and his income is low, he would pay much less in taxes to the federal government.

However, if he doesn't sell the home and it becomes part of his estate, you and your sister will inherit the home at the stepped-up basis. That is to say, whatever the home is worth at the time of your father's death, you would pay tax on only the appreciation that the home may have thereafter. Keep in mind that if you sell the home shortly after your father's death, the value placed on the house for federal tax purposes will be the selling price.

Because the value of the house would be set at the price it was sold, there would be no federal income tax due under these circumstances.

Another issue to consider is whether the real estate market is strong where the house is located. If it is, you could decide that it is better to sell now and pay the taxes rather than risk that the real estate market might deteriorate in that area.

If the real estate market has soured where the home is located, you might want to keep it with the hope that the market will improve.

If your father does not want the responsibilities of the home and wants to feel as if it is no longer titled in his name, you might want to talk to an estate planner and set up a living trust. The trust would hold title to the home, you and your sister could pay the home's expenses and your father might feel as if he has taken care of the asset now. Upon his death, the trust could transfer the home into your name and your sister's name, or you could have the trust sell the home.

You should sit down with an estate planner or estate lawyer to go over all of the options available to you and your father now, while he is still able. At the same time, you can make sure his will is updated and that he has signed a power of attorney for health care and financial matters.

Ilyce R. Glink is an author and nationally syndicated columnist. Her latest book is "100 Questions Every First-Time Home Buyer Should Ask." Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through Glink's Web sites, http://www.thinkglink.com and http://www.expertrealestatetips.net.

© 2009 Ilyce R. Glink and Samuel J. Tamkin

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