Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 11, 1991 TAG: 9103100026
SECTION: BUSINESS PAGE: A7 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Medium
I inquired about the bond while I was in Canada in June 1987. The branch vice president of the Bank of Montreal at Niagara Falls, Ontario, told me that the charter for Chibex was canceled Jan. 25, 1986. If I had redeemed the bond prior to that date, I would have received the money due.
I question how a bond, held by the bank, could become invalid. To me, if the bank had the money prior to 1986, it should continue to have it and should redeem the bearer bond. If, as I believe, the brokerage firm made a mistake, will they correct it? Can the Bank of Montreal refuse to redeem the bearer bond if they still have the money?
A: An issuing company, not the trustee bank, is responsible for paying the face amount of a bond at maturity, along with the regular interest. A trustee's role is to guarantee that the bonds are authentic, make all payments from the company funds and ensure that all bonds are destroyed at redemption. Your bond says that Chibex Ltd. was responsible for payment when the bond matured in 1978.
The copy of your bond shows that Montreal Trust Co., a different institution from the one you contacted, was the trustee.
Anthony Colucci, spokesman for Montreal Trust Co., said its records show that Chibex Ltd. was a mining company. Its mine was destroyed by flooding in late 1975, he said, and the trustees all resigned and walked away from the corporation. The mine is still flooded.
"Everybody abandoned ship," Colucci said, and the corporation was abandoned without the formalities of winding down the business. No interest was paid after 1975, Colucci said, and the bonds were never redeemed. "The securities have no value," he said.
Montreal Trust Co. is holding a small amount of money representing interest paid by the company between 1973 and 1975 to bond holders it cannot locate.
It's probable that both people you talked to were correct. The company became defunct in late 1975 and its charter was later canceled.
The evidence suggests that your parents knew about the situation because they obviously tore off and redeemed coupons through 1975 but not after that date. Those coupons that your parents redeemed were for the only interest that Chibex ever paid.
If you wish to obtain information directly, you can write to Anthony Colucci at Montreal Trust Co., 1800 McGill College Ave., Montreal, Quebec H3A 3K9, Canada. His phone number is 514-982-7172.
\ Just save
Q: I plan to return to full-time employment in August. Because my husband's income will be used for day-to-day expenses, I would like to put aside a majority of my paycheck, or about $1,000 a month, for college and educational expenses. What would be the best available plans that I could use to ensure savings for my children who will enter college in five years?
A: Five years isn't much time for investing in stock mutual funds, which offer the greatest opportunity for growth. You might want to invest 10 percent to 20 percent of your money in a fund, but you cannot risk a market downturn with college so close at hand.
It's also too late for you to take advantage of the tax-saving aspects of U.S. Savings Bonds used for college tuition. Those bonds must be held a minimum of five years before they earn market rates.
You will have to be more conservative by putting most of your money in cash investments such as bank certificates of deposit and U.S. Treasury bills. Money market mutual funds pay higher rates at slightly higher risk. You can diversify into a number of investments, but don't lock yourself into long-term maturities now while interest rates are so low.
The investment vehicles you choose are less important than your continuing commitment to save on a regular basis.
\ Beat the tax
Q: Assume that my wife and I have a jointly owned $100,000 certificate of deposit. We cash in the certificate and deposit all of the $100,000 in my wife's name. At my death, this $100,000 is still in my wife's name. Would this be considered using up $100,000 of my unified credit and charged against my estate?
A: David Lucas, a certified public accountant with the Roanoke firm of Lucas & Boatright, said there has been an unlimited marital deduction for gift and estate tax purposes since 1982. This will typically insulate transfers between spouses from the imposition of gift taxes.
In this instance, Lucas said, the earlier transfer of the proceeds from the jointly owned certificate of deposit to a certificate solely in the name of the wife would presumably constitute a gift from the husband to the wife. However, the gift would be reduced by the marital deduction, Lucas said, eliminating the need to use the unified credit to avoid gift taxes.
by CNB