Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, May 17, 1993 TAG: 9305160005
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Long
I asked about the state insurance fund which is supposed to protect policy holders. They said there is no such fund and there is no plan to set up such a fund in this instance. Is the state fund a sham? When they sell policies, they promise protection through the fund.
A: Policy holders are not protected as are bank depositors. Customers of failed banks receive their money, up to $100,000, about a week after the bank closes.
Each state has, on paper, a fund to protect policy holders of an insurance company that fails and completely defaults. Although state law sets up the fund, it contains no actual money. In case of a failure, insurance companies doing business in the state would be assessed fees to go into the fund. That means policy holders of the failed company would be reimbursed slowly over a period of years.
Each state's fund would protect only residents of that state. If a Delaware company failed, for instance, Virginia would pay off its Virginia customers over time.
This protection is imperfect and has never been tested. The only real protection people have is to ask that a company give its ratings by several financial ratings agencies, such as Moody's and Standard & Poor's, before buying a policy or annuity. But, of course, those rating could change over time. That is one good reason to diversify your holdings.
\ How to set up a gift
Q: I have a rental house in the city which has been rented for 23 years. I would like to give it to my daughter now. It has been depreciated over those years. Would we need to repay the government the depreciation amount?
She will inherit the house at my death and would pay taxes on it. She will probably move into the house if she receives it now. My concern is the liabilities involved.
A: If you can, depending on your age and life expectancy, let your daughter inherit the house. Meanwhile, she can live there if both of you agree to the plan.
That advice comes from Gary Agee, a certified public accountant with the Roanoke firm of Miller, Morgan & Co.
He said a gift would not trigger repayment of the depreciation. The government recaptures the depreciation through lowering of your tax basis in the property. After 23 years of inflation and tax depreciation, that value is surely very low. So you would have a very large gain on which to pay tax if you sell the property.
Your gift would merely shift this burden to your daughter, Agee said. She would take your low tax basis in the property, which is the cost of the property many years ago minus the depreciation.
If she inherits the property, on the other hand, her tax basis would be stepped up to the fair market value of the property on the date of your death. In such a case, Agee said, all of the depreciation, along with all of the gain in value over the years, would be forgotten.
So it would be to your daughter's advantage for you to leave her the property through your will. Agee said there is no reason she could not live in the house meanwhile.
The course you actually follow, however, depends on your age, life expectancy and other individual circumstances.
If you decide to give the property to your daughter now, he said, you must fill out a gift tax form for the excess over the $10,000 annual limit per person. You should not actually have to pay gift tax if your lifetime gifts plus your estate is valued at $600,000 or less.
\ But will it wash?
Q: My husband and I have an Electric Sink Dishwasher by Youngstown. It belonged to his grandmother, purchased probably in the late 1940s or possibly 1950. Due to various difficulties and illness, the dishwasher was never hooked up. It is still in its original crate with all papers and instructions inside.
We have no idea if it is of any value, but feel there probably aren't too many around in this condition since it has never been uncrated. We have someone interested in buying it, but have no idea what it's worth. All of the antique dealers I have spoken with say they know nothing of the value of an appliance. I realize it's not an antique in the truest sense of the word, but I can't help but feel there is a market out there somewhere for this item, even if it's a museum.
A: You can check the reference desk of your public library to determine if antique catalogs list this or other appliances.
As an alternative, you can send clear photographs showing details to Steven Gross at Attic Treasures, 115 West 28th St., New York, N.Y. 10001. Include your name, address and both day and evening telephone numbers. Gross will give you an estimate of his appraisal fee by phone based on the picture.
\ AUTHOR Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke 24010.
by CNB