Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, July 26, 1993 TAG: 9307260017
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
If I could, I would like to set up this money in some way so it could grow and I could give it to different charities or people in need. Also, I'll need to receive as much tax credit from this as possible in 1993 and 1994.
Can this be done, or should I just give the entire amount this year and the next?
A: Your underlying assumption is in error.
The money, if it was in your son's name or held on his behalf through the Uniform Gifts to Minors Act, belongs solely to your son. All decisions related to the money are his to make. You lack the legal authority to cash in the stocks, set aside a tithe and spend the money. Also, assuming the money is his, the tax benefit of a charitable gift also belongs to your son, not to you.
Bruce Stockburger, a tax and estate specialist with the Roanoke law firm of Gentry, Locke, Rakes & Moore, said there is some confusion about your circumstances.
But it appears to him that you talked your son into making a $5,000 charitable contribution from his money.
"It would appear that the proceeds from the sale were clearly the son's and that the $5,000 tithe would be a charitable contribution made by the son," Stockburger said.
The timing of the charitable contribution, he said, "is really up to the son and could be made either this year or next year."
Stockburger said creating a charitable trust "would be a very inefficient and expensive way to deal with this type of a situation."
He said your son could establish a charitable trust with you as trustee, thereby meeting your objective of allowing the money to grow and to make distributions to different charities.
But he said the expense and administrative complexity of establishing this type of trust can be justified only for very large sums of money. He assumed that your son has given you his permission to deal with these funds, but any contribution would be made on his behalf.
Stockburger said he also assumed the statement that you need as much tax credit as possible is made on behalf of the sons whose property is being sold. Even though there are tax advantages in placing money in the name of a child, it is a situation full of peril.
Even if the parent is the named custodian, the money belongs to the child who can spend it as he wishes the minute he turns 18. And it need not be spent on education. Parents should consider holding all funds in their own names so they can retain control over how the money is spent.
Divorce benefits
Q: One item about Social Security that I have never seen addressed in the newspaper is the matter of ex-spouses.
What percentage of the insured's benefits are they entitled to? How long does a spouse have to be married to be eligible for benefits? How many wives can collect 100 percent of the ex-spouse's benefits when the insured is deceased?
If I understand correctly, and different answers can be heard, the wife at the time of the death of the insured must have been married to him for at least nine months to be eligible for 100 percent benefits.
A: Your last statement is correct for the current spouse at the time of death.
A couple must have been married for at least nine months for the current wife or husband to collect benefits on the deceased spouse's work record.
Mary Camper, a supervisor at the Roanoke office of the Social Security Administration, said the situation is different when it comes to divorced people.
In that case, she said, the couple must have been married at least 10 years for the divorced person to collect on the work record of a former spouse, regardless of whether that former spouse is living or deceased.
The 10-year rule is inflexible, she said. She has seen people rejected who were married nine years and eleven months.
If the former spouse is living, the divorced wife or husband can collect 50 percent of the spouse's benefit when she turns 65. If she takes the benefit at age 62, it is reduced by 25 percent. That means she would get 75 percent of half the spouse's benefit if she takes it at age 62.
If the former spouse has died, Camper said, she gets 100 percent of his benefit - the amount he would have received if he had lived - when she is 65.
If she opts to retire at age 62 instead, she would get only 71.5 percent of the spouse's benefit. This is the same benefit a current wife would receive.
As many ex-wives can collect as if they were married to the former spouse for at least 10 years. Camper has seen two or three people collect on a spouse's work record.
Social Security is gender neutral, so the answer applies to ex-husbands as well as to ex-wives. But fewer men than women collect under the former spouse's work record instead of under their own.
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, Va. 24010.
by CNB