Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 10, 1994 TAG: 9401070242
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
Would I be better off to refinance now at a lower rate or, if I had anything to put up front, to use that money to pay down the principal of the loan instead?
I'm near retirement age, and I'd like a little bit less payment.
A: Michael Hincker, manager of Mortgage Service America in Roanoke, pointed out that paying down the principal will shorten the years over which you pay off the loan. You would pay off the mortgage faster and save money in the long run. That's an appealing prospect to many people.
But it would accomplish nothing toward your stated goal of reducing your monthly payments. If you make extra payments, the next month's mortgage bill will be unchanged.
He suggested that you refinance the mortgage at today's lower rates. That would reduce your monthly payment. If you have extra money, you could use it to increase the down payment at the time of refinancing, thus further reducing your monthly payment.
Do not, however, strip yourself of cash as you go into retirement. You should not have all of your assets in the house, because you could not reach the money in an emergency.
Who owns joint CDs?
Q: My aunt and I have two CDs in our joint names. I have also had her power of attorney for a period of time.
My aunt had a stroke and became incapacitated; she is now in a nursing home. Her sister had herself appointed as her guardian a week after she suffered the stroke.
I didn't contact the bank about the CDs, but the bank notified me that the CDs are considered part of my aunt's estate, so I can't touch them.
I think her sister's power of attorney is illegal, because it was given after my aunt became incapacitated. What is the status of my power of attorney? Does her sister have the right to place a stop order on the joint CDs?
A: Your basic question seems to be about the right to the money in the two certificates of deposit.
Alexander Saunders, an estate and tax attorney with the Roanoke firm of Woods, Rogers and Hazlegrove, said Virginia law provides that: "A joint account belongs, during the lifetimes of all parties, to the parties in proportion to the net contributions by each to the sums on deposit." There is an exception to this rule only if the parties are married to each other.
You own, therefore, only such portion of the joint account as you contributed to the account. The amount you contributed is subject to being proved - in court, if necessary.
If your aunt is merely physically incapacitated, she can give a second power of attorney to another person. Depending on what it says, it probably revokes the previous power of attorney.
Should your aunt be mentally incapacitated, the second power of attorney may be invalid. An issue of fact is then presented for proof in court.
But if her sister was appointed committee (or legal guardian) by a court, the court appointment would outweigh your power of attorney.
If your aunt (or a court) has chosen the sister instead of you to handle her affairs, you would be advised to accept that fact.
As to the joint account, you are out of luck if your aunt put the money into the account. This is true as long as she is alive.
If you did contribute some or all of the money to the account, you can get that money back. In such a case, you should reason with the sister or else go to court to prove your right to the funds you contributed.
If the account is named in right of survivorship or payable on death, any money left over at the time of your aunt's death would belong to you.
Land swamps legal
Q: I own two one-acre lots in Las Cruces, N.M. These were bought in 1970 and were adjoining our house. Because of inflation, we would pay more than 40 percent of gross sales prices in taxes and transfer costs if we sold the lots.
Do you regard tax-deferred exchanges under Section 1031 of the tax code as legal and practical for people like myself? We would like to buy a lot here and build in two to five years.
We also have the problem of owning 36 acres of timberland in Ohio that it would be nice to transfer or trade for timberland in Virginia, which we could visit easier. The two lots are probably worth $90,000 to $100,000, and the Ohio timberland around $18,000 to $20,000.
A: Section 1031 of the Internal Revenue Service code provides for a swap of land in a two- or three-way trade of property. Taxes are deferred, because no money changes hands.
Such swaps are perfectly legal.
Bruce Stockburger, a tax specialist with the Roanoke law firm of Gentry, Locke, Rakes and Moore, said the section has been interpreted very broadly.
You could, for instance, swap the Ohio timberland for building lots in Virginia - or for a duplex or any other property for which you could find a willing trading partner. Both trades you mentioned are permitted under the act.
The problem, of course, is finding someone willing to swap two lots in Western Virginia for your two lots in New Mexico. You may have to find a third person who owns some lots you want to buy who is also willing to engage in a three-way trade.
Unless you know someone in a position to trade properties, you will have to hire a broker who specializes in arranging such cross-country land swaps.
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. Or leave a recorded message by calling (703) 981-3434 and when asked for a mailbox number, press 66639 (MONEY), followed by the # symbol.
by CNB