Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 31, 1994 TAG: 9401280290
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
Also, if it states in the will that the executor does not have to be bonded, does he or she need to be?
A: For a will to have any legal effect, it must be submitted to probate, according to Charles E. Troland Jr., a lawyer with the Roanoke firm of Glenn, Flippin, Feldmann & Darby. He's never heard of anyone appending the type of instruction you propose.
Besides, he said, probate offers protection for your estate. It is the process of authenticating the will and accounting for distribution of the estate. Probate is a means of assuring that your wishes will be followed.
Probate may have a bad name, because in some states, such as New York, it is complex and expensive. Virginia, however, has adopted a simplified and inexpensive process.
It is true, on the other hand, that you can exempt your executor from the need to post a bond. Troland said he includes such a provision in every will he writes. It belongs in just about every will. By adopting such a provision, you can save your estate more money than the cost of writing most wills, he said.
\ Tax consequences show need to keep records
I inherited my parents' house after their deaths. The value of the estate is about $30,000.
I invested my own money into this property to make it salable. When it did not sell, I chose to rent it out for two years. When I realized that the tenant had done extensive damage to the property, I had to reinvest funds back into it. Now the property is up for sale again.
If I sell this property for $28,000, am I legally required to pay estate taxes on this property? If so, how much? I do not have all the receipts for the repairs made on the property.
A: There would be no estate taxes, because the total value of the estate was less than $600,000, said James B. Taney, a certified public accountant with the Roanoke firm of Anderson & Reed.
There will, however, be income tax consequences when the property is sold.
Taney said the initial tax basis of the inherited property is the fair market value at the date of death of the last parent, assuming that the inheritance came from that parent.
This basis then was increased by the monies put into the property to make it salable, Taney said.
When the property was rented, the basis was reduced by the depreciation allowed or allowable during the rental period.
Then, he said, the basis was further increased by the money spent to repair the damage - unless those costs were deducted as repairs on the rental schedule.
When the property is sold, Taney said, your gain or loss will be the difference between the adjusted tax basis (arrived at after the above calculations) and the selling price minus the expenses of the sale. It isn't possible to calculate the amount of the gain or loss without this specific information.
To calculate the adjusted tax basis, Taney said, you should make a list of all the repairs and fix-up jobs done to the property. To support these figures, all receipts, bills and canceled checks should be gathered together.
Taney suggested that you contact the people who performed the work, if you lack proper documentation to support the expenditures.
\ Disability insurance and the part-time worker
Q: I am trying without success to buy long-term disability insurance.
I earn more than $40,000 a year working on a permanent part-time basis as a research scientist. I work 24 hours a week, but all the companies I contacted require that you work at least 30 hours a week to qualify for disability coverage.
What is magic about 30 hours a week as a cutoff point?
A: Disability insurers take a hard look at the person and the occupation before issuing disability insurance.
James A. Ford, an agent for Northwestern Mutual Life Insurance Co., said that's because of the difficulty of proving or disproving whether a person is disabled. In life insurance, death is a fact. But disability isn't always so clear, so companies want to insure people who appear inclined to work.
Most people who work part-time are not scientists, Ford said. Part-time work generally pays poorly, so companies believe that as a general rule, those people are less inclined to keep working in the face of some health problems. And, he said, experience shows that people who work part time are more likely to have health problems than are people who work full time.
For many of the same reasons, he said, most companies won't grant disability insurance to people who work out of their homes.
Perhaps you could persuade your employer to obtain a group policy even if the workers have to pay their own premiums. Your employer is under no obligation to provide this coverage, however, even to people working a 40-hour week.
\ 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