Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, September 25, 1995 TAG: 9509260002
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Long
A: You are correct in thinking that this is something you should take care of as soon as possible.
Larry Harding, Roanoke area coordinator for U.S. Savings Bonds, said you should go to a bank and ask for form PD 4000. This form is from the Bureau of Public Debt, and it is used to change the beneficiary of U.S. Savings Bonds.
Owners of Series EE bonds have the power to change the beneficiary at will without an explanation.
The older Series E bonds are another matter, as the signature of the beneficiary is required to make a change. Harding said you should take a copy of the death certificate with you when you change the beneficiary of the Series E bonds.
No tax on estates worth less than $600,000
Q: My mother is 78 and has a simple will leaving the proceeds of her modest estate to her children. We expect her investments total less than $160,000.
Lately, she's read information regarding trusts of various types and wondered if placing her investments in some type of trust would help us avoid inheritance taxes upon her death.
A: You and your mother have no cause for concern. Estates are taxed only on amounts over $600,000. If you know your mother's estate - including her home and any life insurance - is less than this amount, there will be no inheritance taxes.
People set up irrevocable trusts to maximize use of the $600,000 exemption for any single person, or $1.2 million in the case of a couple. Revocable trusts, on the other hand, are needed for special purposes, such as a mentally incompetent or spendthrift child, but they do not affect taxation of the estate.
Some people set up revocable trusts for their own benefit in case they should become unable to take care of their own affairs, but this matter also can be handled by giving a trusted family member a durable power of attorney.
Tell your mother not to worry if her estate will total less than $600,000. The children will not be taxed. And they also will take their own tax basis as of the date of her death, so the capital gain during her lifetime also will escape taxation.
Reverse mortgage could save home
Q: We are a retired couple who own our own home, and we will not be receiving any retirement benefits other than Social Security. We need to downsize, as we are unable to keep up the maintenance of the home.
Should we buy a condo, or should we invest the money from the sale of the home and rent an apartment?
A: P. Wesley Hambrick, a fee-only financial planner with Hambrick Investment Advisors in Roanoke, suggested that you consider the alternative of a reverse mortgage. This would give you a steady stream of income, the amount of which would be based on your age, the interest rate and the value of your home. He said you should approach this option with caution, but he said he has seen it work successfully. It keeps people in their homes.
If you are interested in this option, there is a federally insured home equity reverse mortgage available in Western Virginia. It is administered by Tidewater First Financial Group Inc. of Virginia Beach. You can request a brochure by calling toll-free 1-800-282-4326. You also would receive counseling before reaching a final decision.
Of course, you may not want the burden of a large home in retirement.
Hambrick said there is no right choice between buying a condo and renting. He said you should find the condo and the apartment in which you would be willing to live and then calculate some costs and tax advantages to see which is more favorable.
Remember that costs, particularly rent, will keep rising. And the home you choose is more a matter of lifestyle than it is of money.
Hambrick said many people in your age group rely too heavily on Social Security to support them during retirement. But, he said, the same people have a real nest egg in the appreciated value of their homes, which can be sold tax-free on a gain of up to $125,000 after the age of 55.
Disabled man fears new talent will end benefits
Q: I'm on total disability. I cannot work a job physically, but I can use my hands. I do drawings, and they have come out better than I expected. Is there any way I can market these drawings on T-shirts without losing my disability? This is just a talent I've picked up.
A: You should consider that you would endanger your disability benefits if you do anything to suggest that you can perform any type of work to earn an income.
James Harris, assistant manager of the Social Security office in Roanoke, said you would have to check your status by calling the toll-free Social Security line at 1-800-772-1213.
He said it is possible to arrange a nine-month trial period to determine whether you have capacity to perform work in an occupation, including the work you're suggesting. You would receive benefits during this trial period. Social Security might rule that you had recovered sufficiently to begin earning your own income in a new occupation.
by CNB