ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, April 22, 1996 TAG: 9604230149
SECTION: MONEY PAGE: A-8 EDITION: METRO
COLUMN: Money Matters
SOURCE: MAG POFF
Q: My wife and I each have an IRA. We each list the other as beneficiary. We are both in our 70s, and we are receiving the minimum payout. We have two children and grandchildren.
What happens to these IRAs should both of us die at the same time? We have wills listing both children as administrators. Would they be required to take these IRAs in cash? What about taxes?
A: Walter C. Jones, a certified public accountant with the Roanoke firm of Budd, Ammen & Co., said your children would not be required to take the balance of the IRA accounts at the time of your death.
Because you have already begun taking the minimum distributions, he said, the remaining interests in the IRAs must be distributed at least as rapidly as under the method being used at the date of death.
Thus, Jones said, the withdrawals could continue at the minimum distribution rate already established. Income taxes would be due on the distributions received from the accounts since the funds have never been taxed.
Reverse mortgages
Q: I got in on the closing portion of a television program about homes that increased so much in value that the people couldn't afford to stay there. It said the Federal Housing Administration backs some companies that will pay you monthly even if you outlive the value of the house as long as it's FHA backed. Is this correct?
A: Reverse mortgages are still hard to find and vary in their terms. But the FHA does back a program that provides you with payments as long as you continue to live in the home.
The amount of the annuity-like payment you receive each month depends on your age at the time you take out the reverse mortgage, the value of your house, current interest rates and the years you're likely to live in your home. The older you are, the greater the value of the home and the lower the interest rate, the higher the monthly payment.
To participate, you must be at least 62 years old and have paid (or nearly paid) off your mortgage.
After you leave the home, it is sold and the lien is repaid from the proceeds. Any surplus value goes to you or your heirs.
The catch to all of this is that the program has expired. Congress is considering renewal of the program - indeed, is likely to renew it - but nobody knows when this might happen.
You can get information about this program, and get your name on the list, from Bank United Mortgage of Virginia Beach, the only statewide reverse mortgage lender in Virginia under the FHA program. The toll-free number is 1-800-282-4326.
Reverse mortgages are expected to catch on with other lenders, however, because the Federal National Mortgage Association (Fannie Mae) is now willing to buy such loans on the secondary market. One of the options under this program will give you equal monthly payments for as long as you occupy the home as your principal residence. You can get a free brochure about that program by calling 1-800-732-6643.
Canceling credit cards
Q: I want to cancel some of my credit cards. In addition to calling the credit-card companies, should I also call the credit-rating services and inform them that I am canceling the cards? I don't want the credit-rating services to think that the credit-card companies deemed me a credit risk and canceled my cards.
A: Ron Ernest, president of the Credit Marketing and Management Association of Western Virginia, said it would be a good idea to write to his agency, but not to call. In the alternative, you could visit the agency at 5240 Valley Park Drive in Roanoke to review your credit report.
It would be a good idea to write to the credit-card companies too, retaining a copy of your letters. This gives you a record of the action you took, while a call gives you no proof that you notified the companies.
Normally, Ernest said, a credit-card company will notify credit-reporting agencies that you have closed the account. The association will say in its report that you have canceled the account, but any unpaid balance will still show up as a debt.
By writing your own letters, however, you will help to keep the record straight. The association will check your letters with the credit-card companies.
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