ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, October 14, 1996 TAG: 9610150145
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: MONEY MATTERS
SOURCE: MAG POFF
Q: I believe that I might qualify to share in a settlement by Prudential Insurance Co. in a suit that alleged "churning" by company agents. I, too, was convinced by a Prudential agent to use the proceeds from an existing cash policy in order to buy a more expensive policy. How can I determine if I qualify for compensation?
A: You can call Prudential Insurance Co. of Newark, N.J., at a special toll-free number set up to answer questions about the settlement. The number is (800) 837-3645. You should have all relevant information handy when you make the call, such as the policy number and the exact name of the insured. But a company spokeswoman urged you to call even if your information is limited.
Taxing lawsuit awards
Q: Regarding a lawsuit, are punitive and compensatory awards taxable, and under what circumstances?
A: Compensatory awards are taxable because they replace your costs and lost wages, money on which you would be taxed in any case. Punitive damages, on the other hand, are generally not taxable.
Putting a second child through college
Q: For the next two years, starting in the fall of 1997, we will have two children in college. I am able to pay for one child in college out of my earnings now.
I was wondering what we should do about financing the second child for those two years. We were wondering about a home equity loan or if we should sell our stock of 470 shares of Norfolk Southern. We owe about $57,000 on our house, and we have about 11 more years left on our 15-year mortgage. Our house could be sold for about $120,000.
A: Andrea Wise, who works in the student aid office at Virginia Tech, said you should make an application for financial assistance as soon as possible at the college of your child's choice. She said some type of financial aid may be available, especially when you have two children attending college. Some of the available aid is means-tested, but other grants are not.
She said the equity in your home would not be a factor at all in your application for financial assistance. The stock, on the other hand, would be counted as an asset that could be devoted to education. This suggests that you might consider selling the stock to pay for educational costs.
But you should not strip yourself entirely of easily-accessible cash investments in order to pay for a child's education. You should at least maintain a fund equal to six months of income so that you can deal with any emergency that might arise.
If you do sell the stock, you might apply for a home equity line as a backup, in case of an emergency. Find a home equity line that does not require withdrawing money when you open the line.
The two sources would each net you about $40,000 in cash. Norfolk Southern recently traded at just above $90 a share. And most banks would lend you 80 percent of the value of the home, less your current mortgage.
You should resolve to pay back this money to yourselves as soon as you are able to do so.
Boning up on financial matters
Q: I am a young man with an underdeveloped awareness of financial dealings, such as mortgages, inflation, stocks, bonds, interest rates, credit, etc. I wish to improve my understanding in these matters.
Going to school for this purpose is not possible at this time, so what I'm looking for is a way to educate myself on the basics of these subjects in my spare time. Do you have any recommendations or suggestions?
A: Schools usually don't teach these subjects unless you are seeking a college degree in economics or finance. You will find many seminars and other programs around town, but these are often sponsored by companies whose main purpose is to sell you something that carries a high commission for them.
You should read financial newspapers and magazines in your spare time.
The Wall Street Journal, for instance, prints a lot of financial news and has a special section dealing with personal finances and investing. Money magazine contains a lot of readable material on all of the subjects you mentioned. Those two publications would give you a good background in your spare time. Sample these and other publications at your public library.
LENGTH: Medium: 81 linesby CNB