ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, November 4, 1996 TAG: 9611060010
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: MONEY MATTERS
SOURCE: MAG POFF
Q: I have a 401(k) plan where I used to work. I'm retired and getting near the mandatory withdrawal age.
I was wondering if it's more advantageous taxwise to withdraw the money in a lump sum and use the five- or 10-year forward averaging or to withdraw it in yearly annuities. I don't need all the money at one time.
A: You are going to have to put a pencil to your problem. And you should probably have the assistance of a certified public accountant or a certified financial planner in making the complex calculations leading to this important decision. Everyone who is retiring or approaching the mandatory withdrawal age of 701/2 must determine the best course if they have a retirement plan.
"There is no rule-of-thumb answer," said Fulton Galer, a certified public accountant and tax specialist with McLeod & Co. in Roanoke.
He said the best choice depends on each person's age (yours presumably is at or near 69), marital status, tax bracket and account balance. You have to calculate both options in light of your own situation to determine which is the most favorable for you.
In general, Galer said, many people find it is best to pull the money out of the account and pay the taxes based on forward averaging if they are in the very high or very low tax brackets. But he warned this is not a hard-and-fast rule for everyone.
When you do the calculations, Galer added, you must include the value of keeping the bulk of your money in a tax-deferred account while you make minimum withdrawals. If you take all the money out of the account, pay your taxes and put your money in another investment, you will have to pay taxes on the earnings.
Determining value
Q: I found two documents in my father's things, and I don't know if they have any value.
One is Southwest Virginia Building and Loan Association Inc. Class B installment shares. It is a certificate showing 10 shares at par value of $100 a share.
The other is a deed made in December 1941 on property I didn't know my dad owned. I didn't find any tax receipts being paid. How would I check to see if it's still his or it it's been sold?
A: The building and loan association is the first predecessor of Southwest Virginia Savings Bank of Roanoke.
The president, Bill Rakes, said charter members of the association each paid $5 in return for the right to deposit $100 in a savings account. This requirement subsequently was dropped, Rakes said, but those who had certificates earned a quarter-point higher interest than other members in order to pay off the investment. This lasted for 11 years until the association became insured by a federal agency, which insisted that all members be treated alike.
Rakes said some certificates were paid off and marked satisfied on the books of the association, now the bank, but some are still outstanding. The bank still has a reserve for paying them off.
You should take your certificate to the headquarters office of Southwest Virginia Savings Bank in downtown Roanoke. Rakes said records have been maintained about the status of each certificate by its number. But he said the certificate would be worth very little, if any, money.
As for the real estate, you should visit the office of the clerk of the circuit court in the locality where the property is. The staff will help you trace the ownership of this property through the deed books.
Gift paperwork
Q: In the case of a husband and wife, I believe it is OK for each to give each member of the family $10,000 a year, and the receiver does not have to pay any taxes. Are there any forms that have to be filled out to show these gifts.
A: You do not have to take any action or file any forms as long as you do not give more than $10,000 a year to any single person.
If the gift exceeds $10,000 a year, it is up to the donor to obtain and fill out the gift tax form. The excess amount of the gift then counts against the tax exemption for the donor's estate at the time of his or her death. The donor could, in the alternative, pay gift taxes at the time of the gift, but this would be unusual. No action is ever required by the recipient.
LENGTH: Medium: 81 linesby CNB