Money Management

When a patient's parents can claim medical travel costs

QI believe it would be helpful for the parents of a child with a chronic illness to attend a conference where professional specialists and patients' relatives discuss care and practical matters connected with the disease. If a family travels to such a seminar on my recommendation, can the parents claim a medical deduction for their expenses?

A The IRS has recently ruled that transportation costs and registration fees are deductible, if the main purpose of the trip is to obtain medical and other information essential for a dependent's care. Social or recreational activities outside the conference must be clearly secondary.

Meal and lodging costs paid while attending the conference don't count as medical expenses; they'd be deductible only if the patient actually received a physician's care in a medical facility at the conference site. Total deductible expenses must exceed 7.5 percent of adjusted gross income.

Why a joint account's convenience may turn out to be too costly

QMy 70-year-old mother wants to put $50,000 into a joint account with me, so that I can take on the chore of paying her bills. Would I owe gift tax on some of that money?

A No. The donor, not the recipient, has to pay any gift tax due, but that's no problem if your mother's gifts don't total more than her lifetime credit ($675,000 if she dies this year). You could have a problem, though, if she outlives you. Under federal law, all the funds in the joint account would be taxable as part of your estate, unless your mother could prove that she was the sole contributor, or what portion of the money she contributed. State laws vary in this situation, but it's possible that your mother would have to pay an inheritance tax on her own money.

To be on the safe side, have your mother keep the account in her name alone and give you a power of attorney over it for the purpose of paying her bills. And don't add any of your own cash to the account.

Scary move: building your own home

QWe've heard all the horror stories about building a home, so we're going to have an architect design and supervise construction of ours, rather than depend on a builder. What precautions should we take?

A To help you evaluate an architect, visit some of the houses he has designed and ask the owners these questions: How near did the final cost come to the original estimate? Was the work finished on schedule? Did the architect help choose the contractors and keep close tabs on them? What problems did the owners experience after moving in?

Before signing an agreement, show it to a lawyer who's experienced in negotiating with architects and contractors and familiar with local building codes. The contract should contain a mandatory arbitration clause and allow you to base any complaint on the findings of an independent engineer or architect, rather than a building inspector.

Postponing pension benefits if you continue working

Q I hear that the pension law lets plan participants postpone mandatory distributions as long as they keep working. Can you fill in the details?

A Normally, withdrawals must start after age 70 1/2, but the law suspends that requirement until an employee retires; he or she has until April 1 of the year following retirement to make the first withdrawal. The law also provides that the employee's pension must be increased to reflect the value of the delayed benefits, if the plan is the defined-benefit type.

But the option to hold off taking benefits isn't available to an employee who owns more than 5 percent of the business.

Edited by Lawrence Farber,
Senior Editor

Do you have a money management question that may be stumping other doctors, too? Write: MMQA Editor, Medical Economics magazine, 5 Paragon Drive, Montvale, NJ 07645-1742, or send an e-mail to memoney@medec.com (please include your regular postal address). Sorry, but we're not able to answer readers individually.

 

Lawrence Farber. Money Management. Medical Economics 2001;2:117.