Money Management Q&As
Is there an AMT in your future? A way to put strings on a power of attorney, Points may be unwise when refinancing, Why you shouldn't use an IRA as collateral, Raising your coverage for personal liability, An alternative when a buyer can't qualify for a mortgage, How to check up on a financial adviser,When pension catch-up contributions begin, The deadline for verifying post-Sept. 11 donations, Paying a bill that seems too big, Splitting a lump-sum pension payout in two, Overseas meeting places that get the IRS nod, How to cut the cost of European rail travel, What a home add-on is worth on resale
Money Management
Is there an AMT in your future?
Q I've read that the tax breaks enacted last year could increase my chances of getting hit by the Alternative Minimum Tax. Why is that, and what can I do to soften the blow?
A The law gradually reduces regular tax rates, but not AMT rates. As a result, it's becoming more likely that your tax figured under AMT rules will exceed the tax figured the regular way, in which case you'll owe the larger amount.
The AMT rules restrict some of the deductions you could otherwise claim. For example, you can't deduct state and local tax payments or most miscellaneous expenses, and medical deductions will be trimmed. Interest on home equity loans is also disallowed, unless you use the money for home improvements. So if you expect to come under AMT this year, you may want to push off such expenses to 2003, in the hope that you'll escape the AMT next year. In contrast, it may be desirable to accelerate certain types of income. Before you take action, have your accountant calculate your projected tax both ways.
A way to put strings on a power of attorney
QI'd like someone to have power of attorney over my affairs in case I become incapable of handling them, but I don't want it exercised while I'm still hale and hearty. What are my options?
A You can specify that the power will go into effect only if a doctor certifies that you're unable to manage for yourself. This is called a "springing" power. Or you can prepare a "durable" power of attorneyone that's good regardless of your physical or mental conditionbut give the original document to a third party for safekeeping, with instructions to turn it over to the person named in it only under specified circumstances.
Points may be unwise when refinancing
QBy paying a couple of points up front when I bought my home some years ago, I was able to get a lower interest rate on the mortgage and came out ahead. Now that I'm planning to refinance, I've been advised to go for a no-points loan. Why change tactics?
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