Money Management Q&As

July 26, 2002

How to guard against a will contest, Why a larger mortgage carries a higher interest rate, If a gift to charity is worth more than you paid, Should you trade stocks when the market's closed? Transferring IRA funds to your pension plan

 

Money Management

Jump to:Choose article section...How to guard against a will contest Why a larger mortgage carries a higher interest rate If a gift to charity is worth more than you paid Transferring IRA funds to your pension plan Should you trade stocks when the market's closed?

How to guard against a will contest

Q My married daughter is financially secure and won't need any of my money when I'm gone. But I'm afraid her husband might influence her to contest my will if I leave her out. In that case, could she upset it?

A Perhaps. Some state laws give a child the right to a share of a parent's estate unless the will makes it clear that the child was omitted intentionally. Even if that's not necessary in your state, you'd do well to mention your daughter by name, to forestall a possible claim that you "forgot" her due to mental incompetence.

You don't have to give a reason for disinheriting her or make a token bequest. But if you do decide to leave her some money, you can specify that she'll forfeit the legacy if she contests the will and loses.

Why a larger mortgage carries a higher interest rate

QI talked with my financial adviser about taking out a mortgage to buy a new home, and he told me I'll get a lower interest rate if I don't borrow more than $300,000. Why so?

A That's roughly the limit set by Fannie Mae and Freddie Mac for home loans they'll buy from mortgage lenders. The precise figure is $300,700, up from $275,000 last year. Lenders generally ask for higher interest rates on larger loans, called jumbos, because they're harder to market.

If a gift to charity is worth more than you paid

QSeveral years ago, I bought an antique desk at an estate auction for much less than it was worth. If I donate it to a charity, can I claim a tax deduction for its present fair market value?

A Only if it's reasonable to assume that the charity will use the desk rather than sell it. For instance, if you give the desk to a museum that will display it, you can deduct the full value. But if you donate it to Goodwill or a similar organization, your tax deduction is limited to what you paid.

If you can't find a suitable recipient, you might prefer to sell the desk yourself, pay tax on your long-term capital gain, and donate the balance.

 

Transferring IRA funds to your pension plan

QI want to consolidate my retirement accounts by rolling my IRAs into my practice's pension plan. Is that allowed?

A Yes. Until this year, you could do this only if the rollover involved a "conduit IRA"—that is, one set up solely to hold funds transferred from another pension plan. Starting in 2002, your pension plan can accept any IRA withdrawals that would be taxable if they weren't rolled over—for example, IRA contributions for which you originally claimed a deduction, plus subsequent earnings on them. Special rules apply to IRAs that include nondeductible ("after tax") contributions.

Should you trade stocks when the market's closed?

QI've read that some brokerage firms let customers trade stocks outside of normal exchange hours, but my broker says it's not a good idea. Is he just trying to hang onto my business?

A Maybe, but after-hours trading does present some risks. Because volume is lower during off hours, you may find it more difficult to get a buy or sell order executed at a favorable price, and the price may be more volatile because fewer shares are on the market. Also, you'll be competing with a larger proportion of institutional traders, who likely have greater access to information than you do.

Before trading after-hours, find out if your orders will be handled differently than they would be during regular hours—for instance, whether you can buy "at the market" or must specify a price.

 

Edited by Lawrence Farber,
Contributing Writer

 

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

2002;14:69.