Money Management Q&As

Must you redo a will when you relocate?

I'm moving to a new state. Do I have to rewrite my will?

Maybe not, but it's probably wisest to do so anyway. You could run into trouble if the will isn't "self proved"-meaning it doesn't include an affidavit stating that it was signed by you and your witnesses in front of a notary. Then some courts may not accept the document unless you have your original witnesses sign an oath saying they saw you sign it. So to avoid any possible hassles, review and redraft your will. That's especially smart if you drew it up years ago and haven't looked at it since then, because you may need to make adjustments if marriage, divorce, death, or other events in your family have altered your stated wishes.

My 17-year-old daughter, who lives with us, wants to work part time. Will she have to file a separate tax return or must we include her income on ours? And how much can she earn without endangering our dependency exemption?

You can't report her income on your tax return; that's permitted only when a minor has unearned investment income such as interest, dividends, or capital gains distributions but no earned income. And the amount she earns won't determine whether you can claim her as a dependent. You'll be able to do so because she meets the definition of a "qualifying child"-she's your daughter, presumably a US citizen who lives with you for more than half of the year and doesn't pay for more than half of her own living expenses, and she's younger than 19. You may be able to continue claiming an exemption for her even when she's older-up to age 24-as long as she's a full-time student.

Although your daughter's income doesn't affect the dependency exemption, yours does: You and your spouse can claim a full $3,400 exemption for your daughter only if your joint gross income for 2007 is below $234,600. At higher income levels the exemption amount shrinks.

Using IRA funds for a first home

I'm moving across the country to work for a large multispecialty practice and will need cash for the down payment on a home. Can I withdraw it from my IRA without owing an early withdrawal penalty, even though I'm younger than 59½?

You could pull out up to $10,000 and still avoid the 10 percent penalty for early withdrawal, as long as you qualify as a first-time home buyer. You won't satisfy that definition if you've owned another home within the two years before the date you sign a binding contract to buy your new home (or, if you're building the house, two years before construction on it begins). And within 120 days of receiving the distributed cash you must use it to buy or start building the home, or else you'll owe tax on it at your regular income tax rate plus a 10 percent early withdrawal penalty.

Do you have a money management question that may be stumping other doctors, too? Write: MMQA Editor, Medical Economics, 123 Tice Blvd., Suite 300, Woodcliff Lake, NJ 07677-7664, or send an e-mail to memoney@advanstar.com (please include your regular postal address). Sorry, but we're not able to answer readers individually.