Money Management Q&As

Leaving a Roth IRA in trust for a child

Q:My will sets up a trust for my grandchild. If I name the trust as beneficiary of a Roth IRA I established in 1998, will my grandchild have to pay income tax on distributions from it?

A: No. However, the trustee must start making annual distributions from the IRA on behalf of the child no later than the end of the year following the year of your death. The required minimum withdrawal is based on the child's life expectancy. A larger, tax-free withdrawal can be made in any given year, but the excess can't be used to reduce the required minimum in later years.

Test for mold when buying a home?

Q:The real estate agent who helped us find a new home suggests that we have it tested for mold, which is much in the news these days. Is that desirable?

A: Unfortunately, it's hard to judge what level of mold can cause problems, and the testing procedure is costly because it requires special equipment and technical expertise. Both outdoor and indoor air samples must be taken and compared. (A higher spore level inside implies that mold is growing in the house.) You'd do well to consult the local health department first.

If you're dealing with a distant bank

Q:Some banks outside my area send me ads offering higher deposit rates and less expensive services than I can get locally. How can I be sure my money would be safe with them?

A: Before you do business with a distant bank, be sure you get all the information you need in order to contact it by mail, phone, and online for customer assistance. Also be aware that scammers have been known to use the Federal Deposit Insurance Corp. name or logo illegally. So even if you see the official logo or the words "Member FDIC" or "FDIC-insured" on the bank's ad, check the agency's database at www3.fdic.gov/idaspto be sure your funds will be as safe as advertised.

Bear in mind that some banks operate affiliates and Internet sites under a different "trade" name than the company's "legal" name. The FDIC database uses only the legal name. Unless the affiliate is a separately chartered subsidiary, your deposits there will be combined with any at the parent for insurance purposes, even if the names of the two banks are different.

Take care if you go for fast Internet service

Q:I'm thinking of signing up for a fast broadband connection to the Internet at home. Could this make the computer vulnerable to hackers?

A: Yes, unless you take adequate precautions. With broadband service via DSL or cable, a hacker can obtain your Internet Protocol address and repeatedly rifle or contaminate files whenever your computer is turned on. (With a modem dial-up connection, the IP address changes every time you log on to the Web.) Antivirus software can help counter the threat, but you might also want to install a "firewall" that blocks unauthorized communications. And safeguard your passwords—use hard-to-guess combinations, and never provide them online.

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, 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 Q&As.

Medical Economics

May 23, 2003;80:97.