Money Management Q&As

July 22, 2005

Wills; IRAs; employee education; import rules

Childless? You probably still need a willQ. I'm one of the many adults who still doesn't have a will. Since I'm childless and want my spouse to inherit everything I have, why would I need one?

A. You might not, if your spouse is the beneficiary of your insurance or retirement accounts and the joint owner of all your other assets. But anything else you own other than insurance or retirement accounts could be subject to probate, and chances are your state's intestacy law would conflict with your wishes. In many cases, only half the probate assets, above a specified minimum, will go to your surviving spouse. Your parents or "next of kin" (closest blood relatives) would share in the rest. New Jersey, for example, awards the first $50,000 to the spouse and half the remainder to the parents.

Boosting contributions to salary-deferral plansQ. I teach at a medical school part time and participate in a 403(b) tax-sheltered annuity plan, as well as in a 401(k) through my practice. I'll be turning 50 later this year. How much of my salary can I contribute for 2005?

Using IRA funds to restore pension benefitsQ. When I left my previous employer a few years ago, I received a pension plan distribution and rolled it into an IRA. They want to rehire me and have offered to restore my full plan benefits if I repay the distribution. Assuming I accept, can I use IRA funds for this purpose without owing tax on it?

A. Yes. If you take the "buy-back" money from your IRA, it won't count as a taxable withdrawal because it's going into the plan, not to you as an individual recipient. This is true whether or not the employer puts your repayment into a separate account for you or simply adds it to the plan total. If you decide to use non-IRA money for the buy-back, it will be treated as an after-tax contribution and may reduce the tax you'd owe on a future plan distribution.

Helping employees improve their educationQ. If we pay education expenses for employees who take courses that aren't work-related, must we report the amounts as employee income, and do we owe Social Security and other employment taxes on them?

A. Not if you set up an education assistance program, limit the annual benefit to $5,250 per employee, and exclude courses of a recreational nature, such as yoga classes. The expenses can generally include the cost of books, equipment, fees, supplies, and tuition, but not meals and transportation. If shareholders or high-salaried employees participate, special restrictions apply.

Import restrictions on cultural objectsQ. I'm hoping to acquire some native art works on a trip to Central and South America. Should I be concerned about US Customs restrictions?

A. Definitely, especially if any of the items are pre-Columbian or Spanish colonial. When you return, you'll be asked to show an export permit issued by the country of origin, as well as proof of ownership. Watch out for phony export certificates from sellers. For details of these and photos of restricted cultural artifacts, go to the State Department's cultural property Web site, exchanges.state.gov/culprop.

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@advanstar.com (please include your regular postal address). Sorry, but we're not able to answer readers individually.