Indiana, PA - Indiana County

SMART MONEY: Timing of inheritance matters little

by on May 18, 2014 1:50 AM

DEAR BRUCE: I am executor for my friend and next-door neighbor’s estate. He is a 94-year-old widower, has no children and is leaving me his house, valued at $200,000.

Would my wife and I have a better tax situation if he were to give the house to me now, rather than leaving it in his will? He’s willing to do that if it will put me in a more favorable tax position. We may consider selling the house or keeping it as a rental property. As a general rule, what would be the best option? — A.J., via email

DEAR A.J.: There should be no taxes on a legacy of as little as $200,000. If he gave it to you now, he would have a $28,000 deduction and, of course, if he lives into the next year, it will be another $28,000.

Either way, I don’t see any advantage in putting the house in your name other than just getting it over and done with. When he passes away, file for probate and pay the modest expenses.

DEAR BRUCE: My husband is 60 years old and it looks like it will take around a year to get his Social Security disability. What are the costs to us if we withdraw? — W.P., via email

DEAR W.P.: I am not at all sure what you are withdrawing from. You mentioned you are on disability, but you didn’t give any further information, such as what reasons you are on disability, how much is it providing and so forth. You should certainly sit down with a Social Security Administration representative and find out exactly where you are and what the consequences would be of any actions taken on your part.

With sketchy information, I am reluctant to give you a firm path, but on balance I think you will find the Supplemental Security Income will be retained until such time as you are approved for regular Social Security.

DEAR BRUCE: I currently have four IRAs and CDs invested with a local bank. They pay next to nothing. I am over 59ᄑ. Do you have any suggestions for reinvesting these? — T.T.

DEAR T.T.: You know this is a serious problem. You’re caught in a squeeze, not of your making and not in your control. The Federal Reserve is still paranoid about inflation and as a result, keeps the interest rate at ridiculously low levels. If you are a borrower, say you need a mortgage or personal loan, that’s a good deal. The flip side is people such as you, who are getting taken advantage of royally.

If you are concerned about bank rates, take a look at what money market funds are paying these days: nothing. Unless you are prepared to get almost no return on your money, you’re forced to take some risk and that means entering the marketplace. I still maintain achieving a decent return is possible if you invest in a variety of solid American companies. You will do far better in the marketplace than you will with any bank, money market and most bonds.



Send questions to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided. The Bruce Williams Radio Show can now be heard 24/7 via iTunes and at www.taeradio.com. It is also available at www.brucewilliams.com.
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