Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, November 20, 1995 TAG: 9511220017
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Medium
Should I consider what their value will be at maturity (in this case, the year 2015), or should I calculate only their current worth - at present, still under 20 percent of what I expect them to yield? Since these constitute the great majority of my bond holdings, the difference is considerable.
The bonds are rated AAA (and are insured) and, barring unforeseen disaster, I do not plan to sell them before maturity, so perhaps it would make for an overly conservative portfolio to compute the ratio on the basis of their current value.
On the other hand, I am of course computing the value of my stocks (and stock mutual funds) at current prices - and nothing's a sure thing. (For example, the municipality in question has twice called a fraction of the bonds, presumably because the interest rate - a yield of 11.25 percent - is so high.)
Assuming you recommend calculation based on current worth, what's the easiest way to find that out in future years when I recheck my bond to stock ratio? I'd like to think I won't always have the convenience of a recent call to give me the redemption price.
A: Peter Milward, manager of the Roanoke office of J.C. Bradford and Co., said such calculations are always based on the current market value of both stocks and bonds. He said you already appear to recognize that this is the desirable method. You point out, correctly, that you are evaluating the worth of the stocks based on current prices.
It is not easy to obtain a value for all bonds, he said, but the value of any AAA-rated zero coupon municipal bond should be simple to find out. He said the broker who sold you the bonds should provide you with this service. Or you could contact any full-service (not discount) broker who "will be delighted to give you a quote of current market value."
One answer might be to keep your holdings in an account with your broker instead of holding on to the stocks and bonds. In such a case, your monthly statement should give a current value for every stock and bond in your portfolio. Having an account also makes it easier to buy and sell. If you deal with a full service broker, he or she should be able to make a stock-to-bond ratio comparison for you.
Figuring estate tax
Q: I am 74 with no spouse and no children.
I figure that if I die before Jan. 1, 1996, my total estate would be $620,000. What would the estate tax be on this amount? Would it be levied on the entire amount or only on a part of it?
A: The government does things in a convoluted manner.
Mike Bell, a certified public accountant with the Roanoke firm of Brown, Edwards & Co., said the initial tax rate is 37 percent on estates up to $750,000. The tax code provides for taxation of the entire amount, but then gives a credit of $92,800, the amount of tax that would be charged on an estate of $600,000. Everyone gets a credit up to that amount.
The net effect is that your estate would pay a tax of 37 percent on the $20,000 excess if you are worth $620,000. Remember that you may be underestimating the value of your estate after you are gone.
Bell said the top estate-tax rate, 55 percent, applies to estates over $3 million. Those estates would also get the credit for the $600,000.
If you have no spouse and no children, you should have a will directing how you want your assets distributed after your death. Otherwise the Code of Virginia will control the inheritance. You should see a lawyer who is a specialist in the subject of wills and estates. Perhaps you can engage in some estate planning prior to reduce the taxes.
Here's hoping that you live much longer than you project and that your assets continue to grow, even if it does cause tax problems.
Obtaining insurance information
Q: My husband and I are in our 80s, and we are trying to update our assets. Many years ago we purchased a lot of small insurance policies from different companies. Each policy was for $2,000 or $2,500, and all together they probably don't amount to $50,000.
All of the agents are gone, and we do not have addresses for all of the companies. Who can I call to find out if these companies are still in business and if the policies are still in force?
A: Call the Virginia Corporation Commission hot line to find out the current addresses for the companies. The toll-free number is 1-800-552-7945. The people who answer the phone can tell you if the companies are still doing business in Virginia and how you can reach them.
You will have to contact each company separately to determine the status of your policy. Your example illustrates that most people have a need for overall planning for a life insurance program. A family should have a life insurance program based on individual circumstances and not buy haphazardly as agents call.
by CNB