Gee, Does Medical Tourism Mean I Can Go To Appleton???

by LAS

I ran across a mention that a hip replacement costs only about $27,000 in Appleton, Wisconsin, while it can cost as much as $126,000 in a major metro area such as Houston, Texas. Why the disparity?

Obviously wide variations in income levels between major metro areas and smaller towns are a big factor. But also the fact that the hospital has to pay much higher property taxes and other expenses in a big city is another major factor. It may also have to buy another lot to build a parking structure on for patients and visitors, while the small town has free street parking.

The small town hospital might also sacrifice some frills, too. 

Joe Schmo and Mrs Schmo and the Inherited IRA

by LAS

Joe Schmo can leave his IRA to your surviving spouse (Mrs Schmo) or child (Johnny Schmo), no problem. But doing it right can avoid a big tax bite. This is according to Jane Bryant Quinn, so if your local finance advisor is at all confused over how to handle this, tell him that.

Mr Joe Schmo has a very fine IRA, but one day he kicked the bucket. Fortunately he designated Mrs Schmo as his beneficiary.

Mrs Schmo has to put this IRA in her name. This is called retitling. With a traditional IRA, she has to leave the money alone until she reaches age 70 and a half, when the law requires her to start making withdrawals. (NOTE: With a Roth IRA, you can keep money you do not need in the IRA for the next generation.)

Mrs Schmo is under 59 and a half, so this is how she should re-title this IRA: “Joe Schmo IRA (deceased MO-DAY-YR) for the benefit of Jane Schmo, beneficiary.”

When Mrs Schmo reaches 59 and a half, she ought to re-title it once more, this time in her own name. This has the advantage of allowing her to let the money accrue value until she need it, or rather when she is required to make withdrawals at age 70 and a half.

Now, let's say that a parent leaves the balance of an IRA to an adult child. The child also has to re-title the IRA. Joe Schmo leaves his IRA to his only child, Johnny Schmo, so Johnny has to re-title it like this: “Joe Schmo IRA (deceased MO-DAY-YR) for the benefit of Johnny Schmo, beneficiary.” (if there are several children, each one should re-title his or her share of the IRA)

Note that inherited 401(k)s can also be similarly retitled as an inherited IRA.

There is a book out there on this specific topic, “Retire Secure! Pay Taxes Later” by James Lange. 

“Payable-on-Death” or Power of Attorney to Avoid Inheritance Taxes?

by LAS

Bereaved parents who added an adult child to their bank accounts have found that the state can tax their own money as an inheritance, if the child dies an untimely death.

Laws in Pennsylvania, Indiana, and Nebraska tax inheritances. Also, Iowa, Kentucky, Maryland and New Jersey tax inheritances but exempt parents from being assessed this tax. (NOTE: When I lived in Wisconsin I had to pay inheritance tax to the state as well as the federal government; I have no idea why Wisconsin is not on this list.)

So keep this in mind if you live in those states and you wish to have an adult child handle bills for your funeral and other debts without waiting for probate to be settled. We have found that most banks will allow you to put the name of an adult child on your account under the terms of “payable on death” – which would have avoided the cases of parents paying taxes on their own money because of an untimely death of the designated child.