Big inheritance brings tax query

DEAR BRUCE: I have been named executor and beneficiary to my cousin’s estate. There is a large amount of money involved, approximately $500,000. Do I need to claim on my federal-income-tax return the net money after all estate-inheritance taxes are paid? I’ve been told that I only have to claim ‘earned income’ on my return. I am retired and on Social Security. ‘ Reader in Pennsylvania

DEAR READER: Unless your cousin has already claimed against his lifetime exemption, there will be no federal income tax because there is $1 million exemption. The estate may have to pay some money to the Commonwealth of Pennsylvania, but you’ll have no tax responsibility as an heir. All taxes in estate matters are to be paid by the estate before the money is distributed. Once the money is in your account, any interest or other income that it earns is taxed at whatever the marginal rate. If you collected a fee as executor, you would be taxed ‘ but in this instance, that would be foolish.

DEAR BRUCE: I have a credit card that I’ve never used and don’t intend to. Many friends say that I should just keep it, but I don’t want to have an unused credit card in my possession. What procedures should I take to cancel this card and have it removed from my credit report? ‘ P.R., via e-mail

DEAR P.R.: It’s amazing how many of these letters I get. Write a note to the credit-card company, indicating that you are canceling your account, and cut your card in half. The company will be happy to accommodate you since there is no profit unless you are paying an annual fee. Of course, I am assuming that you have other credit cards. If this is your only card, I would keep it for emergencies; otherwise, proceed as I have outlined.

DEAR READERS: I’m amazed at the amount of inquiries I get from folks who have gone through this life and have no one to leave their worldly goods to at the end. In some cases, substantial assets are involved. Rather than try to answer each letter individually, I have framed a general answer that I hope will be of some help to those people who are struggling with the problem of what to do with their assets when they leave.

Many of you have accumulated a fair amount of wealth and yet, unhappily, there is no one you choose to leave it to. In general, if your assets are substantial, many charities will be happy to deal with this problem and help you set up the appropriate trusts or legacies so that some good will come of your accumulated wealth.

Perhaps you feel that part of your success came as a result of some educational experience. Why not consider endowing a scholarship so that each year some youngster benefits from your generosity? Perhaps you were treated at a medical institution and as a consequence enjoyed a long life. It’s unlikely there is a hospital that could not use an endowment of some kind.

There is almost an unending list of charities that are constantly trying to raise money ‘ to cure a disease, establish a halfway house, etc. All of these should at least get your attention. In every case, the staff at these organizations can put your affairs in a proper order. You also should know that if you have a change of heart, you are under no obligation to continue these requests and you have every right to change them.

DEAR BRUCE: I know your feelings on time-shares. Our time-share issued a special maintenance assessment, owing to the 40 percent of members who have neglected to pay any of their fees. The promoters claim they have been ‘robbing Peter to pay Paul’ and now need to make a special assessment. I feel this is illegal, and they should demand the money from the delinquent members. I have paid my fees on time. I will pay this special assessment under protest to avoid a 30-percent collection fee. If I am wrong, please comment. ‘ Reader in Georgia

DEAR READER: It’s been a while since we discussed time-shares. I feel they are a bad deal and to be avoided. Obviously, a great many people who purchased time-shares in your unit feel as I do and are simply not paying their fees. It’s not a simple matter to collect from them, either.

While many large companies have entered this enterprise and given it more legitimacy, it is still my contention that time-shares are a poor investment. I suspect you could prove this by writing to any of those 40 percent of unpaid folks and tell them you’ll give them a dime on their dollar for their time-share. Your mailbox would be swamped.