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Moving to California Means It's Time to Review Estate Planning Documents

August 27, 2000|LIZ PULLIAM WESTON

Q. My wife and I moved from Florida to Southern California last year. While in Florida we had many legal documents drawn up by an estate planning attorney, including wills, revocable trusts, living wills and powers of attorney for health and for finances. Are these documents legal in California, or do we have to go through the whole procedure again?

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A. Welcome to California and, yes, you should have your documents checked out by an attorney here. Any time you move across state lines, it's wise to have your estate plans reviewed. This is especially true when you move from a common law state to a community property state, or vice versa.

Community property laws have profound effects on how assets can be owned, divided, bequeathed and taxed, so it pays to make sure your documents are in keeping with those laws. (Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaskans can have community property treatment of assets with a prior written agreement.)

You can find a certified specialist in estate planning by calling your local bar association or by visiting http://www.calbar.org.

May your retirement in the Golden State be a long and happy one.

Banking Best Done Face to Face

Q. I have found, when dealing with banks, that it is most effective to go to a branch and talk with people face-to-face when one has a dispute. One can merely look as if one might make a scene, and quickly get the person with the authority to solve problems. Yet I now see ads for "branchless banks" that offer some of the highest certificate of deposit rates available. It seems a customer would be forced to try to resolve any disputes by phone. Why, then, should I want to do business on the Web?

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A. No reason, if you're happy with the interest rates and service you get from bricks-and-mortar banks and other businesses. Life is about choices, after all.

Many who prefer doing business on the Internet find that the occasional hassles are more than offset by the convenience and the good deals. We who would rather chew glass than shop are particularly enamored of services that deliver groceries and other goodies to our doors. Internet-only banks generally have lower fees and pay higher interest rates on savings, which is why some people choose to do their banking online.

If you like face-to-face interaction, though, and the joy of causing a scene in a public place, then the price you pay may be a few tenths of a percentage point on your money.

With IRAs, 'Earned' Is the Word

Q. I take considerable exception to your remarks on newborns having Roth IRAs. Be assured that there are a great many minors with income from trusts. These minors aren't movie stars or celebrities--many have inherited from grandparents or others. If you pay income tax on it, it is income.

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A. Ah, yes, but it is not earned income, is it? And that makes all the difference.

To fund a traditional or Roth IRA, a person must have earned income or, in tax parlance, "taxable compensation." Taxable compensation comes from wages, salaries, commissions, bonuses and tips. It does not come from dividends, capital gains or trust distributions. (Interestingly, taxable alimony counts as compensation, but your newborn is unlikely to get that, either.)

You can save money for your newborn in other ways and, once she has her first job, you can match any earnings she has with a contribution of up to $2,000 annually to a Roth IRA.

Debunking a Credit Card Myth

Q. Just a short comment on the credit card game. Most consumers think they are putting one over on the credit card issuer by paying their bill in full each month, thereby getting free use of the money for a month but paying no interest. This analysis is only partially true. Merchants pay transaction fees every time a customer uses a credit card. I am on the board of directors of a medium-size credit union that issues cards, and we find that after deducting bad debts and our cost of money, we get more income from the transaction fees than we do from interest. Given these facts, the recent move of some banks to impose a fee on those who pay their bills in full appears strange.

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A. You make an excellent point. I can't imagine why anyone would stay with a credit card issuer that imposed such a fee. There are plenty of competitors that would be happy for the business, and who don't try to penalize customers for being prudent by paying their bills in full each month.

If you're looking for card options, check out Bankrate.com at http://www.bankrate.com or CardWeb at http://www.cardweb.com.

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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit http://www.latimes.com/moneytalk.

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