Keeping Inheritance In Family

Q. I've inherited a small sum of money that I would like to share with two relatives. What are the tax implications? Should I give them the full amount or in $10,000 increments over the next few years, since the IRS allows gifts, tax free, to any person of up to $10,000 annually?

- A.V.,

New York

A. You have several options, says fee-only planner and attorney Gary Schatsky, in New York.

1. Give as much as $10,000 a year without any tax implication.

2. Give an amount over $10,000 now. But if you do, you must fill out a federal estate and gift tax form and file it with your next year's taxes.

Also, any amount above the $10,000 limit would be deducted from your federal unified tax credit, which is the total amount in your lifetime you can give to a non-spouse without federal estate tax.

The unified credit, currently $625,000, rises to $650,000 next year.

Q. Why should anyone buy a load fund when there are excellent no-load funds that are far less costly?

- Name withheld,


A. There are far more load funds than no-load funds. Some load funds may be attractive because they have low initial investment amounts. Many international funds also carry loads.

"Money is better managed in a load fund," says a spokesman for the Franklin Templeton Group, a load group. "Managers know they must have a hands-on policy to keep performance high."

Theoretically, when buying a load fund (that is, a fund with a special charge) "you are paying the sales person for giving you advice," says Lawrence Solomon, an analyst for the No-Load Fund Investor, Irvington-On-Hudson, N.Y.

But the risk is that the "adviser" may be secretly earning a commission for touting certain funds. So, "it's better to pay [an independent] adviser's fee, and then go out and buy a fund that makes the best sense for your needs," Mr. Solomon says.

While both load and no-load categories have many top-performing funds, studies show that no-loads have significantly lower expenses - more money in your pocket.

If you want to buy a load fund, check with your 401(k) retirement account. Loads are often waived as part of your group plan.

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