How to Claim Ex-Spouse’s Benefits

Q :I am 77 and was divorced in 1979 after 40 years of marriage. How do I go about applying for benefits on my ex-husband’s account? - D.R.F .

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A: A divorced person is entitled to receive Social Security benefits accumulated by his or her ex-spouse if they had been married at least 10 years and the ex-spouse is already receiving benefits.

(If that spouse is not yet receiving benefits, the couple must have been divorced for at least two years and the working spouse must be at least 62.)

If your ex-spouse is alive, you may start collecting benefits at 62, but the benefits will be just 37.5% of the wage earner’s benefits.

If you wait until age 65 to begin collecting, the payment is 50% of the wage earner’s benefits. If your former spouse is dead, you may start collecting at age 60, but your benefits will be just 71.5% of what the wage earner would have been entitled to receive. If you wait until age 65, you can receive 100% of what your ex-spouse would have received.

If you are disabled, you may start collecting benefits at age 50 if your former spouse is dead. If your former spouse is still alive and you are disabled, 62 is the minimum age at which you may begin claiming benefits.

You may apply for benefits by mail, telephone or in person at your local Social Security Administration office. To apply by phone, call the nationwide Social Security number: (800) 772-1213.

No matter what method of application you choose, be sure to ask for assistance in applying for “divorced spouse benefits.” Also, be prepared to present a marriage certificate, divorce decree, proof of age, proof of death of the former spouse (if applicable) and both your Social Security number and that of your ex-spouse.

For more information about ex-spouse benefits, order the Social Security Administration’s pamphlet No. 05-10084, “Survivor’s Benefits” by calling (800) 772-1213.

New Yield Schedules for Savings Bonds

Q: I purchased some EE Savings Bonds in February, 1993. The following month, the government lowered the guaranteed interest rate paid on bonds held a minimum of five years, from 6% to 4%. Once I have held my bonds for five years, what is the guaranteed rate I am entitled to receive?-- J.F.R .

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A: You are entitled to receive the 6% guaranteed minimum rate because that was the rate in effect at the time you purchased your bonds. Bonds purchased before March 1, 1993, and held at least five years earn at least 6%; bonds purchased after that date and held at least five years earn a guaranteed minimum of 4%.

You should also know that bonds held at least five years can yield more than the guaranteed level; they pay either the guaranteed minimum or 85% of the average rate paid by Treasury notes with five years left to maturity, whichever is higher.

Interest Deductible Only on Recorded Lien

Q: My father and I own the house where I live. He recently paid off the mortgage and I now owe him half that amount. I expect to repay him next year when the house is sold.

Meanwhile, I am paying him $530 a month, the agreed-upon interest on my outstanding loan balance. May I deduct this interest from income on my tax returns?-- N.K .

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A: Your ability to deduct your payment to your father depends entirely on two key factors: how the note is secured and whether it was officially recorded. For the interest on your debt to be deductible, your note must be secured by your interest in the house.

In other words, you must have signed a trust deed. Further, that deed must have been recorded in your county recorder’s office. If these two conditions are not met, the government does not consider the interest you are paying to be true mortgage interest, which is deductible, but merely personal or consumer debt interest, which is not deductible.

Ordinary Income Tax Due on IRA Yields

Q: I am 68. One of my individual retirement accounts contains $10,000 that is invested in a limited liability company investing in oil.

Do I have to reinvest any of the money generated by that account back into the IRA, or may I spend it as I wish and pay taxes on it?-- T.E .

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A: Taxpayers older than 59 1/2 are entitled to make withdrawals from their IRAs without owing the 10% federal government penalty or the 2.5% California penalty. The only proviso is that they pay ordinary income taxes on any withdrawals.

Since you are over the minimum age, you may spend the dividends generated by the oil investment and pay Uncle Sam whatever ordinary income tax you owe on the proceeds.

Bank Has Own Rules on CD Withdrawals

Q: My wife and I are both over 65. We invested an IRA in a bank certificate of deposit. The bank says we can withdraw any interest the CD generates, but it will charge us a penalty if we withdraw any part of the principal before the maturity date. I thought an IRA could be freely disbursed once the holder turned 59 1/2. Am I correct?-- J.R.C .

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A: You have confused your penalties. Taxpayers older than 59 1/2 are not subject to government early-withdrawal penalties, but they are still subject to penalties imposed by banks and other investment programs.

The penalty you were told about is imposed by the bank to discourage savers from withdrawing funds from term certificate of deposit accounts; it has nothing to do with your age or the government.

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Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053

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