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DIVORCED TO GET STATE AID
Hi,
I live in Ohio. Several years ago, due to medical problems and no insurance, my husband and I divorced. That way I could get aid from the state.
Well, I didn't get all my
medical bills covered and have quite a large debt from unpaid bills. My ex now has a really good job and medical insurance. Our question is, if we remarry will he become responsible for debt I incurred while we were
divorced? Please respond via my email address if possible, thanks for your time.
[Unsigned]
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Dear Unsigned,
Your question raises many legal and tactical issues.
Employing legal mechanisms (such as divorce) to circumvent laws is not uncommon. Sometimes it works; sometimes it backfires.
A major company is
currently under close scrutiny for engaging sub-contractors that hired illegal aliens. According to TV reports, the state will try to show that the major company knew about the illegal aliens and was, in effect,
complicit.
There is nothing wrong with hiring sub-contractors. There is a lot wrong with hiring sub-contractors that you know are engaging in illegal practices.
Uncle Jim's experience base indicates
that legal mechanisms can often be used to accomplish illegal ends. However, if the cumulative result is illegal, the legal mechanisms will not excuse illegal intent.
Did you consider what would happen to
your estate if you or your husband died during this divorce? Did you write a will for this special occasion, or just hope for the best? Did you consider the impact on pensions, Social Security, jointly held
property?
Your request for response via E-mail leaves much to question. This is a public forum! To the best of my knowledge, if ANYONE encourages illegal conduct publicly or privately, THEY may
face legal consequences. Do not ask or expect others to become part of your tactical divorce that may have unforeseen consequences.
Please think before you act. Your divorce, legitimate or fraudulent,
didn't work as well as you dreamed. Learn from your miscalculation.
Get yourself a good lawyer. Only your personal attorney should advise you on the legal aspects of a second legal marriage following a
tactical divorce.
Everybody's Uncle
VOLUNTARY AUTO REPOSSESSION
Everybody's Uncle,
I bought a Chrysler PT Cruiser at the beginning of this year something that I have wanted to have for a long time. I went and bought it and am now in a
financial downfall. I have been wondering how I can go about getting my car voluntarily repossessed? If you can help me gather this information I would greatly thank You.
Sincerely,
Jennifer Truswell
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Dear Jennifer,
Before you opt for voluntary auto repossession, be sure you understand the process.
Turning in the car might not relieve you of your financial responsibility.
Voluntary repossession, unless you totally understand the fine points, should have the overview of an attorney.
Let's assume you owe $20,000 on the subject vehicle and allow
repossession. The lien holder, balancing ethics against his brother-in-law, might sell the car at a price lower than $20,000. Usage, wear, mileage, damage, storage concerns, insurance, his brother-in-law and other
things might result in a sale price lower than the amount you owe. Let's say $15,000. You still owe the $5000 difference. Now you owe money for a car you no longer own and are in need of transportation.
Repossession shows poorly on your credit rating.
Consider other possibilities.
Check several sources on the Internet and in publications that estimate
the wholesale/retail value of your car. You may be able to sell the vehicle privately and be much better off.
Cars are depreciating assets. The worst depreciation usually occurs on
the day of the purchase and in the year that follows. If you bought the car with little or no money down, you may have negative equity (you owe more than the car is worth). If you made a substantial down payment,
the car might be worth more than you owe or allow you to sell and "break even."
Refinancing, if possible, might reduce monthly payments.
Working extra hours or part-time on the weekend can add income.
Sell other assets.
Draw from an IRA or 401(k). Taking a 10% penalty is probably the lesser of two evils.
If your financial difficulties are curable over the short run and you have room on a credit card or access to other funding, look for an alternative. Avoid repossession, there are too many negatives.
Everybody's Uncle
UNEMPLOYED AND FACING EVICTION
(Unedited)
i am 19 and unemployed and i live with my parents and they are getting evicted is there any program that i can get quickly to help with rent money i
have till the 17 of november
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[Jimism: There are two elements in communications, substance and style.]
Dear Niece,
You could apply to your local welfare office, approach a local church or
charity and make your best case. You can take the landlord to court and fight the eviction. Courts don't like to put people on the street and often throw the burden of housing back to the owner.
That responds to the "substance" of your inquiry. The style provides far more information and allows for many reasonable conclusions.
A. Neither your parents nor you nor the combination of all three are earning enough to pay the rent.
B. Eviction usually comes after months, sometimes years of
confrontation, but you waited until only a couple of weeks to address the problem.
C. You believe or hope that someone will come to your rescue.
D. You my niece, at 19, show poor writing skills. Your unedited inquiry gives little inspiration to perspective employers that require communication skills.
E. I'll bet you know that "I" is capitalized as is the "n" in November. There is no punctuation.
F. This says LAZY!
There is a program that can help. Sit down with your parents and change your collective mindset. No one owes you anything. No employer wants
"lazy." Unless you have marketable skills, no one will hire you. A marketable skill is as simple as showing up and doing a day's work. "Program" your mindset.
[Jimism on kid think: If I sit here long enough something good is bound to happen.]
Apparently your family circle accepts this self-destructive, childish posture as a viable formula for living.
All three of you should get out and find some kind of employment. Supermarkets, large retailers, government agencies and the Help Wanted section of the newspapers are good starting points. Three people
working, even at the minimum wage can support a modest household.
Go do it!
Everybody's Uncle
DOES DISABILITY CLEAR BAD CREDIT?
Everybody's Uncle,
I have bad credit because I became disabled and wasn't able to pay my credit
card bills, but before my credit was excellent. I receive SSI income which is $552.00 per month. Every penny of that money goes to my guardian who
uses that money to help pay mortgage and utility bills. I don't have money to buy myself food. I get food stamps and Medicaid. I sent proof to the credit
agencies, is it the law that they must close out my account. If so, does this clear my credit history?
(Unsigned)
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Dear Unsigned,
Credit and disability are separate issues. Debt is not forgiven because of disability. Lenders expect and are entitled to repayment and interest. You have bad credit because you failed to meet your obligations.
You and your guardian have to recognize your repayment of debt as part of your expenses along with mortgage and utilities. A budget should be
worked out that considers all your obligations. YOU, not your guardian, should watch every penny. I am less then thrilled that you hand over your monthly check for un-itemized mortgage and utility charges.
Mortgages can be recast; utilities have various payment plans. Consider all possibilities. I am a little suspect of a guardian that takes all your money but leaves you to sink or swim on food stamps. Which parties,
other than yourself, have responsibilities or draw benefits from your mortgage and utilities expenses? Are they paying their fair share?
Your employment opportunities may be limited by your disability, but
work opportunities often exist for those aggressive enough to find them. "Disabled does not mean unable."
Sending proof of your disability to a creditor may help negotiate a special
payment arrangement but unless your credit contract has a disability provision (look carefully, it might) the debt will have to be addressed.
You can negotiate with most credit card issuers. Interest rates can be changed or eliminated. Debt forgiveness is a possibility. Even a small payment every month can show good intention.
Creditors can extend or deny credit, at their pleasure, within some guidelines relating to discrimination. To the best of my knowledge, there is no law that requires creditors to close your account, but why would
they extend additional credit to anyone in default? If your account is closed for non-payment, your history will be tarnished not cleared.
Sorry for your situation,
Everybody's Uncle
STOCK MOM AND SON
Hi,
I have a question for you. My husband and I have been married for 23 years. He is an only child and he and his mother have some joint stocks. Recently she
and I had a falling out. She just informed him that she wants him to sign off the stocks because if something were to happen to him, she would have to
pay the taxes on the stocks. Is this correct, or does she just want his name off, so I get nothing. I live in Pennsylvania. Thanks very much for your time.
Renee
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Dear Renee,
If your husband signs away his interest in jointly held stock his mother would have to pay tax on any taxable event occurring while she has total ownership. Assuming there are no extenuating circumstances, she would
wholly own the stock and become subject to tax when such stock was sold creating a capital gain.
If "something were to happen to him," Mom, in joint tenancy would have
claim to all the stock. If both are authorized traders on a stock portfolio, either could sell the stock and have access to all the funds. Ethics and law may not be bed-partners after a family fallout. Check this
immediately.
As tenants-in-common your husband's estate would be the logical heir.
Best advice:
Consider the emotional and economic impact of challenging the status
quo. If the value of the stock is insignificant, one falling out after 23 years may be repairable and a family breakup avoided. If there are significant assets dividing the stock makes financial sense.
Keep the bigger picture in mind. Will Mom disinherit her son? What impact will befall the family? What about grandchildren? Holidays? Money can be replaced; families can not. Don't win a battle and lose a war.
When time is not critical, decide when the emotions have settled down. Otherwise, think quickly but wisely - and act.
Everybody's Uncle
SPECIAL NEEDS TRUST
[Due to length and complexity, I will respond line by line.]
Hi Uncle Ed-
[Uncle Jim]
Maybe you can help me or know where I could find this info online?
I am in California. I am thinking of purchasing a small mobile home and putting it into a Special Needs Trust (or Supplementary Needs Trust) that I am setting
up for my adult disabled daughter who is on SSI. (I will find an attorney who specializes in this.)
[I suggest an attorney that specializes in Elder/Disabled Care. The
average legal eagle may not have the sharp focus to make the arrangement you require.]
I cannot afford to gift it to the trust. I will get the loan and then lend the
money to the trust to buy it and it will pay me back. I want the trust to rent it to Brandie so that there will be enough money built into the rent to pay for
upkeep, insurance taxes etc. I and some other family members can also contribute to the upkeep.
[You have done your homework well. The mechanism seems feasible.]
The reason for the Special Needs Trust is - of course - so that her GOV.
benefits will not be jeopardized. Unless I, or someone else, dies (and I will someday) there will not be a lot of cash in it for awhile. But having the home in
it will prevent her from having to spend down to $2000 to keep her Gov. beanies if she were to move and sell it.
[These trusts are used specifically for that purpose. Let's hope the
Government does not change the rules.]
She will soon be having a Supported Living Agency helping with her care and
they will be paying half of her rent and utilities - which is the only way she can afford to do this.
[This level of pursuit exceeds my experience base. My applause for your accomplishment.]
This is a permanent Service for her and an alternative to a group home. I have
read (SSI online- CONFUSING INFO!) that a person on SSI CAN rent a home from a Special Needs Trust without having their SSI benefits reduced-where if
they lived there rent free they would lose 1/3 of their cash grant. Is this right?
[Again, your question exceeds my experience. However, there are
arrangements available wherein a third party (a trustworthy potential heir) can own a dwelling but your daughter would derive benefits (rent or occupancy) as a REMAINDERMAN. Such property can be kept separate
from the Special Needs Trust and away from governmental inclusion. This requires an attorney with a very sharp pencil.]
Also do you know if anything that is left in her trust upon her death would go
back to the state for her care? Or could it be left a charity?
[When the "state" provides years of care for an individual it is, in effect,
passing the bill to the taxpayers. Our so-called "Charities" are so scandal- ridden - please think twice. Returning a small residue to the taxpayers
does not offend me. However, there are Will arrangements that can accomplish almost anything, like bequest to a needy family member.]
I also read that as the grantor of the trust and trustee - I would actually own
the assets of the trust even though they would be for her use. Does that mean that they would actually be considered my resources? Is this right?
[Here we walk a technical tightrope. Revocability of a Trust might be a mitigating factor. From the banker's side, trust money is dedicated and
prudently not considered the grantor's resource. Prudence, of course, is subjective.]
The reason I ask is that I am disabled although I am a working disabled person.
I only receive med-I-cal. In CA you can make up to $26K a year if you are permanently disabled and still get med-I-cal coverage. They want us to work. And we do too.
But if they considered that I owned the assets in the trust - since I also own my own little mobile home - then I would have two homes and that is a no-no.
We pay space rent - do not own the land.
[Government decisions are often made by morons. Do not violate the two home rule.]
After studying all the gobbly goop on the SSI sites online- I contacted them
and they said "Bring a draft of the Trust in and we will let you know if it is ok".
Piffle. It cost a lot to have a Trust written up and if this would jeopardize her
benefits - I want to know how and why and I want to know NOW. I would go about the whole thing a bit differently.
[Government Agencies live by their own rules. Submitting a VERY
EXPENSIVE "draft" could bring review by a low-level moron that is programmed to turn down any and all "drafts" that circumvent general policy or contain three syllable words. This can cause legal
entanglements that are too costly too defend.]
I have life insurance (term) and my home and car and that is about it. I know
I can do a family trust with a pour over clause so that it all goes into a SNT for her at my death but I wonder if only the life insurance would go - if the state
would take everything else I have to pay medical bills. We were hit by a drunk driver many years ago and I feel great about finally being able to hold down a
good job. Brandie was not so lucky. I will also have a will, power of attorney and durable power of attorney done for me.
[Ordinarily, life insurance passes directly to the beneficiary. However,
inheritance is not excluded from the beneficiary's assets. Bequeathal to the SNT should keep the "GOVULTURES" at bay.]
All I want to do is to make sure my daughter has a place to live and is taken
care of best I can. Life is short. I am lucky I already had life insurance before I got injured. Funny - I can use $$ from the trust to pay for a trip to Disneyland
for her - but not to pay for extra groceries or to help her pay rent on a nicer place than what she could afford on SSI You can supplement but not Supplant.
[What supplements or supplants exceeds my experience level. You have more knowledge about the system than I do. I post this inquiry to provide fodder for those who can benefit from this exchange.]
Doesn't seem quite right. They make it so hard. And no one can live on what
they give you. I will not be around forever. Being disabled and having a disabled child doesn't happen all that much and there isn't a lot of info on it.
[Your circumstances are regrettable and unusual. Such circumstances are often not considered when programs are originated. Hence, a contest for newcomers to the game.]
They just want everything and that is all there is to it.
[Let's keep prospective here. You are the one asking for benefits and at the same time using sophisticated mechanisms to retain assets.]
Even if I make decent money - I cannot have more than $2000 in the bank as
a resource or CD's or mutual funds but the trust could have and invest those things (taxation rate is high - I know) but I would have a fiduciary that works
with folks like Brandi that works with SNT to help me should there ever actually be any $$ to invest.
[I am inspired by the degree of investigation and information you have
acquired. My sense is that your acquired expertise surpasses most fiduciaries in the common market. I, for one, would not accept authority or responsibility for your assets without our respective attorneys
involved. The exposure would exceed any reasonable expectation of compensation.]
I have talked to the IRS about what is required in filing for a trust and as a
Landlord - the trust after deductions can have up to $3000 in it before it was subject to taxation. Shouldn't be a problem since it will pretty much be rent in - expenses out and nothing much left there for profit.
[You should consider the future sale of such property as a potentially profitable event. As a rental, it is a business property subject to capital gains tax.]
Renting an apartment has not worked for Brandie - she is loud and intrusive -
(but cheerful) and has behavior problems. We have been here 10 years and the people here are like family to her and the management understand and
love her. The home is right across the street from me and I could make sure the Caregiving agency is doing what they are supposed to do and help out.
This is too long and will probably not get answered but I sure enjoyed your other questions and will be back.
[I am happy that you have at least attained stability for your daughter
and yourself. Thank you for your kind words and confidence.]
Thanks
Teri
Brandie's mom.
You are welcome,
Everybody's Uncle
CREDIT CARD EXTRA
Everybody's Uncle,
I transferred my credit card balance over to a new credit card that offered
0% APR for the next 9 months. This was a smart way for me to eliminate my
debt. My question is, should I close my first credit card? It currently has a zero-balance. I was going to automatically close it but I was told by a family
member that they heard that it's a good idea to keep it open...that it looks better on your credit report that you have ALL THIS ADDITIONAL CREDIT
AVAILABLE TO YOU...yet you decided to 'smartly' not use it. We will probably be purchasing a new house within the next 3 years, so I want to know which will look better on my credit report?
Thanks,
Natalie
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Dear Natalie,
You should not cancel your first credit card unless there is a fee or other consequence for keeping it active. Your family member advised you correctly. A history with credit activity, no late payments, and a low or
zero balance when you apply for your mortgage will show favorably. You may want to pull your credit report a few months before shopping for your new home to allow time to correct errors (not uncommon) or adjust
balances for the most favorable posture.
Best of luck on your future purchase.
Everybody's Uncle
Negative Equity
Everybody's Uncle,
We have a 4-year-old van that is worth at least $5000, but owe about $11,000.We have no warranty anymore. We do not have much money to close the gap
. We are in need of a vehicle that can tow a heavy trailer (probably a truck or SUV). What can we do? We cannot wait much longer, we are afraid that the
van will soon have mechanical problems, which will be very expensive. Any suggestions?
(Need New Truck,)
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Dear NNT,
Owing more than the vehicle is worth creates the delicate condition of negative equity. Lien holders want the vehicle to be worth more than the financed amount to secure their loan. Under some circumstance (Ex: high
mileage) vehicle value drops below the amount owed. Some individuals allow the vehicle to be repossessed voluntarily or involuntarily, thinking
the lien holder takes the loss. A repossessed vehicle can be sold "at auction" often well below the market value. You (the former owner) can
be hit with a judgement for the difference between auctioned price and market value. My advice is to avoid repossession under virtually all circumstances.
Options:
Financially, private sale of the vehicle at the highest price is the best the best course, dollar-wise. Get the highest retail market price; use the money as a down payment on the next vehicle.
Trading the vehicle (wholesale) to a dealer yields fewer dollars but has advantages. Repair and ethical responsibilities for resale shifts to the
dealer. Avoids the hassle of private sale and gap between vehicle sold and new vehicle.
Buy an appropriate vehicle. Don't buy a van if you need a truck. That
could be the underlying cause of your negative equity situation - excessive wear due to inappropriate use.
You don't have to purchase a new vehicle. Seek out a reputable dealer
and avoid some of the depreciation hit you take on a new vehicle. If you have a dependable mechanic ask him to check the target vehicle and/or have a diagnostic test performed by an independent party.
Leasing is an option I do not recommend. Scroll down to my comparison of buy or lease. You would be a financial dead duck if your present vehicle were leased.
Most important, think logically and long term before making any decision. Stay within your financial means. Don't get caught up in today's pay later mindset.
Here if you need me,
Everybody's Uncle
Can't Pay Bills
Everybody's Uncle,
I really am in a financial bind. I am behind on everything. I have two personal loans, rent, house bills, car, insurance (health and auto), one credit card, one
secured loan, Internet, and cell phone, and my bank account is overdrawn by 300 dollars. I need 3400 dollars to catch my bills up. I only make 8.50 an hour
and I am starting a second job next week making 8.00 an hour. I am also going to waitress a little on the weekends. This will catch me up, but I cannot hold
these people off anymore. No one in my family has it. What should I do? I am trying to avoid bankruptcy, but I do not know what other option I have.
(Too Many Bills)
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Dear Too Many Bills,
The solution to your problem is a change of mindset. All the additional work and income will not help unless you manage your finances. Failing that, you will become slave to your recklessness.
We live in a credit and debt driven society. You are an example of the consequences of such policy. The misuse of cell phones is a killer. Inexpensive cell plans with few monthly minutes provide emergency
service and modest usage; blabbing away is a budget breaker. Credit cards are excellent tools when used prudently, but devastating as easy money. Hide the credit card, hang up the cell phone, stop wasting money.
Bankruptcy can cost hundreds of dollars, dollars that would be far better spent on debt reduction. Bankruptcy will not pay rent, house bills, car
insurance or day to day expenses - not advised based on the information provided.
You say, "No one in my family has it." The honest question is who in their
right mind would advance money to anyone with your track record? Wake up, niece! This is a sink or swim world: start swimming.
Resolve overdrawn situation at bank IMMEDIATELY. Bad checks can lead
to legal problems.
Options:
Maximize income
Start a NECESSITY ONLY existence
NO luxuries until all responsibilities are up to date
Contact your credit card company and ask for an easier payment
arrangement
(If you have not maxed out your credit card, [I'm gagging] use in desperation only.)
Talk to your landlord, but put a high priority on rent
Explain your situation to those who gave you personal loans
Scroll down this column for similar inquires and responses.
Sorry I have to be tough with you.
Get back to me and I will walk you through step by step.
Tough love,
Everybody's Uncle
I am 73, my husband 76. For a year so our joint bank account is overdrawn by
him every month, sometimes several hundred dollars. There is a $28.00 overdraft charge by the bank for each check. All I pay from this account are
our household utilities, about $250.00, his health insurance $150.00 -- he has the balance after paying his car note of 183.00 to do as he pleases, 700 to 800.
He is forgetful at times (evenings when he's been drinking). I am not sure how much of his problem is related to alcohol or to signs of aging.
I have been paying groceries, household items, car insurance and home insurance out of my bank account which is over $150.00 month less than his. I
feel desperately in need of advice, as it is difficult to live like this. Can you advise???
(unsigned)
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Dear Overdrawn,
There are several issues to consider:
Financial:
If your husband is financially irresponsible, steps must be taken before serious damage is done. Just as friends don't let friends drive drunk,
responsible adults don't let loved ones cause financial chaos.
If you can convince your husband to allow you to monitor his check writing - do that. Unemotionally, point out his flawed history. If he does
not respond to reason you have cause to use other tactics.
If you have a son or daughter that can bring positive influence - get help. If family tactics fail, contact an attorney. If both names are on the
account, talk to a bank officer, sometimes they can be of assistance. In any case his overdrafts must be stopped.
Medical:
You suggest "drinking" and "signs of aging" as possible causes for his conduct. A simple non-invasive medical evaluation can detect the early stages of dementia.
Effected individuals have problems with day, month, and year, naming the current president, remembering a series of three random after a few minutes on another topic items (ex. apple, pen, necktie), drawing the
face of a clock, composing a simple sentence, and many everyday thought processes we take for granted. Recalling a grocery list is a good sign; disorientation on a familiar route is negative. Early detection is
important, there are drugs that slow deterioration.
Drinking problems at any age have to be addressed. Driving while under the influence can cause bodily harm and property damage. Check writing
under the influence can bring financial damage or ruin if left unmanaged. Family, clergy, or group help should be considered if drinking is the problem.
Social:
You know your husband better than anyone else. Make a determination about how to approach him. An emotional explosion will worsen the situation. Gather your thoughts, consider all the above, seek help from
family, clergy or professionals and proceed mindful of emotional elements. Love and understanding works better than condemnation and threats.
You have a delicate situation to address but you must do so. It will get worse if ignored.
Here if I can help.
Everybody's Uncle
Everybody's Uncle
I have a lot of credit debt (about $20,000) and have thought of going to a debt consolidator for assistance in getting rid of it, or at least bringing it to more
manageable levels. I do manage to keep on time and am not late with anything, but I am deeply concerned, especially because of today's economy.
My son has discouraged this because it will leave negative reference on my credit record, (it's been good except for the amount of debt against annual
income) in case I wish to purchase a house in the next two years or so to replace the one I own now (too big for me). What do you think?
(Unsigned)
~~~~~~~~~~~~~~
Dear Unsigned,
Sorry you are carrying excessive debt. Debt consolidation may not require an agency nor have negative impact on your credit rating. If you
get solicitations for credit cards with low "teaser" rates, switch to those cards and track them closely. A switch from 2% to 15% can be shell shock.
Contact all credit card companies that hold your debt. Tell each that you want to consolidate your debt, need a $20,000 credit line and want a lower interest rate. If your track record is good so are your chances.
I don't recommend using an equity line because I have a fundamental resistance to collateralizing credit card debt. However, the mechanism is available.
Creating an equity line on your house, if you don't have one already, is relatively easy and usually involves no costs. Contact your local banks
and do some comparison shopping. Online equity lenders are available as well. The mechanism can both lower the interest rate and monthly payment but often encourages more credit card debt.
If you are anticipating selling your present home and moving into something smaller the potential for some profit exists. I strongly recommend using such profit to pay off all existing debt. Carrying $20
,000 of debt on a credit card at 10% costs $2000 per year, $3,000 at 15%. There are much better things to do with thousands of dollars per year.
Good luck,
Everybody's Uncle
__________________________________________________________________
_
[Take higher deductible or stay with lower deductible medical insurance?
From 4/24/02 Radio Show. Values approximate for purpose of this example]
Everybody’s Uncle,
I am a private contractor. I pay $350 per month for a $5000 deductible medical insurance policy. I was offered the same policy with a $10,000
deductible for $150 per month. I am young, in good health, and anticipate no claims. Should I continue the $5000 deductible or move to the $10,000 deductible?
Whenever financially feasible, higher deductibles should be considered. If possible, put aside $5000 (or any presently affordable amount) of
personal funds in a designated account.
Assuming you put nothing aside, your premium decreases by $200 per month. Depositing this $200 per month into a designated account
accumulates to $5000 in only 25 months (2 years, one month), less if interest earned is considered.
This $5000 set aside can grow indefinitely by continuing to deposit $200 per month to the account. Money can be invested in CD’s or other
principal guaranteed vehicles to improve growth. Higher deductibles can be considered as reserve grows. Deductibles are usually annual, a $5000 reserve covers only one deductible.
Lower deductibles should be avoided when possible. First Dollar Coverage is costly.
In the example above, if we assume a maximum insured value of $100,000 (including deductible), you are paying $350 per month for $95,000
of insurance. With the higher deductible you are paying $150 per month for $90,000 of insurance. In effect, you are paying $200 for the first $5000 of coverage and $150 for the next $90,000. You save $200 per
month by setting aside $5000. Imagine a bank account that paid $200 per month on a deposit of $5000, a 48% yield.
In the long run, self-insuring and higher deductible can save premium dollars. Unless you are sickly or accident prone, the higher deductible makes sense.
The same general principal applies to all deductibles. Auto insurance should examined in the same manner for higher deductible savings.
Everybody’s Uncle
Can I be held responsible for the debts my mother had before she died?
Mother's debts are chargeable to her estate. Taxes, wages, liens and other legitimate outstanding bills can be brought against the estate.
Unless there is an encumbering connection between any beneficiary and a claimant (for example: co-signer on mom's loan), daughters or other inheritors need have little concern.
Thumb rule: Children are not legally responsible for the debts of their parents. Morally, inheritors can resolve obligations known to exist sans contract. That is more a matter conscience than of law.
Everybody's Uncle
Everybody's Uncle
I am 73 years old and have managed my own financial affairs all my life. I am
now concerned that I do not understand new developments, or companies, or funds the way I used to, or the way I should. I think I need a financial advisor
to give me advice and suggestions regarding my approximately $200,000 portfolio. Any suggestions?
Unsigned
Dear Unsigned,
I will answer your question and provide some general information for other readers.
For most senior citizens, the most important considerations are:
Yield, to enhance your life style
Preservation of principal, to avoid losing assets that can or do generate income.
If you ask an insurance salesman for financial advice, he will sell you insurance or insurance related products. These are high commissioned products that exchange your present cash for future insurance benefits.
Do not hesitate to ask the amount of commissions he receives on the products he offers. (Watch him squirm.)
If you call a Securities Broker, you may be introduced to stock, bonds,
mutual funds and whatever other products they have to sell. Security sales are supposed to be risk appropriate but the lure of high commissions can alter the perception of " appropriate."
For seniors with no need to increase income, I recommend Bank CD's with no more than 24-month maturities and regular reviews with an eye to interest changes. Covered call writing on owned equities is strongly
advised.
Government Security Funds, Utility Funds, Municipal or Corporate Bond funds, as well as Blue Chip Stock Funds have various risks that must be weighed on a case to case basis.
"Fee only" financial consultants that sell NOTHING are expensive but may be your best bet in the long run. Unfortunately, you may find yourself
hearing about arrangements you need: living wills, annual service contracts, special needs trusts, long term health care, etc.
Again, these have to be considered on a case to case basis. Where
contracts are involved a competent attorney is a must. Hire a completely independent lawyer, not one recommended by YOUR financial consultant. Collusion is always possible.
Generally speaking:
The question you must ask is "How can I get objective advice from a salesman with a product to sell?"
Here is how:
Understand that you have an obligation to educate yourself regarding
any investment you make.
There are many excellent books available at bookstores and the local library that explain various products, typical fees, commissions and risk factors in each type of investment.
Armed with some knowledge, conversations with "salesmen" will be less intimidating and perhaps insightful.
For many individuals an "annual renewable term life" insurance policy is
the least expensive protection for family needs. Term insurance combined with an established mutual fund that complements your investment risk tolerance can be an excellent financial program.
With a little knowledge you can avoid salesmen in adviser's clothing or, better yet, let them talk, insist on written information, assemble information, study, and then make your own decisions.
Letting them know that you have legal counsel in the wings and Everybody's Uncle on your side should keep them objective.
Everybody's Uncle
Uncle,
I am self-employed and have pretty good income. However, I think I am
paying far too much income tax. I don't know anything about taxes but when I call my accountant it takes weeks for him to return my call and nothing
changes anyway. I think it is time to look for a new accountant. Do you think I'm right and how do you pick a good one?
Nephew needs help
Nephew,
Jimism: There are two elements to running a business, the product and the business of doing business.
Without reviewing your records I can not pass judgement on your net
income or an opinion on your accountant.
Accountants (and other businessmen) under-perform either because the client account is insignificant or the accountant is not tending to the
business of his business. Mention the deficiencies and remind them of your prompt payment. If there is no change, it is time to move on.
A good accountant not only crunches numbers -- he cares. He informs
you that virtually every expense of running a business is tax deductible. He explains general deductibility then brings a sharp pencil to your particular needs.
He will help you work in gray areas.
Example:
If you are using credit cards for personal and business expenses, pay up all personal credit debt first. Interest on personal debt is not deductible, interest on business debt usually is.
Example:
Charitable contributions may be more effective as business deductions. Taxpayers that take standard deductions gain no benefit from charitable contributions. Small business operators that plan well can deduct
qualifying charitable deductions as a business expense.
Attention to accounting is an essential part of running your business, not
an option. Price is a consideration in all business matters but "cheap" can be very expensive
Accountants face financial realities. Accountants that monitor and advise
all year long can not compete price-wise with "tax perennials." Tax hawks look for every deductible penny and can save you thousands of tax dollars.
Corner store tax perennials charge $100 to transfer raw figures from a questionnaire to a tax form with indifference to the tax consequence. What's better, a service with higher fees that saves you thousands or a
$100 wonder than costs you thousands?
Schedule C is the heart of a Sole Proprietor's return. You don't have to become a tax expert, but understanding this one form can help you make
an educated choice of accountants, improve client to accountant communication and save uncountable sums over the lifetime of your business.
Everybody's Uncle
Dear Uncle,
I am 59 years old and have owned and managed rental property in Ohio for the last 20+ years. Here in Florida one must be licensed to manage condominiums
and apartments. The cost is $179 for classes and about $175 for testing and licensing. What is your opinion of the potential for me to find employment in this field at a $40k plus annual salary + benefits?
Florida is a big state. In some quarters 40K is a comfortable living; in
others, starvation wages. The most important consideration is not an arbitrary number but rather coordinating income and living expenses. Housing ranges from relatively low to very pricey. Income, in general,
compares poorly to many parts of the country. Location is everything.
You may be putting the move before the job. Prior to any move, research
the target area to a fault. Housing and living costs must make financial sense. Job opportunity must be realistic or, better yet, contracted. If you
are selling an existing residence and enjoying a lump sum, you have greater range but the study should reflect all elements of income and expense. At least one full year of zero income should be considered a
very real possibility.
Advice:
If you need income to provide your daily bread, get your resume out. Make calls to management companies. Check out the job-opportunities
section of the local paper to get a feel for the targeted area. Avail yourself of all info from all sources defining the target.
Don't jump at a one-horse town. A location that has a general need for
your services will leave you with other options if the first horse goes lame. Visit the area to be sure you will be comfortable. Renting modest
quarters for a year gives you time to settle in and seek solid employment. If circumstances allow, dual residency for a test period makes sense. Life in Florida is in sharp contrast to Ohio. Climate, humidity, bugs,
snakes and reptiles often send sun-seeking retirees back to Sandusky or points north.
Good luck,
Everybody's Uncle
Everybody's Uncle
Is there a way I can add up my frequent flyer miles from different airlines and use these to travel on any airline? Thanks!
Not to my knowledge. Some overseas airlines combine mileage with specific US carriers. Some credit cards accumulate mileage rewards and
transfer them to any one of a number of participating carriers. I have been able to purchase mileage from the carrier when I was close to an award level, but not lately. Don't hesitate to ask. As a general rule, try
negotiating everything. Airlines change fares and rules literally hour to hour.
If anybody has had success combining airline mileage, please forward information. I will verify and past it to all readers.
Best I can do,
Everybody's Uncle
Dear Everybody’s Uncle,
I sold a truck to my sister's boyfriend. He was supposed to make bi-weekly payments. His first payment was due yesterday. He called to say his work
messed up his paycheck and he can't pay me till next week. What should I do?
First, learn not to do business in an unbusinesslike way.
You are not a finance company. Social financing is almost always a bad idea but especially so when selling a vehicle. If the vehicle breaks down
for any reason there is a good chance you will be accused of selling a lemon. If he wraps it around a pole, what will be his highest priority, paying you or getting himself another vehicle? He now has your truck and
your money. Did you get anything in writing?
As an aside, I am always amused that slow payers are annoyed because someone is late paying them but expect you not be annoyed when they are late paying you.
Social sales often state lower prices to avoid sales tax. If this is the case, your already week case is further diminished by a lower than true sale
price. Since you completed the sale, he can say he paid you in cash. Your legal position is poor to non-existent. Of course, you could ask your sister
to bear witness against her boyfriend and put herself in a no win situation - not a good scenario.
As a tactic, write up a payment schedule - just so there is no confusion.
Put the sale price on the top and write in the amount and date of each payment. Ask him to sign or initial the document. An honorable person does not balk at good record procedures. If he balks expect trouble. In
effect you are creating a "contract" after the fact, more accurately, the precedent of payment. If he pays you in check the sequence of payments
will evidence the sale. If he pays cash give him a signed and dated receipt and ask him to sign or initial it. Tell him offering a receipt for cash avoids confusion, especially when payments are not timely.
You could say nothing and wait for next week. Maybe you'll get paid; maybe you won't. Maybe he is the most sincere person in the world and
will never miss a payment again. Maybe you will only sustain a small loss. Maybe you will use more caution next time.
A lot of "maybes" in there.
Everybody's Uncle
Everybody's Uncle,
I am getting married. I have the ring, the man I love, a church, and the date - July 7, 2001. I don't have the money! Both my fiance’ and I are broke. My
parents have nothing and live in another country. His parents are retired and live in Tennessee. He has 13 brothers and sisters who are all in financial
problems of their own and my sisters are strapped. One is the mother of three and the other has so many financial problems as she has lost her job and now is just above water.
How do I do a wedding, realistically? HELP!
Jewel
Dear Jewel,
The financial responsibility of parents and siblings is ZERO. Discussing their situations has no bearing on your marriage. They owe you nothing. Expectations on your part are selfish and thoughtless.
If you and your man are both broke, why are you considering marriage? Love, a ring, a church and a date are icing on the cake of matrimonial
maturity, not the "cake" itself. Lacking common sense on the threshold of commitment, I suggest you reconsider or at least postpone your nuptials.
If two marriage minded adults are not able to save enough money to pay for a modest wedding reception, what is the likelyhood of future financial stability - what about the added responsibility of a family?
Being poor is not necessarily an impediment to marriage; being "broke" is. Two people working hard, even over a short period of time, can fund a
modest reception and lay the foundation for a happy life, but not without discipline and focus. I suggest you build a foundation before you jump into marriage.
If you go ahead with your marriage plans, keep it simple and ask nothing of your relatives. A simple home or back yard party with cookies and tea
is appropriate for those in difficult circumstances. Bonus, even meager gifts from "strapped" friends and relatives may cover the costs of the day.
Good luck,
Everybody's Uncle
My husband and I have been married for almost 7 years. We moved to the city because in a small town we could not make ends meet and have very bad
credit. After discussing the possibility of bankruptcy we decided we wouldn't but we still can't seem to make ends meet and we both have decent jobs.
What kind of advice can you give me on what I can do to manage money better, and clean up our credit? Any advice appreciated. Thank you.
The key to resolving credit problems is self- discipline. Mechanisms are
useless unless you change the conduct that got you into financial difficulties to date. Your move to another location and the improved income is a positive.
Some suggestions:
1. Cut up or lock up credit cards and agree that that credit will not be used except in emergencies.
2. Cut out all luxuries, including cell phone calls and dinners out. Stop them cold! Sit down make a list of things that can be cut out. Revue each
other’s list. Set strict spending limits. Carry little or no discretionary cash. (Always carry “emergency” money.)
3. Increase revenue. A low paying part time job may parch your ego but save your credit.
4. Contact your creditors and ask if you can get a lower interest rate while you are trying to catch up on payments. Rates can drop to 6% on request.
5. Explain your situation and ask for a different payment plan that will lower your monthly payment. Credit card companies realize that
bankruptcy can cost them all the money you owe. They often will settle for a lower payoff amount. Seventy-five percent of the total is fairly east to negotiate, but when forced to decide between a lower percent, or
nothing (as in bankruptcy), they might be inclined to negotiate.
6. If you get debt forgiveness, the amount forgiven is considered taxable income.
7. Do not ignore payments. Pay any amount you can afford on monthly accounts.
8. If possible, switch debt to the lowest interest rate credit card. Although not likely under the circumstances, if you are solicited from
credit card companies with a low “teaser” rate, move debt there.
9. Do not switch debt to any equity line, yours or any other party. You do not want to place collateral under credit card debt.
10. Sometimes family assistance is available, but borrowing from friends or family is not generally a good idea. Credit can be restored
emotional ties can be irretrievably broken.
11. There are books available at the library and bookstores that address credit problems.
12. There are credit resolution services available.
13. Contact an attorney before contracting any service or plan that is not fully clear in all respects.
Good Luck,
Everybody’s Uncle
Everybody’s Uncle,
My friends favor leasing cars. They like the lower monthly payments and the
ease of unloading the car after the lease is up. Ownership appeals to me. Which is better, buy or lease?
Nephew,
If you don’t mind paying for convenience and all runs smoothly a lease can work for you. Financially, buying has the edge.
Leases establish miles allowed over the term of the lease. If your three
-year lease allows 36,000 miles but you return the car with 26,000 miles, you pay for 10,000 unused miles. If you return it with 46,000 miles you
pay for the extra miles. Ten thousand extra miles at 15 cents per mile means an extra $1500 charge at turn in. Changes of residence or business locations are not always predictable and can seriously effect
total mileage.
Bottom line: unless you hit 36,000 miles right on the head you will either pay for miles you did not use or pay for additional miles at turn in.
Leases allow for ordinary wear and tear but serious damage is your responsibility. Assume, on the first week, a fallen tree pancakes your $30,000 car with $22,000 of damage. Insurance covers the damage but you
might not want to drive a repaired wreck for three years. As owner you can sell the car for salvage, eat the loss, and buy another car. Breaking a lease can add time and costs to the process.
A minor dent or scratch could occur in the last month of the lease. An owner could buff it out, touch it up, live with it, or settle for low cost restoration. The lessor might insist on a higher standard of repair.
Sometimes disputes end in ugly conflict or court.
Cars depreciate after purchase or lease. Leasing does not change
depreciation. Purchase payments are higher because the buyer is paying for equity in the vehicle. Assume a $30,000 car leases for 5 years at 400
per month. After 5 years the lease costs $24,000. Buying the car at $550 per month costs $33,000. If the car has a residual market value of $12,000, the buyer paid $9,000 more but has $12,000 equity, a net gain of
$3000. (The amount could be greater or less depending on interest rates and other variables.)
Leases often require low deductible insurance. Low deductibles can raise
insurance costs hundreds of dollars per year.
Some people are fanatical about maintenance, others indifferent. Leases
assume average or worse. If your standards are high the vehicle will have greater resale value -- another gift to the dealer if the car is returned at the end of the lease.
Buying the car at the end of the lease is often a possibility but not always a certainty. In the case where you fall in love with the car, maintain it to
a fault, have low mileage, find no difference in the newer models, and want to buy it, you might be out of luck. Do not except the salesperson’s opinion. Check the contract carefully; ask an attorney.
If the car has 76,000 miles you might have to decide among unpleasant alternatives. Surrender the car AND $6000, buy the car at market value of $12,000 PLUS dealer markup, extend lease, the lessor has the options.
Owning a vehicle means you have the options. You can postpone acquiring a new vehicle and enjoy low annual cost. Your personally maintained car might serve a “coming of age” driver or mom’s shopping
needs. It could bring an excellent return in the open market.
One argument often used to promote leases is maximizing cash for other moneymaking activities. EU doesn’t know of many surefire ventures that
guarantee returns exceeding the higher cost of leasing.
Many people take leases because they have a month to month budget.
You might get more car for the money in the short run but in the long run buying is usually the better choice.
Everybody’s Uncle
A question that should be asked more frequently:
Should I fund my IRA every year?
Before making any investment, do your homework. First, ask this question: Will the person telling you to make this investment, profit from
it. If the answer is yes, consider the profit motive not just the advice.
Investment salesmen, like used car salesmen, must be weighed with a grain of inquisitiveness. They will give you many good reasons to “buy”
their product. Everybody’s Uncle, who makes no commission on your investment, will give you some of the negative aspects of IRAs.
In the 15% tax bracket you save $300 in taxes on a maximum IRA contribution of $2000. If you withdraw the money prematurely (prior to
age 59 ˝) you face a 10% penalty (with some exceptions) and pay tax on the withdrawal in the year taken. This example assumes a 28% tax bracket and premature withdrawals with no special treatment.
Let’s say you make an IRA contribution of $2000 at age 20. Three years later you moved from the 15% bracket to the 28% bracket and make a $2000 premature withdrawal:
You save $300 in the year of contribution, but pay a $200 penalty and $560 income tax in the year of withdrawal. In this situation, you save
$300 but lose $760 -- a net loss of $460 plus applicable commissions, fees and expenses.
Think twice before making an IRA contribution if you in the 15% tax bracket. You may NEVER be in a lower tax bracket; so it is pay (at the
lower rate) now or pay (at perhaps a higher rate) later.
Many IRA dollars are invested in mutual funds where growth results from capital gains.
[Example of a CAPITAL GAIN: You buy 100 shares of “stock” for $2000. You sell it for $3000. Your CAPITAL GAIN is $1000. For the purpose of this
example all “CAPITAL GAIN” is LONG TERM. LONG TERM refers to items sold after being held longer than one year.]
A $1000 CAPITAL GAIN earned outside an IRA incurs a maximum tax of 20%.
Tax on $1000 CAPITAL GAIN = $200.
All IRA withdrawals, no matter how earned, are considered “income” and taxed as such.
The same $1000 CAPITAL GAIN withdrawn from an IRA incurs a 28% tax and a 10% penalty.
Tax on withdrawal = $380
Effectively, CAPITAL GAINS are taxed at a higher rate when withdrawn from an IRA.
Young IRA contributors must lock up their assets for decades or face a 10% penalty. EU’s life experience includes too many examples of
premature withdrawals when financial priorities change between ages 20 and 60. Before placing assets in penalty status, consider the advantages and disadvantages. IRA rules change, tax rules change, tax rates are
trending up, capital gains rates are trending down. Print this page and present it to your investment professionals. If they find any inaccuracy, please forward source.
--Everybody’s Uncle--
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