Contact your bank as soon as possible, within 60 days of the transaction at the most. You may be required to submit the alleged error in writing. Banks typically investigate the error within 10 days. Your funds should be reimbursed if the bank can’t find an explanation for the alleged error. In certain circumstances, such as a point-of-service debit withdrawal, the bank may be allowed more time to investigate the error.
The bank should notify you of their findings in writing, regardless of whether they found an error. If there was an error, they must finalize your reimbursement.
Notify your bank as soon as possible to limit your losses. If your debit card was stolen and used fraudulently, you can usually get reimbursement for those transactions.
Your loss will be limited to $50 for an ATM card if you notify your bank within 2 business days after the card is lost or stolen. Your loss could be up to $500 if you fail to notify your bank within 2 business days. If you don’t notify your bank within 60 days of receiving your statement, you could also face unlimited losses on transfers after the 60 day period.
Call or write to your bank, or see if you can stop it through your bank’s website or online banking system. You should request to stop the transaction at least 3 days prior to the scheduled payment, and ask for written confirmation of your request to cancel the transaction.
Checking Accounts: Checking accounts offer a simple, quick way to access your money. You can deposit as often as you like, and most banks will give you an ATM card to use at stores or withdraw cash from an ATM. You can write checks using this account as well.
- Some checking accounts pay interest. These are called negotiable order of withdrawal (NOW) accounts. The most common type is the demand deposit account, which does not pay interest.
- There are often fees associated with checking accounts. Some banks charge a monthly maintenance fee regardless of the balance. Some charge a monthly fee if the account balance falls too low. There may also be transaction fees, check fees, or ATM withdrawal fees.
Money Market Deposit Accounts (MMDA): A MMDA is an account which accumulates interest, usually at a higher rate than a checking or savings account. However, you will need to meet or exceed a certain balance in the account to gain that interest. The interest rate may rise as the balance grows.
- You can write checks from a MMDA, but it’s not as easy to withdraw from an MMDA. You are limited to 6 transfers per month, and only 3 of those transfers may be in the form of a check. There are usually transaction fees associated with MMDA’s.
Savings Accounts: You can withdraw from a savings account, but there may be a cap on the number of withdrawals and transfers.
- Minimum balance fees may apply to savings accounts.
Credit Union Accounts: These accounts are very similar to bank accounts, with different titles.
- A share draft account is equivalent to a checking account, a share account is equivalent to a savings account, and a share certificate account is equivalent to a certificate of deposit account.
- Credit Unions may charge less than banks for these services.
Certificates of Deposit (CD): CDs offer a set rate of interest for a certain term, from a few days to several years.
- Typically, you can’t withdraw your money until the end of the term, but some banks will allow you to withdraw the interest earned.
- Return rates are usually higher for these accounts since the term is set.
- The fees for withdrawing early can be very steep, and will take away from your interest and potentially even the principal investment.
- Your bank will notify you when the CD has matured, but many CDs automatically renew. Pay attention to the maturity date if you want to withdraw your money before the CD begins a new term.
There are many features to consider when shopping for a bank account.
- What is the rate, and can the bank change the rate after the account is created?
- Does the interest rate change based on the balance? How is this change calculated?
- When does the interest begin to compound – when will you start gaining interest on both your principal and the interest gained?
- What is the annual percentage yield?
- What is the minimum balance required to earn interest?
- Will you receive interest when a check is deposited, or when the amount is credited to the institution?
- Is there a flat monthly fee?
- Are there penalty fees for falling below a certain balance?
- Are there fees for each deposit and withdrawal?
- What fees are associated with ATM deposits and withdrawals?
- Is there a charge for paying bills online or over the phone?
- Will I be charged for each check I write?
- Will fees be lower if I open multiple accounts with this bank?
- Is there a fee for canceling or bouncing a check?
- Is there a fee for closing the account shortly after opening it?
- Is there a fee for each balance inquiry?
- Are there limits on the number of withdrawals, or the dollar amounts of withdrawals?
- Will I still receive interest if the account is closed before interest is credited?
- How long does it take for a check to clear?
- How long must I wait to withdraw funds deposited into the account?
- What is the term of the account?
- Will the account roll into a new term automatically?
- Is there a grace period for withdrawing your money after the account matures?
Banks are required to disclose all fees associated with their accounts. An account with fewer, lower fees is usually better, regardless of the interest rate.
Check-printing fees are often higher at banks than outside printing providers.
An old-fashioned savings account may be subject to monthly fees which are higher than the small amount you gain in interest. A checking account with few fees may be a better choice. For larger amounts of money, a money market account might be a good option. You’ll earn more interest with this type of account, but again, you may be charged extra fees if the account balance drops below a certain amount.
Overdraft protection prevents you from bouncing checks. If you don’t have enough funds for a check, your line of credit will be used to ensure the check goes through.
A bond is a certificate which a borrower agrees to pay back after a certain time frame – basically, you, the bond buyer, are loaning money to a government entity, municipality, or company, and the borrower agrees to pay a certain amount of interest per year.
Bondholders don’t have partial ownership of the company like stockholders do. The bond also isn’t affected by the company’s record. The bondholder is entitled to the principal plus the agreed upon interest.
Corporate bonds are issued in $1000 denominations. The company agrees to pay that amount when the bond matures. However, the actual value of bonds is tied to market rates, so a bond sold early may be worth less than you paid for it. A callable bond may be bought back at full face value before the maturation date.
It can take up to 10 years for a bond to mature.
The bond quality is a rating of the company’s credit-worthiness. Several organizations rate bond quality, but they’re always ranked on a letter scale, A-D. The U.S. Treasury Bond is the only risk-free bond.
Bond prices drop as interest rates rise, and bond prices rise as interest rates drop. The length of the maturation period also affects bond prices, and the longer the maturation period, the bigger the impact from a change in interest rates.
A bond mutual fund is an investment company that manages its own portfolio of multiple bonds. Investors buy ownership in the company, and the company buys and sells bonds with the goals of the fund in mind. Since it contains multiple bonds, so you can’t lock in the payment rate like you can by purchasing a bond directly. However, the bond manager can invest in a large number of different funds, which might not be possible for an individual. The fund must also buy back your shares at any time. If you wish to sell a bond you invested in on your own, you’ll have to find a buyer for it.
Report all mutual fund gains as income, regardless of whether you reinvested. You’ll receive 2 kinds of distributions: ordinary dividends, and capital gains.
Ordinary dividends are net gains of the fund which are paid out periodically to shareholders. They are considered dividends to you, and must be reported as such.
Capital gains are subject to different tax rates. A mutual fund’s net gains from selling securities falls into this category. Your mutual fund should send you a form with a breakdown of capital gain distributions.
There are two main types, but the terms will vary depending on the lender. Short-term loans have a maturity period of up to a year. Purposes for a short-term loan might include working capital loans and lines of credit. Long-term loans usually mature in one to seven years, but loans for real estate or business equipment may last up to 25 years. Other purposes for long-term loans might include company vehicles, furniture, and construction.
To successfully apply for & receive a business loan, you must know:
- What the purpose of the loan is
- Exactly how much you need
- Your plan to repay it
The loan officer will probably request a copy of your business credit report. The loan officer will consider the following, based on your provided information and your business credit report:
- Have you invested a significant amount of savings or personal equity into the business for which you are requesting a loan?
- Do you have a record of credit worthiness?
- Do you have the training and experience needed to run a successful business?
- Do your business plan and loan proposal show that you are knowledgeable about your business/trade? Are you committed to the success of the business?
- Is the cash flow sufficient to manage the monthly payments?
- Name & address of the business
- Purpose of the loan
- Exact amount needed
- Age of the business
- The business’ assets and number of employees
- Ownership structure/legal organization of the business
- Personal financial statements, as well as those of the primary owners
- For an established business: income statements and balance sheets for the past 3 years
- For a new business: projected income statement and balance sheet
- Collateral you’re willing to give as security for the loan
- Details on each principal in the business – education, experience, skills, accomplishments
- Products you sell
- Markets you participate in
- Who your competition is, and how you’ll compete
- How the business will serve its customers
Buying or Leasing a Car
It depends. Can you make a good deal with the dealership? What kind of mileage and wear do you expect to put on the car? How will you be using the car?
Compare the initial, ongoing and total costs of leasing & buying to determine which is a better fit. Also consider whether ownership of the car is important. If applicable, see if you can get a cost deduction for using the vehicle for business.
Most importantly, know what you want. Decide on the size, type, and features you need before you start visiting dealerships.
Once you’ve decided on a car, do some research. Find out what the dealer pays (invoice price) for that car. There are a number of consumer resources available online to help with this research. Do your own research on the value of any trade-ins as well.
Next you’ll need to negotiate with car dealers. By finding the invoice cost of your desired vehicle, you can effectively negotiate a lower mark-up. When negotiating, remember that you’ll have a relationship with the dealer for a number of years. You’ll likely have to service the car at the dealership. So, if you’re not comfortable with the dealership, find a different one.
Look into financing before you approach the dealership. If you know what banks are charging, you can more effectively negotiate financing through the dealer.
Make sure the dealer knows that you know exactly which car you want and how much the invoice cost of that car is. Make it clear that you are considering multiple dealerships. Don’t discuss financing or mention trade-ins until the dealer has made an offer, and keep shopping even when you’ve found a good price.
Don’t agree to any add-ons by the dealership, like rust-proofing.
Depending on the model’s repair history, you may want to consider a long-term warranty.
Leases come in two varieties: Open-End/Finance leases, and Closed-End/Walk-Away leases.
- Open-End: The customer accepts the risk that the car will have a certain “estimated residual value” at the end of the lease. The car is appraised at the end of the lease. If the estimated value of the car is equal to or greater than the estimated residual value, you won’t have to pay any additional costs. If the appraised value is lower than the residual value, you may have to pay the difference. However, some contracts may allow you to receive a refund if the appraised value is lower than the residual.
- Closed-End: At the end of the lease, you simply return the car to the dealer. It must not have received more than normal wear and tear, and must be under the mileage limit stated in the lease agreement. The monthly payments will be higher for this type, since the dealer is accepting the risk that the car’s value will decrease.
Under the Consumer Leasing Act, dealers must disclose:
- The total number of payments
- The total amount of those payments
- A schedule of payments
- Amount of each payment installment
- Any penalties for late payments
The Consumer Leasing Act (CLA) prevents dealers from collecting more than three times the monthly payment at the end of a lease.
A dealer may collect a higher amount if the mileage limit was exceeded, or if the car is returned with excessive wear and tear.
The dealer may decide to sell the car after the lease has ended. If the car sells for less than the residual value stated in the contract, you may have to pay up to the equivalent of three monthly payments to make up the difference. You may be able to negotiate the final sales price so the dealer can’t sell the car for less just to get it off the lot.
You do not get a refund for staying under the mileage limit. If you purchase the car at the end of a closed-end lease, you may be able to avoid paying for excess mileage.
You will need to pay an additional amount if you terminate the lease early. The amount is based on the difference between the estimated residual value at the end of the lease and the current residual value. This could be a very large difference, and most leases state you must keep the car for at least 12 months.
The dealer must tell you if you can terminate early, and the cost of early termination, before you accept the lease.
Compare rates between companies to make sure you get a reasonable rate. Without changing policies, you can also: buy a cheaper or safer car, switch to a higher deductible, compare costs in nearby communities, pay semi-annually instead of monthly, or drop collision damage coverage.
A larger deductible will greatly reduce the amount you pay in premiums. Besides, it’s usually more economical to fix your car on your own after an accident if the damage isn’t substantial. The insurance company may raise your rates if they get involved in the repairs.
Yes, both your car and address affect your rates. A more expensive car will usually be more expensive to insure, so check rates before buying a car. Used cars are often cheaper to insure than brand new cars.
Residents of areas with more accidents per capita, such as big cities, will pay more for car insurance.
It depends on the value of the car. Collision coverage may cover hail, flood, and fire damage, so it can cover repair costs should your old car become damaged.
Monthly payments are more convenient, and you’ll pay less at one time. However, monthly payments cost more in the long run.
A corporation is a legal entity which is independent of its owners. To incorporate, you must fill out articles of incorporation and file them with the appropriate state office, and pay any fees.
A corporation always starts as a C corporation, which is subject to federal income taxes on the entity level. An entity becomes an S corporation after filing the appropriate form (2553) with the IRS. The net income is passed through to the shareholders and included on their personal tax returns, thus avoiding the corporate double tax.
- With a corporation, shareholder liability is limited to the assets of the company, not the debts or obligations, and your personal assets will not be at stake.
- There are a number of tax advantages.
- It’s easier to set up retirement funds and plans.
- The existence of a corporation does not depend on its members. The business can carry on even after the departure or death of its founders or owners.
- Centralized management.
- It’s much easier to transfer ownership of a corporation.
- Capital can be raised through selling stock.
No. In most states, one person can fill all necessary roles.
A registered agent is named by the corporation, and must be available during business hours to receive state documents or service of process. The registered agent must be located in the founding state of the company. Most, but not all states require the corporation to name a registered agent.
EIN stands for Employer Identification Number, and it is another name for the Federal Tax Identification Number. This number allows the IRS to track taxes paid by the corporation.
Death of a Loved One
- Copies of insurance policies
- Marriage certificate, if their spouse will be claiming benefits
- At least 10 copies of the death certificate
- Birth certificates of any dependent children
- Social Security numbers of the deceased, their spouse, and any dependent children
- Military discharge, if the deceased is a veteran
- A complete list of the deceased’s property, including stocks, savings accounts, real estate and personal property
- The deceased’s will
You may want to seek help from a financial advisor, but here are some guidelines:
- Vehicles: The title may need to be modified.
- Insurance policies: You may need to change the beneficiaries of the deceased’s spouse’s life insurance policies, or decrease the amount. Home and auto insurance may also need to be revised.
- Bank accounts: A joint bank account will automatically pass to the deceased’s spouse, but let the bank know to change the ownership records. If the deceased’s name was the only name on the account, expect to go through probate.
- Safe deposit box: If the deceased is the sole name on the safe deposit box, you’ll need a court order to open it.
- Stocks and bonds: Contact the deceased’s broker to change the title of stocks and bonds.
- Credit cards: If the deceased is the sole name on the credit card, cancel the account. The estate should handle any remaining payments. For joint credit cards, the spouse should inform the issuer and ask for new cards with only the survivor’s name.
The deceased must have paid at least 10 years of Social Security to be covered. If eligible, there are two types of benefits. The first is a one-time death benefit, which is paid to a spouse or child which is entitled to the benefits, to cover burial and funeral costs.
Survivor benefits for spouses or children may also be distributed. The spouse is eligible if they are 60 years or older, but benefits will be greater after the age of 65. Disabled widows are eligible at age 50. However, if the deceased’s spouse cares for dependent children, they may be eligible for benefits at a younger age. Children of the deceased who are under 18 may also receive benefits.
Call your local Social Security office to find out if family members are eligible for benefits.
- Federal Estate Tax: Estate tax is due on estates which exceed the unified credit exemption equivalent after amounts given to the spouse and charity are subtracted. An estate tax return must be filed within 9 months.
- State Estate Taxes: Some states may stack an additional tax onto federally taxed estates, or they may apply an estate tax to those who are exempt from the federal estate tax. Some states also tax the individuals who receive inheritance.
- Income Taxes: State and federal taxes for the deceased are due for the year of death. Taxes are due on the regular filing date for the coming year. The deceased’s spouse may file jointly for the year of death, or up to two years if they care for a dependent child.
To refuse all or a portion of inherited property, it’s best to use a disclaimer. This allows the property to pass to the next beneficiary in line. Passing it directly to the next beneficiary in this manner can save a large amount in estate taxes.
Not usually. Unless you paid for the privilege (for example, purchased it as an investment) to collect those policies, they are considered non-taxable income.
Yes, it is considered income. The deceased didn’t pay income tax on the distribution, so the recipient pays the income tax instead.
Joint assets will pass to the joint owner. The beneficiaries designated on life insurance and retirement accounts will receive benefits as specified. Assets held only by the deceased will be distributed according to state intestacy laws. Most states give preference to spouses and children.
You must pay for certain legal benefits like Social Security, worker’s compensation, and unemployment insurance.
Health insurance, life insurance, disability insurance, retirement plans, flexible compensation, and paid leave are typical components of a comprehensive benefit plan. Additional benefits could include bonuses, tuition reimbursement, awards, or other perks.
Before implementing your benefit plan, determine how much you’re willing and able to spend on it. Find out which benefits are most important to your employees and prioritize those benefits. And finally, decide whether you will manage the plan, or leave plan management to an insurance broker.
Plans fall into 2 categories: fee-for-service, and prepaid. There are several different types of insurance plans available.
- Indemnity plans/insurance: Each employee is able to pick their own doctor. They’ll pay for health services on their own, then file a claim with the insurance company, which then reimburses the employee. Deductibles and coinsurance apply (In coinsurance, the employee pays a certain percent of the cost of healthcare, and the plan covers the other other percentage. Typically the split will be 20%/80%, or something similar). There are 3 common indemnity plans.
- A plan that covers hospitalization, surgery, and hospital physician care
- A supplemental plan which reimburses the employee for charges not covered in the first plan
- A plan that covers both hospital and medical care
- Preferred provider organizations (PPO): A particular insurer or employer and certain hospitals or doctors form a contract to provide healthcare to employees at a lower price. This option is more expensive than a HMO since the network of providers is larger. There is no obligation to use the in-network providers, however, out-of-network providers will be more expensive.
- Health maintenance organizations (HMO): With these plans, healthcare is provided by a network of hospitals and doctors. Coverage is often more comprehensive than a PPO, and includes preventative care, like immunizations, medical care for babies, weight-loss programs, and more. With a HMO, the primary care provider must be a single doctor, though you can usually choose between several doctors. There is no out-of-network coverage in an HMO plan, but the limited choices mean that HMO plan costs are lower. The plan premiums are fixed, and employees just pay a small copay for services, rather than receiving reimbursement after the fact.
Disability insurance provides replacement income for an employee who becomes disabled and cannot work. There are two types of disability insurance:
- Short-Term Disability: This insurance is used when the employee cannot perform the functions or duties of their job. It will pay out for up to 26 weeks. Benefits depend on the employee’s salary, and usually cover 60 to 80 percent of their normal salary.
- Long-Term Disability: This type of disability insurance kicks in after the maximum 26 weeks of Short-Term Disability. These benefits continue until the employee recovers from their disability, or until their normal date of retirement. This covers a similar percentage of their salary as short-term benefits. If they receive disability benefits through Social Security as well, the benefits don’t stack. The Social Security benefits will be subtracted from the employer-paid benefits.
An employee’s beneficiaries can collect death benefits if the employee dies before retirement. There are two common types of life insurance:
- Survivor income plans provide regular payments to the beneficiaries/survivors.
- Group life insurance plans provide a lump sum payment to the beneficiaries.
In self-insurance, the business itself pays a portion of all of the expenses of an employee, similar to a traditional health provider. It’s usually paid out of a trust, reserve account, or partially offset by employees’ premiums.
Start young. Someone starting to save at a young age will be able to save a lower percentage of their income with the same result. Determine how much money you’ll need to retire comfortably and when you wish to retire, and determine the percent you’ll need to save using that. The amount of income you need will depend on any mortgage payments, car payments, and children’s’ education expenses that you’ll need to pay once retired.
If your employer will match contributions to a retirement plan, it’s recommended you contribute the full amount they will match. Contributing the maximum amount can also help defer taxes.
You can also save an emergency fund to cover 6 or more months of expenses, to help you feel more secure once retired.
- Risk vs. Return: What return are you expecting, and what risks are you willing to take to receive that return? To take a high risk, you must have a reasonable chance of the desired return.
- Asset Allocation: Select assets from different categories. A combination of stocks, bonds or mutual funds can reduce risk. If one type of asset isn’t performing well, having investments in other assets can reduce losses.
- Diversification: Don’t invest everything in the same stock – diversify your investments to prevent losing all your invested money.
- Monitor Your Investments: Look over the trading records. Make sure trades went through at the right time, and make sure your investor didn’t overcharge commission. Keep these documents to support you should you need to protest a trade. Watch your investments so you know whether they are growing or not, and reinvest if needed.
- Professional Help: Consult a professional to help you evaluate risks and find the right investments. However, don’t let a professional talk you into investing more aggressively than you feel comfortable with.
- You may face large risks if you seek a high return. You could possibly lose your entire initial investment.
- Not all assets can be sold easily. Pay attention to fees for selling early, and maturation dates for assets.
- A stock may deviate from its previous pattern.
- The media coverage that the company receives can positively or negatively affect your investment.
- Trade through your brokerage firm.
- Don’t make purchases from phone solicitations.
- Don’t write personal checks directly to the sales representative.
- Review monthly statements for errors or unusual charges.
- If a sales rep does something suspicious, contact the branch manager.
- Starting too late: Compound interest is powerful, so start early to reap the most benefits.
- Paying high fees: Commission charges can easily cancel out any interest you’ve earned.
- Investing emotionally: Planning, reason, and tried-and-true strategies lead to successful investing. Don’t try the newest, most exciting strategy just because it sounds good.
- Not investing with your own needs in mind: Don’t blindly follow a plan. Your portfolio should be tailored to your needs.
- Not factoring in taxes: Net profits from stocks are taxed as capital gains. A tax-deferred investment account can help protect the money you’ve earned.
- Taking big risks: Huge risks can pay off, but they can also backfire at your expense.
Total return is the amount of money that a fund makes after reinvesting and receiving dividends is the total return.
The amount an investment pays each year is the yield. Typically this is a percentage of the market price of the investment. This amount does not factor in appreciation.
An annuity is an insurance contract. The insurance company will invest in stocks and bonds on behalf of the purchaser using tax-deferred money. When the purchaser turns 65, they will begin to receive payments. These payments change depending on the value of the securities, but the purchaser will receive payments until their death.
Annuity contracts can be subject to extra costs, like commission and surrender penalties, so read the contract thoroughly.
Tax rates will depend on whether the annuity is qualified or non-qualified. A tax qualified annuity funds a qualified retirement plan. Taxes will be deferred during the gestation period, and taxes will not be applied until the funds are withdrawn. A non-qualified annuity is purchased with after-tax dollars, but taxes will still be deferred on the amount saved.
Yes, it is crucial to plan for financial separation if you are considering a divorce. All financial assets and liabilities will need to be divided. Support for the custodial parent of your children should also be accounted for.
You’ll need to spend some time assembling an inventory of your financial situation so you can effectively plan for payment of debts and division of assets.
- List all debts accumulated during the marriage, joint or separate, and plan for their payment. This will include mortgages, credit cards, auto loans, and other liabilities. It’s best to pay any joint debts before divorce if possible.
- List all assets, joint and separate.
- Home or other real estate
- Value of investments
- Valuables such as antiques, jewelry, furnishings, luxury items, etc
- Balance in all bank accounts
- Locate the past few years’ tax returns.
- Find the exact amount of income for each spouse.
- Track down records for life insurance, health, pension, and retirement benefits.
Outlining the full financial situation gives you a better starting point to plan for the division of these debts and assets.
Immediately cancel all joint accounts. Creditors can legally pursue both joint owners, regardless of who accumulated the debt. As long as the account is open, creditors will hold both of you responsible. Late fees will be reported in both names, which can seriously harm your credit history.
You may be required to pay the full amount upon closing the account. You can ask the creditor to split the balance between two separate accounts if you can’t pay off the full amount.
The agreement reached during the divorce can specify who will pay these bills.
You can separate your credit history from your spouse’s with a bit of work. If you can prove that the shared accounts were opened by your spouse prior to marriage, and that your spouse pays the bills, you might be able to convince the creditor that the damaging information is relevant only to your spouse. Convincing creditors takes time and persistence.
To avoid additional inconvenience in a divorce, keep credit in your own name. Don’t use your spouse’s name (Mrs. John Doe) for any type of credit.
If the divorce causes the name on your account to change, your loans may be reappraised and you may even have to reapply.
Get an updated credit report, and ensure that your name and your spouse’s name are being reported correctly. Check for any incomplete or incorrect information in your account. Incorrect information can be corrected by writing a letter to the credit reporting agency. They must confirm receipt of your request and inform you when the mistake has been corrected.
- Once divorced, you’ll file separately.
- Child support is not taxable, and also not deductible by the payer.
- Alimony is taxable for the recipient, and deductible by the payer.
- Property settlements are not taxable in accordance with the divorce. Transfers of assets between the spouses are not taxable income, gains, losses, or deductions.
These plans are separated as non-taxable if in accordance with the order of the court. However, if the accounts are allocated, they will be taxed for the recipient. When divided, the payer may not deduct the amount and the recipient will not have taxable income.
No, but some fees for advice regarding income & estate taxes may be deductible. Fees for deciding the alimony amount and collecting alimony may be deducted.
The custodial parent usually has the right to the deduction. This is decided in the divorce agreement and the non-custodial parent may only accept the deduction if it’s agreed to in writing.
Unmarried couples don’t inherit each other’s property automatically. Married couples are often protected by state intestacy laws, even if they don’t have a will, so the survivor of a married couple will inherit at least a portion of the deceased spouse’s property.
Unmarried couples don’t have the right to speak for each other in a medical emergency. For example, if your partner loses consciousness or capacity, someone will have to make medical decisions. Unless you’ve filed certain paperwork, you aren’t legally able to make those decisions.
Unmarried couples can’t handle the other’s finances in a crisis. Married couples with joint assets are less affected by this issue.
- Both of you should create wills. This will help ensure proper distribution of your assets, and protect each partner’s rights.
- Consider joint ownership of property. This can guarantee that the property passes to the other owner if one partner dies.
- Create power of attorney for each partner. This permits your partner to sign checks and papers and handle financial affairs for you if you become incapacitated.
- Create a health care proxy, or medical power of attorney, as well. This allows your partner to make medical decisions for you if you become incapacitated.
- Create living wills, so that each partner’s wishes are known regarding artificial feeding and other life-extending measures.
Once married, you can file a joint tax return. This makes the filing process simpler, but your tax bill may be higher since more of your income could be taxed in higher tax brackets when filing jointly.
You cannot avoid the marriage tax penalty by filing singly.
Life insurance will provide benefits for your children, dependents, or beneficiary, so married couples often require more life insurance. If you have someone depending on your income, you should purchase life insurance.
Yes. Failing to update your will may leave your beneficiaries without the benefits they are entitled to.
Yes. Ways of holding joint property vary by state.
- Sole tenancy: One individual has ownership, and property is passed on in accordance with their will at death.
- Joint tenancy with privilege of survivorship: Two or more people have equal ownership, and property is passed to the joint owner upon death. Essentially avoids probate.
- Tenancy in common: Property has joint ownership with privilege of survivorship. Property is passed down in accordance to the will upon death.
- Tenancy by the entirety: Similar to joint tenancy with privilege of survivorship. This is only possible for spouses, and prevents the spouse from getting rid of the property without the other’s consent.
- Community property: Available in some states. Property gained through marriage with equal ownership.
Hiring an Attorney
It’s good idea to hire an attorney if:
- It’s a difficult legal dispute
- The dispute will be solved in court
- Significant time, money, and property are at stake
If your situation doesn’t fit the above description but you’re still not sure, consider some other options. See if there is a book or guide you can use to help resolve the issue, or seek out reputable legal advice from another source. A non-lawyer organization may be able to help you through the process.
See if you can get a recommendation from someone you trust, like a friend, doctor, or even your bank. You can also check the referral lists by the Bar Association, or find a referral service for your specific problem. Check how the referral service selects lawyers if you choose to use one. Once you have a list of candidates, research and speak with the attorneys until you’ve found a good fit.
- Look for flat fee deals for routine cases.
- Discuss the hourly rate, and how it’s charged. Obtain a written agreement for the hourly rate and work to be performed.
- Find an attorney that has worked on cases like yours. It saves time spent researching and filing paperwork.
- See if you can help them with anything to lighten their workload.
- Minimize their role. If you only need their help on one aspect, they may be willing to work out a lower rate.
- Hire a lawyer for advice and coaching, but represent yourself in court.
- Be prepared for meetings and phone calls. Minimize the time they spend looking up information for you, and make sure you ask all the questions you need at one time.
- Be truthful. Again, this saves time and money.
- Communicate changes in the situation as soon as possible.
- Ask for regular invoices, and if you’re not sure about something on an invoice, contact your attorney.
There are books, classes and conferences that can give you the knowledge to solve some legal disputes. There are many processes for resolving a legal dispute without legal help.
- Have an attorney give you advice or proof letters, but not represent you fully in the dispute.
- Simply negotiating with the other party can resolve many disputes. Use a book or other resource to learn the process of negotiation.
- There are dispute resolution centers for certain types of disputes, which offer mediation and/or arbitration services.
- In mediation, a third party helps the two parties discuss the issues and hopefully come to an agreement.
- In arbitration, a third party finds a resolution after hearing both parties present their side of the dispute.
- If the damages don’t exceed a certain limit set by your state, you may file in small claims court. You will act as your own lawyer, so be prepared to gather evidence, research relevant laws, and present your story in court.
Compare prices and services offered by different providers, and see if you qualify for discounts. Set your deductible as high as you feel comfortable with, this will lower your premiums. It’s often cheaper to insure your home and car with the same company.
Make sure you’re covered for natural disasters that may happen in your area, and ensure you’re covered for rebuilding costs, not just the current value of your home. Take inventory of the possessions in your home. This will make replacing items easier. If you make changes to the home, notify your agent. Check for any limitations on your coverage.
A security alarm system or a sprinkler system for fire prevention may reduce your rates. Speak with your insurance company to find out how much you’ll save – it may not offset the cost of installing these systems.
If you have a spouse, child, or other dependent relying on you, you should have life insurance. Life insurance can provide income for your family and helps cover your burial & funeral expenses. You may choose what to do with your payout – it can go to family, charity, or anywhere you choose.
If you have a spouse and young children, you will need a large amount of life insurance to support your children until they are no longer dependents. If both you and your spouse provide income, you should both take out life insurance in proportion to your income.
If have a spouse, but no dependent children, you’ll want enough insurance to provide for your spouse and cover burial costs & any debts you have. If you have no spouse and no children, life insurance can still cover burial costs and help distribute your estate.
There are 7 types of life insurance:
- Term: You pay for a policy over a certain period of time. If you do happen to die during that period, your family will receive benefits. This type of plan can transition to whole-life coverage without a mandatory physical.
- Renewable: The policy automatically renews every year. You don’t have to submit any new information or have physicals. This continues every year until you’re in your 70s, and the policy increases each year.
- Re-entry: You’ll have to take physicals periodically so the company can assess your rate of risk. If you don’t take the physicals, your premiums will go up.
- Level: Your premium will be locked at a certain rate for a certain time, however, not necessarily for the entire period of coverage.
- Decreasing: The face value of this policy decreases over time, but the premium remains the same.
- Whole Life: Cash value builds up, dividends may be offered, and death benefits are provided. The policy continues until death, does not need to be renewed, and coverage won’t be ended unless you fail to pay the premiums.
- Universal Life: This plan is like whole life coverage, but with more flexibility in cash value growth and how you pay premiums.
- Variable Universal: You choose the investments for your cash value. This is riskier but gives you more control.
- Variable Whole Life: Like the above, you control the investments made. Like Whole Life, you have less flexibility in cash value growth and methods of paying premiums.
There are four categories insurers use:
People with semi-serious illnesses can still take out life insurance, they’ll just pay a higher premium. Chronic illnesses and high-risk professions or hobbies will put a person in the substandard category. A person with a terminal illness will be uninsurable.
Different companies may place you in in different categories, so your premiums can vary greatly depending on your insurer. Once approved, the insurer cannot end your coverage unless you fail to pay.
Beware of salespeople – they are often paid on commission. Don’t let a salesperson push you into a plan that doesn’t fit your needs. Check the insurer’s rating, as you want to be sure the company will still exist when your family needs the policy’s benefits. Compare costs and commissions between insurers to find the best fit.
Most states have certain rules set by insurance regulators, which require agents to calculate these two indexes to help you price shop: Net payment index, and surrender cost index.
If you’re concerned about the death payments, look at the net payment index. A lower number means the plan is less expensive. If you’re curious about the cash value of the plan if you surrender it, look for a low surrender cost index.
Limited Liability Companies
LLCs are good for those who are concerned about personal exposure to lawsuits related to your company. The LLC organization type protects you from liability in these claims. Some organizations cannot be run as an LLC, like those in the banking, trust, or insurance industries.
LLCs both limit liability and grant pass-through tax status. This allows for more loss deductions and distribution of tax benefits between owners. Taxes are lowered or eliminated when a new owner joins the business, and if the business is liquidated. Depending on the state, an LLC may have a single owner.
The LLC operating agreement specifies the working & financial relationship between the co-owners. It defines the percentages of ownership for each owner, rights and responsibilities of each member, shares of gains and losses, and a plan for the business should one owner leave.
Showing that attention was given to the organization of the LLC may make courts more likely to respect personal liability limitations. The written agreement can prevent conflict or misunderstanding regarding financial management. And, each state has default rules of operation for LLCs – create your own, so you’re not subject to default rules which may not serve you.
Yes. An owner may be held personally responsible if he or she: does something purposely illegal or clearly wrong, fails to deposit taxes withheld from employee wages, or personally injures someone.
One exception in particular is extremely important. If the court finds that the members of the LLC acted as individuals, they may declare that the LLC isn’t real. There are steps you and your co-owners can take to avoid this outcome:
- Act legally, be rational. Don’t hide facts or misrepresent your finances to any third party.
- Make sure you have sufficient funding to meet expenditures and possible liabilities.
- Keep the LLC and any personal business completely separate.
- Create and follow an operating agreement.
If you find yourself without limited liability protections for your personal assets, you can look into liability insurance. This insurance can protect some corporate assets and personal assets from claims and liability.
Yes. Paying as much as possible each month will greatly reduce the total amount you pay, but there are certain disadvantages to prepaying.
- If you don’t have enough saved to cover 3 to 6 months of expenses, it would be best to save that amount before paying additional amounts on the mortgage.
- If you have high credit card debt, you’ll save more money by paying down those debts first, since credit card debts usually have high interest rates.
- Sometimes, the additional amounts would be more beneficial if invested.
Some interests are deductible – some partially, and some fully.
- Education-related interest
- Business interest
- Investment interest
- Mortgage interest
You may wish to speak with a financial advisor regarding the specifics of these deductions.
It is potentially a large financial burden, since a co-signer accepts the same legal responsibility to pay the loan back if the borrower defaults.
In the case of a default, the co-signer usually pays back the remainder of the loan as well as any late fees or legal fees associated with the default. This can have a negative impact on the co-signer’s credit. The lender may go after the co-signer at any time, but typically they won’t go after the co-signer until the borrower defaults on the loan.
If you do agree to co-sign, see if the lender will agree to only collect from you if the primary borrower defaults. Ensure that your liability is limited only to the unpaid remainder of the loan, and not additional fees.
The Truth in Lending Act obligates the lender to provide a written statement outlining all the costs of the loan and the terms of financing. The statement must be delivered before the settlement. The disclosure will include information about your loan, the finance charge, the amount financed, and the payment schedule, so review it thoroughly before you sign.
A reverse mortgage allows you to take advantage of a portion of the equity currently built up in your home. It works the same way as a standard mortgage, in reverse. So, you’ll receive payments monthly rather than having to make payments monthly.
The payments could be used to supplement income, pay down medical costs or debts, cover education expenses, prevent foreclosure, or allow the homeowners to retire.
Unlike a home equity loan, as long as you own the home, you won’t have to pay back the lender.
If the homeowner sells the home or dies, the home must be paid off. If sold, the remainder of the home’s equity is passed on to the rightful heirs.
A home equity line of credit allows the homeowner to borrow and use their home as collateral. A home equity line of credit is often used for large expenses, like a child’s college education or unexpected, expensive bills.
Upon receiving the home equity line, you’ll be approved for a certain limit. This is the maximum amount that may be borrowed at any given time for the duration of the plan. The lender may set the limit as a percentage, based on the value of the home and the amount owed.
Once the line of credit is approved, you’ll be able to borrow, usually through checks. Sometimes, a borrower may be given credit cards to use the borrowed money, but there may be spending minimums for these credit cards.
A traditional second mortgage gives you a set amount of money, which is paid back over time or due in full by a certain date, and the rates are usually fixed. A home equity line of credit usually has variable rates and you can borrow as needed, in the amounts you need.
The APR is also calculated differently for each: For a second mortgage, the APR calculation factors in the interest rate, points, finance charges and other fees, while a home equity line’s APR is calculated only using the periodic interest rate.
It depends. You’ll want to be sure the current market rate is at least 2 points lower than the rate on your current mortgage. Speak to lenders to see what rate you can get.
Don’t forget to consider additional fees and costs. After considering all the costs, get a quote of your total payment after refinancing. If you want to find out how long it will take to recover the costs of the new loan, divide the closing costs by the amount you’ll save each month on payments.
If you’re planning to sell the home soon, it may not be worth the additional financing costs.
- Compare both APR and additional fees across multiple lenders. The APR for home equity loans or lines of credit does not include the total fees associated with the loan, like closing costs.
- Most home equity loans have a variable rate, based on a publicly available index, like the prime rate or the U.S. Treasury Bill rate. If the rate is linked to an index, find out which index, and check what their margin is. Companies may have a limit on how much the interest rate can fluctuate over a certain period of time.
- Be cautious of discounted introductory rates – they can fluctuate, unless it is stated that the rate is fixed. A lender may draw you in with a great starting rate, which can then rise to a rate far greater than what you agreed to.
Long-Term Care Insurance
Long-term care insurance guarantees that you’ll receive payments to cover care (like assisted living or nursing homes) for a certain period of time. Indemnity-type long-term care insurance offers more flexibility than other types. This type of insurance pays caregivers directly, and you’ll receive the daily benefit directly as well.
Premiums rise with the age of the insured individual, so you’ll receive a lower price if you purchase this insurance at a younger age.
Over a third of Americans will need to be in a nursing home or assisted living facility eventually. However, there are differing opinions on whether long-term care insurance is worthwhile.
Long-term care insurance premiums can be costly, but it can also save you a sizable amount long-term. Some policies provide coverage for home care, allowing you to remain in your home for as long as possible. If a policy doesn’t provide enough money to support you and cover your in-home help, you could be forced into assisted living.
If the insurance is too expensive, you can also consider applying for Medicaid.
- See if your policy allows for personal, at-home help so you can continue living in your home for as long as possible.
- Make sure the plan covers more than the bare minimum. Some policies only cover expenses which are medically necessary.
- Protect yourself against inflation. You may be able to add a clause to the policy which causes your payout to raise a certain percentage per year, to cover costs of inflation.
- Be aware of the duration of the policy. A 5 year policy may be more than you need.
This period is the time you’ll have to wait from when you can receive the insurance (when you start receiving long-term care), to when you actually receive the benefits. This period of time is usually negotiable. The longer you decide to wait to receive the benefits, the cheaper your premiums will be.
- Make sure the policy can be renewed each year.
- Make sure that if you’re disabled and able to work part-time, you’ll still receive benefits.
- Set your elimination period to 3 to 6 months to keep your premiums low, and save a reserve for that 3-6 month period.
- Make sure you can receive benefits up until the age of 65, when retirement funds kick in.
Yes. Limited liability companies (LLCs), limited partnerships, limited liability partnerships (LLPs), and corporations all limit liability in some way.
A corporate double tax occurs when a business entity is taxed on its income, and its owners then pay taxes again when collecting corporate profits. An entity taxed in this way is a C corporation. To avoid this double tax, become an S corporation to eliminate federal tax on the entity as a whole, or defer the second tax on the owners by suspending profit distribution.
A pass-through entity is best, as it eliminates taxes on the entity as a whole. Instead, owners of the entity are taxed on the profits they own. Owners can make deductions for startup or operating losses. The most common pass-through entities are limited partnerships, LLPs, LLCs, S corporations, sole proprietorships, and general partnerships.
A partnership or LLC can qualify to be treated as a corporation for tax purposes. You may choose S corporation status if your business is a corporation, or treated as one. This decision is binding, so consider it carefully.
Malpractice liability is the biggest concern. You cannot be protected again malpractice liability in your own practice, however, there are protections against malpractice liability for co-owners. Professional limited liability companies (PLLCs), LLCs, or LLPs should be used if possible. Professional Corporation status may or may not protect you from co-owner malpractice, depending on your state’s laws.
A change of entity status can have large, long-term tax implications. Planning is needed to avoid extra taxes on the event. It’s best to coordinate with a professional before making any changes to your entity status.
First of all, contact the seller. Approach them with evidence: canceled checks, receipts, photos of the problem, warranties, or contracts. Perhaps you want the item replaced, but you may just want an apology. Regardless, determine what you need to resolve the issue. Call the store or service provider to schedule a meeting with the manager or other appropriate representative. Describe the issue in detail and tell them what your goal is. Keep track of dates and names for any meetings or phone calls. If there’s a warranty on the product, it may be better to contact the manufacturer instead of the seller.
If the above failed to resolve the issue, seek out a consumer complaint agency. The city or state consumer protection agency, local Better Business Bureau, or an industry trade association are good places to start. Who to contact for specific issues:
- Banks: State-banking regulator
- Insurance: State insurance regulator
- Securities: Securities regulator
- Utilities: Public utility commission
- Licensed trades, like plumbers: State-licensing department
- Used cars: State consumer protections agency
- Mail order/mail fraud: Area postal inspector
When the above options fail, you’ll have to file a lawsuit, or a case in small claims court if the amount is small. Often, simply having an attorney draw up a letter outlining the lawsuit to the service provider or seller leads to resolution of the issue. You won’t need a lawyer in small claims court, but in the case of a lawsuit, you should hire a lawyer.
- Check if the utility offers subsidies for energy-efficient homes. If not, you can still cut some costs by re-sealing windows and checking your insulation.
- Switch from incandescent bulbs to fluorescents or LEDs to save on electricity.
- Keep the thermostat as low as comfortable in the winter and high as comfortable in the summer.
Accurate and thorough record-keeping is a necessity for a successful business. It provides you with the data needed to identify strong and weak cycles, your business assets, and your income and expenses. You’ll also need current records to prepare financial reports. Proper recordkeeping will help you prevent under- or over-paying your taxes. These records are also extremely important in the case of an audit by the IRS.
Financial records should include income, income projections, accounts receivable and their balances. Record the amounts you owe for utilities, rent/lease, merchandise, equipment, advertising, payroll, payroll taxes, facility maintenance, and benefit plans. Indicate how much cash is used for inventory, how much cash is on hand, which products are turning a profit, and your gross and net profits.
The most basic record keeping system would be a journal which contains transactions, payroll records, accounts payable records, inventory records, and petty cash records. An accountant can help you create a full recording keeping system, and teach you how to update these records.
Financial records are very important, as they are the basis for your financial statements and tax returns.
To determine your needs, think of all the areas of the business where large amounts of data must be handled quickly and accurately. Consider the different reports and forms that need to be generated from that data. Then, try to find software that meets your reporting needs.
Specialized software is available for many facets of a business, including accounts receivable, payroll check writing, and inventory reporting.
- Introduce the company. Include the company’s legal status. Describe the company itself, your staff’s experience, the management structure, and your objectives. Explain what makes your business different from the competition.
- Explain your market. List the products/services offered by the company. Describe your market, its location, and its size.
- Describe how you will manage your finances. State the source and amount of initial equity capital. Prepare a monthly operating budget for the initial years. Show the point at which you’ll break even using balance sheets and income statements. Outline how accounting affairs will be managed.
- Detail your day-to-day operations. Provide details regarding insurance coverage, lease/rent agreements, staff- and employment-related processes, and production processes.
- Restate your objectives & methods. State your objectives again, and reinforce your proposed methods.
Many of the same laws which apply to normal businesses also apply to home businesses. Speak with a lawyer and the Department of Labor for your state to learn which laws and regulations will apply to your business.
You may need to obtain: a separate bank account for the business, a separate business telephone, a work certificate or license, and a sales tax registration number.
If you have employees, you’ll be held responsible for social security taxes and income withholding. You’ll need to observe all health & safety regulations and minimum wage requirements.
Certain products can’t be produced in a home due to zoning regulations. Explosives, fireworks, drugs, poisons, toys, and sanitary or medical products cannot be produced in a home-based operation. Some states prevent home production of other items, so check your state’s laws.
You must plan ahead for the transfer to be successful. You’ll want to create strategies for all aspects of the transfer.
- Family: Establish the family members’ roles in the company, taking into account each member’s desired level of responsibility.. Explain what is important to the family in relation to the business. You may wish to create a procedure for family members that leave or enter the company.
- Business: Set some agreed-upon goals. Make sure everyone knows the direction of the company.
- Succession: Create a plan for the transition to the next generation. Explain how you’ll decide when the next generation is prepared to run the company.
- Estate: Without an estate plan, the business may be subject to far higher estate taxes, which disadvantages the successors. Plan for a tax-effective transition.
Most importantly, learn the basics of accounting. An understanding of accounting principles will help you manage your cash flow better.
You should keep enough cash on hand to cover bills and cover emergencies.
Understand your operating cycle. This is a typical operating cycle:
- Buying inventory.
- Accounts receivable and cash sales make up your total sales. Accounts receivable are usually paid 30 days from purchase date – this applies to both your sales and inventory.
- Inventory payment. Once inventory payments go through, your cash and accounts receivable are lessened.
- Receivables collected. When you collect your receivables, your cash is increased. At this point the operating cycle has come full circle.
You can determine whether cash flow is sufficient by analyzing the operating/cash flow cycle. You’ll be able to see whether there is a net loss or gain, and which inflows and outflows are causing the losses or gains. Monitoring the cycle over time will alert you to changes in the cash flow.
Stocks are traded in lots. A round lot is 100 shares, any other number of shares is an odd lot.
The majority of stocks are common. Preferred stocks have certain advantages: you will not have a right to vote like normal shareholders, but your dividends are set. Dividends from common stocks depend on the performance of the company.
Yes. These companies must follow the same rules as U.S. companies, and they must register their securities with the SEC.
Travel & Entertainment
Rarely. Usually, you may only deduct the cost of meal if traveling on business, or if you’ll be out of town overnight. Only 50% of the meal cost, including tip, may be deducted.
If you return unused reimbursement, you should provide your employer with a detailed spending report, as well as meet some other requirements.
Deduction limits are not obligatory for you, as an employee, and will not affect your travel, entertainment or meal costs.
If you’re being reimbursed by your employer, you’ll need to provide an expense report, and return any excess funds. If the place, time and purpose are verified, per diem plans or mileage allowances may be used in place of detailed accounting. Record your expenses as soon as possible.
The IRS only requires detailed accounting in these cases if: you aren’t fully reimbursed, or if you fail to return excess reimbursement.
There is no dollar limit on these expenses, however, these expenses should be necessary, ordinary, and reasonable. The deduction may not exceed 50% of the costs.
Other limits apply for luxury expenses.
- Accommodations and meals. There is a 50% limit on meals.
- Costs of transportation, or a per-mile rate if traveling in your own vehicle
- Phone and fax costs
- Laundry and baggage handling
- Tips given for any above services
Worker’s compensation applies to injuries that occur on the job location. Coverage varies by state, but most will pay out for the lifetime of a worker if they are permanently disabled. Contact your state’s Department of Labor if you need information on worker’s compensation.