# Tuesday, December 30, 2008
It Pays to Stay Alive in 2009!
No respirator plugs are likely to be pulled this month as the federal estate-tax exclusion is scheduled to jump to $3.5 million from $2 million so far this year. The new $1.5 million hike in exclusion could translate into hundreds of thousands of dollars in tax savings for heirs of wealthy benefactors who can stay alive until New Years Day.

The debatable so-called “death tax” has more and more affluent Americans keenly planning their health. In fact, many believe it’s just as important to have a good lawyer for estate planning as a cardiologist for their health care. There’s an even bigger incentive to survive until 2010 too when federal estate tax is expected to disappear entirely before reappearing again in 2011 with a $1 million exclusion.

Obama’s presidency is also expected to result in a $3.5 million exclusion in 2009 and thereafter with a top rate at 45%. The plan is ultimately expected to repeat the estate tax for 99.7% of households and the new changes would be made permanent in order to add some stability to the tax code. In the end, that just means that the rich may want to stay alive for just a few more years…

Tuesday, December 30, 2008 6:44:37 PM UTC  #    Comments [696]  |  Trackback
# Monday, December 29, 2008
Are Reverse Mortgages a Good Idea?
Reverse mortgages are portrayed as a great way for elderly people to extract value from their home in order to fund their retirement. Homes with lots of equity can be liquidated into cash with very little risk, providing funds that can help during tough times during retirement. The downside of course is that the heirs to the home will receive less or none of the remaining home value.

The U.S. Department of Housing and Urban Development (HUD) recommends that interested people consider the following 10 points, however:
  1. What is a reverse mortgage?

    A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD's reverse mortgage provides these benefits, and it is federally-insured as well.

  2. Can I qualify for a HUD reverse mortgage?

    To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

  3. Can I apply if I didn't buy my present house with FHA mortgage insurance?

    Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

  4. What types of homes are eligible?

    Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

  5. What's the difference between a reverse mortgage and a bank home equity loan?

    With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

  6. Can the lender take my home away if I outlive the loan?

    No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.

  7. Will I still have an estate that I can leave to my heirs?

    When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs.

  8. How much money can I get from my home?

    The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

  9. Should I use an estate planning service to find a reverse mortgage?

    I've been contacted by a firm that will give me the name of a lender for a "small percentage" of the loan? HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

  10. How do I receive my payments?

    You have five options:

    Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

    Term - equal monthly payments for a fixed period of months selected.

    Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.

    Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.

    Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Monday, December 29, 2008 4:23:36 PM UTC  #    Comments [5]  |  Trackback
# Friday, December 26, 2008
Credit Card Crisis May Replace the Mortgage Crisis in 2009
The mortgage crisis may soon be replaced by the credit card crisis and more Americans are defaulting on their credit cards. After years of flooding the mail with credit card offers and towering credit lines, lenders are now sharply curtailing both offers and lines of credit in an effort to preserve capital after writing off more than $21 billion in bad credit card loans in the first half of 2008 alone.

Many experts expect the credit card industry to write off an additional $55 billion over the next year and a half as total losses could surpass the 7.9% default rate reached after the technology bubble burst in 2001. Lenders have been quick to react by hiking fees, cutting reward programs, and decreasing their credit lines even among wealthy customers.

Credit card companies are realizing that they need to cut back sharply as there is no room for extra credit cards. People are completely maxed out with mortgages, home equity lines, and credit card debt. When forced to decide whether to pay a mortgage and lose a house or default on a credit card, it is often an easy decision for cash-strapped consumers to make.

Those that want to preserve their credit scores, however, may want to look into alternatives to simply defaulting. One of the best ways to get your bills paid reasonably is negotiating with your creditors. This can be done personally by calling them up or via professionals through so-called debt settlement companies.

Friday, December 26, 2008 6:08:47 PM UTC  #    Comments [72]  |  Trackback
# Tuesday, December 23, 2008
How to Get an Extension on Your Taxes
The United States is in one of the worst recessions in its history and its citizens are feeling the pain. With rising credit card delinquencies and bank foreclosures, taxes might be low on the list of concerns at the moment. Those that need more time to come up with their tax money may want to take a look at filing a tax extension to allow more time to pay their bills. So, how can you get an extension and how much might it cost you to delay?

Consumers can get an extension by filing Form 4868 with the IRS. Submitting Form 4868 by April 15th will give you an extension to October 15th to file your return. A late filing penalty will not be imposed if you fail to submit a payment with Form 4868, provided you make a good faith estimate of your liability based on information and paid 90%+ of the amount owed. The penalty is typically 0.5% of the unpaid tax per month.

Consumers who owe $10,000 or less and cannot pay their taxes may also want to consider filing a Form 9465 installment agreement. You must show that full payment cannot currently be made, and that in the previous five years you filed income tax returns and paid the tax, and did not enter into installment agreements during that period. The late penalty is also reduced to 0.25% from 0.5% per month. Combined, these are the options available to those who have trouble paying taxes.

Tuesday, December 23, 2008 4:39:13 PM UTC  #    Comments [10]  |  Trackback
# Thursday, December 18, 2008
Think Twice Before You Buy a Gift Card
The National Retail Foundation said that gift cards are the most requested gift again this year, which should come as no surprise given their popularity since being introduced. However, consumers thinking about purchasing these cards for their loved ones may want to reconsider. It may be convenient to give a gift that will always be the right size and color, but there is some risk involved that must be considered.

Research by the Tower Group found that gift card holders lost more than $100 million this year alone. Big stores filing for bankruptcy, including The Sharper Image and Linens ‘N Things, led to the majority of the losses while more may be on the horizon. Circuit City, which filed for bankruptcy a few weeks ago, asked and received court permission to honor its gift cards, but others may not be so lucky.

Some gift cards also have design flaws that could make them less valuable. For example, some gift cards have expiration dates where the value becomes worthless if it’s not used. Meanwhile, other cards, notably those provided by Visa and MasterCard, charge fees if they are not used that can add up to a few dollars a month. Both of these attributes make gift cards far less attractive than cash or actual gifts that do not lose value.

So, think twice before you buy your loved one a gift card this holiday season…

Thursday, December 18, 2008 7:50:54 PM UTC  #    Comments [533]  |  Trackback
# Monday, December 15, 2008
5 Ways to Reduce Your Tax Debt
The past year has been a rollercoaster ride for many U.S. citizens with markets moving up in the first half only to plummet in the second. As a result, many independently employed people, such as real estate investors, are sitting on a mountain of tax liability despite heavy losses. This tax debt can be difficult to deal with, but here are some tips on setting up payment plans and reducing the amount you owe.

There are five strategies to get out of your IRS problems:
  1. Installment agreement: The IRS lets you setup a monthly payment plan for paying off the amount that you owe.
  2. Partial payment installment agreement: The IRS recently setup a new program where you have a long-term payment plan to pay off the IRS at a reduced dollar amount.
  3. Offer in compromise: The IRS has a program where you can settle your tax debts for less than what you owe if you make a lump sum payment or accept a short-term payment plan.
  4. Not currently collectable: A program where the IRS voluntarily agrees not to collect on the tax debt for a year or so.
  5. Filings bankruptcy: Tax debt can be eliminated under the strict rules of a Chapter 7 or Chapter 13 bankruptcy petition.
It is important to consider the long-term ramifications of any actions that you take. Payment plans put a financial burden on you going forward and may involve paying interest. Meanwhile, a bankruptcy may eliminate your debt, but it will also hurt your credit rating over the long-term. This could make it more difficult to get home or car loans in the future.

Monday, December 15, 2008 5:34:03 PM UTC  #    Comments [153]  |  Trackback
# Friday, December 12, 2008
How to Save on Prescriptions

Those reaching retirement age may not have to save up for a car anymore, but they are digging deep to pay the increasing costs of prescription drugs. More than half of all insured Americans are now taking at least one so-called maintenance drug for a chronic condition, according to a recent report.

The increased demand has lifted the price of such brand-name medications some 2.5x faster than the rate of inflation last year. Luckily, there are many ways to lessen the pain without resorting to shady practices like traveling to Canada or Mexico and smuggling drugs (prescription that is) back into the U.S.A.

Many discount chains have begun selling their own prescription drug programs to provide an alternative. Wal-Mart began selling 30-day supplies of generic drugs for just $4 each and recently unveiled another plan providing a 90-day supply of generics for just $10 (or your co-pay if it's less).

Another growing trend is mail order pharmaceuticals. Some employers are now requiring their workers who fill the same prescription for three months in a row or more to order 90-day supplies from an approved mail-order company. It is wise, however, to check out these companies before using them as many are sketchy.

These two alternatives are becoming increasingly popular as insurers are raising co-pays on brand-name drugs. Generics have always been cheaper than brand-name drugs, but it has been increasingly costly to insit on a brand-name. The average co-pay for a brand-name drug is now $43 compared to just $28 in 2001.

So, the next time you hit the store to fill your prescription, ask yourself if there is some way you could do it cheaper!

Friday, December 12, 2008 8:54:36 PM UTC  #    Comments [569]  |  Trackback
# Thursday, December 11, 2008
5 Tips to Save More Money
The savings rate in the United States has traditionally been negative since the Great Depression fears ended. However, consumers are now experiencing the same thoughts and feelings of their ancestors and are looking for ways to save. So, what are some good ways to boost your savings and have more cash down the road? Here's five tips that we've found to be most effective:
  1. Automate Your Savings - Setup an automatic 401(k) or IRA retirement plan, so you don't even see the money in your spending accounts. This makes it much easier to save from a psychological point of view.

  2. Use Rewards Credit Cards - Everyone has to spend money and one way to save money is to use rewards credit cards that offer you gifts in exchange for making purchases. However, be careful not to use one that has an annual fee.

  3. Search Out Deals - Getting better deals from your service providers is often as easy as asking. Competition among cable and phone companies will force them to cut your rates to compete while credit card rates and debt settlements can also be negotiated to lower rates.

  4. Drive Smoothly - Breaking and speeding can add up quickly in the cost of gas for your auto. As a result, driving with cruise control and hot speeding in the city can help you save money on your gas bill.

  5. Use Coupons or Rebates - Coupons and rebates are free ways to save money. A little extra time spent at night clipping coupons can help save a lot of money at the grocery store. Remember, $2 saved is already a gallon of gas or 20 miles or more on some cars!

Thursday, December 11, 2008 7:55:50 PM UTC  #    Comments [195]  |  Trackback