Debt Management Credit Counseling Corp (http://www.dmcconline.org), a nonprofit charitable organization (“DMCC”), provides free seminars to support South Florida school efforts to teach students financial literacy. Focusing on teaching students the importance of credit and how it works, this educational program has been a part of DMCC’s mission since 2001. Covering everything from how credit is established to how to use a credit card, DMCC speakers make the presentation fun and easy to understand. Seminar schedules are currently being developed; administrators and faculty interested in taking advantage of this free service should contact DMCC’s Education Department to reserve a date.
FEATURE ARTICLE: Buried under your dead relative’s debt?
Death is a fact of life, and when someone dies, the deceased’s family naturally may wonder what will happen to his or her mortgage, auto loan, credit card bills, unpaid income taxes and other debts.
The simple answer is that debts become part of the deceased’s estate and typically should be paid before the remaining assets are distributed to the heirs.
Beyond that, debts after death are a very complicated subject, best approached with professional help, says Martin Shenkman, an estate and tax planning attorney in Paramus, N.J.
“When somebody dies, the executor or personal representative, different lingo is used depending on which state you’re in, is charged with marshaling the assets for the estate and paying all the debts.” Shenkman says.
Exactly how debts should be paid depends on the nature of the debt, the terms of the deceased’s will and state law. For example, a loan collateralized by an asset usually stays with the asset, which means someone who inherits a house might get a mortgage as well. Someone who receives a car might get an auto loan to go with it. However, sometimes a debt may be paid off by the estate.
Executors and heirs also need to consider the possibility of hidden debts. To find out about undisclosed loans — or to ensure there aren’t any — an executor can monitor the deceased’s mail, search for P.O. boxes in the local area, review recent bank statements and speak with the deceased’s financial advisers, Shenkman says.
Credit card bills can be among the easier debts to resolve, unless the estate is insolvent. That’s because credit card companies may reduce or stop the accumulation of interest and fees on an account once they’re notified of a death. They might even, as Shenkman says, “accept a flat payment and call it a day” since they know resolving an estate can take months.
Debts also can come to light when a legal notice is published, as required by law in most states, says Michael Halloran, a wealth management adviser at Estate Strategies Group in Jacksonville, Fla.
“Before the estate can go through the court system, you have to publish, ‘Mike Halloran died, and I’m the executor or personal representative of the estate, and if we owe you anything, you need to tell me,'” Halloran says.
Creditors usually have a 60- or 90-day period in which to respond to a notice.
Jointly owned assets
Debts after death can become even more complicated if the deceased owned a business or guaranteed or co-signed someone else’s loan, Shenkman says. The estate may be responsible for such debts, depending on the ownership structure of the business and the legal wording of any loan guarantees. Again, legal advice is a wise investment.
Another complication is some assets may be shielded from certain creditors. For example in Florida, a life insurance policy is safe from most creditors, Halloran says. In other states, no assets are protected. Again, the word “may” should be emphasized due to differing state laws.
Assets transferred through joint ownership or community property generally don’t escape the rules, though collection may be more difficult for creditors, in some cases. In other cases, the asset may simply be repossessed. “Say I own a car jointly with Sue, and I die,” Halloran says. “If the bank has the collateral on the car, they can say, ‘Sue, you have a choice. Mike died, but if you don’t pay us, we are taking the car back.'”
Not enough money
If an estate is insolvent, meaning the assets aren’t enough to pay off the debts and the bequests in the will, the executor must sort out some tricky and sensitive issues. Shenkman says he’s seen an increase in such situations due to the poor economy.
“If there is insufficient money to pay off all the debts being claimed, you need to know legally what the priorities are of who gets paid or who doesn’t,” he says.
Such situations can get ugly because people may be grieving the death of the relative.
“When someone dies, it’s a very emotionally charged event for the family and loved ones. When you combine that with the potential of not getting an inheritance but instead having to deal with debt, you’re really talking about a hypercharged situation,” Shenkman says.
MONEY SAVING TIP: Keep your car as long as possible.
When possible, try to keep your car as long as possible. Find the balance between the money spent on repairs versus the monthly installment on another vehicle and choose to run your old car as long as the repair costs are low.
DID YOU KNOW…why clearance items are in the back of the store?
The clearance racks are placed in the back of almost every mall store on purpose — so you’ll be tempted by everything else more expensive in your path.
You have to pass all the new trends and displays, all the sales and promotions. Retailers are betting that your hands may be full by the time you reach that clearance area, so you will not be able to stay there and search for the better deals, says Underhill in his book.
Resist the urge: “Head to the clearance area first to find the best deals,” says Kay. “This way, you will have a frame of reference for comparing prices of similar items in other parts of the store and will be able to make smarter choices.”
Debt Management Credit Counseling Corp (www.dmcconline.org), a nonprofit charitable organization (“DMCC”), has been designated an Approved Housing Counseling Agency by the U.S. Department of Housing and Urban Development. Initial housing counseling services to include budget counseling and financial management workshops. Individuals and families who are interested in creating a budget or attending a workshop, and organizations interested in scheduling an onsite workshop, should contact the DMCC Education Department.
FEATURE ARTICLE: 8 Things You Should Shred Right Now
According to financial services consulting firm Javelin Strategies and Research, identity theft affects 11 million people a year, at a cost of $54 billion.
If you don’t want to become a statistic, a good place to start is to get a shredder.
Shredding documents isn’t just for accounting firms and people with something to hide — every day working Americans have houses full of documents containing potentially compromising information, from Social Security numbers to bank account information. To dispose of them, security experts recommend getting a good cross-cut shredder (which makes your documents into confetti, as opposed to the long strips that a determined thief could reconstruct).
Old Tax Returns: As a general rule, you should save your tax returns on the chance you get audited. But after three years, you’re in the clear — that is unless the IRS suspects you are guilty of fraud, in which case the agency can audit you as far back as it likes. “Keep three to four years of tax returns in a firebox,” says Brent Neiser, senior director of the nonprofit National Endowment for Financial Education. Shred anything older than that. The biggest concern here is Social Security numbers. Yes, that’s numbers, plural. “Your dependents’ Social Security numbers are on those, too,” points out Gabby Beltran of the nonprofit Identity Theft Resource Center.
Bank Statements: Anything with bank account numbers should be shredded, and that obviously includes your paper bank statements. That’s especially true for that box of old bank statements you just found in your attic that you don’t know why you kept in the first place. To avoid having to shred your statements every month, some experts recommend just making the switch to online statements. “We recommend people turn off bank statements and get as many as you can via email,” says Phil Blank, managing director of security, risk and fraud for Javelin. “The most commonly perpetrated means of defrauding people is to steal things out of their mailbox.”
Credit Card Offers: Unless you’re going to actually take the bank up on its offer and open an account, you should destroy these mailed offers right away. “A lot if identity theft happens within families, so don’t leave them lying around,” warns Neiser. “Somebody in the house who knows your basic information could fill it out.” Whether you need to shred or simply rip up the offer is a matter of disagreement among advisers though. The priority is making sure someone doesn’t open a card in your name, but since there shouldn’t be any information like your Social Security number on these offers, you probably don’t need to obliterate them into tiny pieces. Still, tearing it up may not be enough to stop someone from opening up a credit card and shredding your credit rating. A couple years ago, MainStreet reported on someone who tore up a credit card offer, then taped it back together, sent it in and got a credit card from Chase.
Old Photo IDs: Maybe you like to save your old college ID and security badges from previous employers for sentimental reasons; we won’t begrudge you a little scrap booking. But if you want to dispose of them, consider using a shredder. While a photo ID alone isn’t enough to steal your identity, keep in mind that the ID — and the information it contains — could be used as part of a larger identity theft scheme to bypass fraud prevention measures. “A driver’s license has height, weight and date of birth — biometric information they can use to verify an account,” says Beltran.
Pay Stubs: It might not seem like it at first glance, but your pay stub is rife with information that can be used by a skilled identity theft. “Absolutely shred your pay stubs,” says Blank. “Some [financial] institutions will ask you as validation the amount of your last deposit; if they have that pay stub, they can give the bank that information.” He adds that the information contained there can also provide a fraudster with other targets. “They’ll know who your health care provider is, and what bank accounts you have,” he says.
Credit Card Convenience Checks: Credit card companies often send so-called “convenience checks” to cardholders, which are basically checks you can use to borrow against your line of credit for quick cash. Needless to say, you don’t want these to end up in the wrong hands. “The worst thing people get in the mail are these convenience checks,” says Neiser. “It looks like a credit card bill, but if you open it up, there are checks in there that are live loans that to me is very dangerous.” If you don’t plan on using these, shred them immediately.
Canceled Checks: Just because you write “void” on it doesn’t mean a canceled check can’t be a ticking time bomb. Remember, your account and routing numbers are listed on the bottom of every check. “Not only is the bank account number on there, but there’s also your address and possibly your phone number,” says Neiser. “And some people write their full credit card number on the check [to pay their bill].” As for duplicate checks, those should have the checking account number omitted for your security. But if you have any security concerns, but still want proof of payment, Neiser points out that you can usually request a receipt from the recipient (for your property tax payment, for instance), then shred the duplicate check.
Canceled Credit Cards: Sometimes you need to cancel a debit or credit card — maybe you want to rein in your spending, or you’re leaving your bank, or you suspect the number was stolen. So do you need to shred the old one? “Theoretically it’s not supposed to be problem, but we recommend that people cut through the magnetic stripe, as there’s encoded information on there,” says Blank. “Also, you don’t want people to know where you bank.” If your shredder can’t handle plastic, Blank recommends cutting it into four pieces, and then throwing the parts into at least two different trash bags. Hey, you can’t be too careful.
MONEY SAVING TIP: Consolidate and pay off debt as soon as possible.
If you carry any debt, focus on consolidating it to a lower interest and paying it off as soon as possible. Money paid in interest is money thrown away! Why spend your hard-earned cash to make the financial institutions rich?
DID YOU KNOW…You’re not supposed to turn right when entering the store?
“Retail shopping studies have found that most people turn right when they enter a store. That’s because the majority of the population is right-handed and right-oriented,” says Underhill.
Knowing this, stores highlight tempting new items and trends to the right of the entrance. You’ll find that the music is louder and the displays are brighter to attract you where you will look and turn first. This is also where the most expensive items in the store are generally displayed.
Resist the urge: “Shop with blinders on,” says Kay. “Stick to your list with the cash in your hand. Avoid credit card debt at all costs, and head straight to what you came for.”
Debt Management Credit Counseling Corp (http://www.dmcconline.org), a nonprofit charitable organization (“DMCC”), provides businesses in the State of Florida with a custom Partner Program in order to increase employee financial education, work productivity and revenue, at no cost to the employer or their employees. Companies and providers of employee assistance programs interested in partnering with DMCC to construct an individualized educational program should contact the DMCC Education Department. This valuable employee benefit will teach employees about managing money and dealing with financial issues, so that their personal financial stress does not affect the overall quality of their work.