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Beyond your Will: A Letter of Instruction

Letter of Instruction

Many people view their will as the final document they need in life.  From a legal perspective, that’s true.  One of the most often overlooked things you can do and leave behind for your loved ones is a letter of instruction. 

The letter of Instruction

A letter of instruction is not a legally binding document.  It’s informal and meant to provide those you’ve left behind important information about any personal and financial matters that need to be addressed.  

The letter of instruction should be easy to change and update and address several common concerns of those left behind.  

Important documents and financial papers

First things first.  You need to tell everyone where you will is in the letter.  You’ll also want to disclose where your power of attorney documents, living wills and medical directives.  Also, leave birth certificates, info in SSI benefits, any marriage licenses that may be applicable and if necessary, divorce documents. 

Next,  you’ll want to list all of your assets and their locations.  If you have a financial advisor, they should have these items for your loved ones.  If not, leave bank account numbers, investment account numbers and locations, info on retirement accounts like 403b, IRA or 401k accounts. You’ll also want to list any health insurance plans you have, information on your business if you’re self employed, info on any life insurance or disability policies and if you’re a veteran, leave information pertaining to your service and any benefits that come in because of that service. 

Finally, list all of your liabilities, especially ones your family may not know about.  The last thing you want is for your family to get dragged into litigation or get hit with surprise bills. 

Final Arrangements 

The letter should also include details about your desired funeral arrangements.  How do you wish to have your body disposed of? Burial, cremation, composting (apparently that’s a thing), shot off in a rocket? Your family needs to know.  Also, what kind of service do you want? Who do you want to preside over it? Is there any special music you’d like played? Where do you even want the service to be?

Additionally, make a list of anyone you would want notified of your passing and include contact information if possible.  If you would rather people donate in your memory list that as well, along with those charities you’d prefer. 

Passwords and Digital Information

Almost everyone has an online presence now.  It’s important for your family to know where you have accounts and what you want done with them.  Leave user names, passwords and any other information you’ll likely need to access your online life.  Also, leave instructions for social media pages and how you wish for them to be handled after you’re gone.  

Personal items

One of the biggest points of contention that occur after someone’s death is the disposal of small personal items.  Do you want your niece to get your China set? What about your silver?  Do you want to leave your wedding ring to your daughter or son? What about other sentimental items that have little monetary value but mean the world to people?  Our recommendation is to always pass these items along before you pass, it allows you to see the person you love enjoy the item and it keeps quarrels down after you’ve gone.  However, should you choose not to pass it along before you pass, make sure to leave a mention as to who should get what when the time comes.  

Last but not least

A Letter of Instruction can offer you and your family peace and guidance during a difficult time.  It’s hard to write such a letter but your family will thank you if you do.  I know when my own grandmother passed, having this type of letter made dealing with the emotions of the time so much easier on everyone involved.  

Once you get started, you may find that the letter writes itself, but take the step and get started.  If you’re not sure about the status of your estate, give us a call and let us walk you through the process of creating an estate planning package.  Our estate planning package will give you and your family peace and comfort during difficult times and make your final wishes known. 

Responsibilities Abound, Choose Wisely

Procrastinators usually face problems.  The scramble to get things done in a timely manner. Often, they make less than optimal decisions.  This is especially true of people who procrastinate on the issue of estate planning.  

This type of procrastination generally can’t be turned in late because….well, you’re probably dead or incapacitated.  If you don’t take the time to plan properly now, it can cost your family big time in the future.  This is exceedingly true when it comes to choosing the right executor to handle your affairs after your passing. 

Responsibilities Abound

Most people think that being an executor is an easy job.  There truly isn’t much to it, or so they reason in their head.  In reality, it’s quite the opposite. 

Executors have numerous significant responsibilities.  They can collect from debtors, inventorying the assets of the estate and protecting them, filing estate tax returns and paying related taxes, dealing with creditors, handling investment decisions and liquidating and distributing assets and property to beneficiaries.  

So, who should you choose as your executor? Most people just assume a family member of a close friend will do it. However, that’s not always a safe assumption.  As this article from Kiplinger states, you need to talk to your potential executors and make sure they’re willing to take on the task AND they’re actually up to it.  

Things you should consider before naming an executor:

  • Will this person be too grief stricken at your passing to do the job effectively?
  • Does this person stand to gain from your will and if so, will that be a conflict of interest?
  • If the previous statement applies, do you think that it will lead to disputes between family members and/or other beneficiaries of the estate?
  • Is your potential executor a trustworthy person with a good knowledge of financial best practices?
  • If this person needs to hire professionals, will they be professionals you would trust?

To avoid these risks, we always recommend that you examine your potential executors carefully before giving them these kinds of responsibilities.  If you believe that your potential executors lack the financial acuity or moral authority to handle your estate you may need to look elsewhere to find a good executor, even if you believe you may end up hurting some feelings.  

In the end, having a plan is the key ingredient to estate planning.  However, to hone your estate plan and ensure it is successful in distributing the assets in a way that puts you at peace, you need to put in the extra leg work to make sure you have a good executor or team of executors to handle your final wishes.

When you’re ready to get started with your estate plan, give us a call.  We’ve helped thousands of people put together a solid basic estate plan and we’re ready to do the same for you.  

A Myth: 5 Big Lies About your Score

myth

We’ve talked a lot about credit scores and we’ve tried to debunk a myth or two about them.  Credit Scores are the topic of almost every conversation we have in our office with clients.  They’re always concerned about how a bankruptcy will affect their credit score going forward.  While we can tell you that bankruptcy will change your credit score, we can also tell you that your credit score will improve dramatically in the weeks and months following your bankruptcy.  Don’t believe me? Just as the Consumer Financial Protection Bureau. 

That said, there are a number of myths about credit scores and how they change and how that change impacts you.  

Myth #1: The higher the income, the higher the score

Your income and your credit score are almost entirely unrelated.  Obviously, the better your debt to income ratio is, the more likely you are to get credit. However, the bulk of your credit score is made up of three things: Payment history, how long a line of credit has existed and credit utilization. 

We’ve had clients making minimum wage who have excellent credit and clients making 6 figures with credit scores in the 500s.  Your income is not indicative of your credit score.  

#2: Carrying a balance increases your score

Apparently, more than 3/5 of consumers believe this.  It is also a total lie.  In fact, credit card utilization (i.e. how much you owe) is one of the biggest factors in determining your credit score. 

You should always shoot for having a utilization rate under 30%.  That is considered healthy by pretty much every major credit reporting agency.  Carrying a balance is eating up your credit utilization and also likely costing you substantially in interest.  

#3: Closing an old card will increase your score.

Nope. One of the major factors in determining your credit score is the longevity of your credit history.  The older the account the more it helps your cause.  In fact, you should do everything you possibly can to keep a card active, even if you don’t use it. 

Take it out from time to time, but at least once a year, and use it for a small purchase.  Pay it off on or before the due date to keep the card active.  The longer you have that account open, the positively it will reflect on your credit score. 

#4: There’s only one credit score

This is a major myth.  While the FICO score is the most commonly used score, there are a number of other companies that utilize and create credit scoring models.  

There are many credit scoring agencies out there and they all do things slightly different.  In fact, the score you just saw on whatever app you’re using may not be the same one that lenders view.  However, there is one universal truth.  If you have “Good” credit with one, you should be in the same ballpark on all the other ones as well.  

#5: Co-signing a loan won’t affect your credit

This is perhaps, the most dangerous myth about credit scores.   Co-signing is ALWAYS a bad idea.  We’ve discussed it before.  Co-signing increases your credit utilization just as if you charged up a significant balance.  Credit agencies consider co-signing the exact same thing as you taking out a loan on your own.

If the person you co-signed with misses a payment or, god forbid, defaults, you’re on the hook for that loan.  Those missed payments and the eventual default will lead to extremely negative consequences for your credit score and could potentially lead to lawsuits and other collection efforts.

Don’t let lies, misinformation and myths get in the way of making good choices when it comes to credit.  If you have questions about your credit, financial information or bankruptcy, call us.  Our firm has been helping people get out of debt for almost 40 years.  

The Charitable among us

Charitable

Charitable donations are a regular part of people’s lives.  Whether it is a religious organization or a different kind of charity, our society and our laws frequently take steps to encourage donations to these types of organizations.  The IRS Tax Code allows for deductions from income for donations to these organizations and the bankruptcy code also specifically allows these types of donations to continue. 

While it’s true that the bankruptcy code doesn’t allow certain transfers of money before filing, reasonable charitable donations don’t qualify as a “fraudulent transfer.” A fraudulent transfer is, for example, let’s say that before you file bankruptcy, you sell your car to your sister for $10,000 less than it’s worth, or you just give it to her.  That’s called a fraudulent transfer because you are effectively “cheating” your creditors out of money they could have potentially recovered. 

The bankruptcy code allows the transfer of money or property to charitable organizations to an extent.  Under the code, you may transfer money to a charitable organization so long as it does not exceed 15% of your total gross income for the year in which the transfer was made.  In cases where it does exceed 15% of your income, it is still not considered a fraudulent transfer as long as it was consistent with what you had been doing in the past.  In other words, if you’ve given 20% of your income to charity, you may continue to do that.  That said, it is imperative that your giving is in line with what you’ve done in the past.  Otherwise, fraudulent transfer rules could kick in.  

Once a debtor files their case, fraudulent transfer rules aren’t quite as big of a deal.  You’re generally free to make charitable contributions.  In a Chapter 7, debtors should be very cautious of transferring property to ensure that it is exempt (protected from the trustee) before transferring it.  In a Chapter 13, you can continue to donate along with making your payments and it is counted as an ongoing expense.  You may continue to make these reasonable donations so long as you can also make a fair payment to your creditors.  

Of course, all of these situations require the guidance of an expert attorney.  That’s where we come in.  We have helped thousands of people successfully navigate the bankruptcy process.  If you’re ready to take the first steps towards financial freedom, give us a call.  




A Matter of Fairness

fairness

Bankruptcy is, at its core, a matter of fairness. It’s one of the greatest tools for people looking to get out of debt and return to a semi-normal life (I say semi-normal because let’s be honest, what is normal anyways). If you’re unable to pay your bills and service your debts, you’ve got to make tough choices every month.  

Do I want to keep paying Monster Mega Bank for some shoes and a TV I bought 5 years ago when I couldn’t see the big picture, or do I want to put that money towards my retirement savings? 

If you don’t have enough money to make your mortgage payment, car payment, utility bills or groceries, you need to cut where you can, and old debts are a good place to start.  

What does Bankruptcy Do?

Bankruptcy is designed to ensure fairness.  Look, no one wants to take on debt they promised they’d pay and then not pay it.  

Bankruptcy is designed to ensure that everyone gets a fair shake.  Creditors get paid back what a person can afford and the debtors are able to go on and pay for life’s necessities.  

Safe Spending?

As a debtor who is considering bankruptcy, many clients ask, what CAN I spend money on? The answer is simple

  • Healthcare
  • Personal care products (think grooming and personal hygiene)
  • Reasonable clothing (don’t run down to the local Chanel boutique and buy a new suit)
  • Childcare costs
  • Educational expenses
  • Utilities (Power, Gas, Water and Sewer, Internet, TV).
  • Transportation expenses
  • Reasonable expenses for entertainment

Additionally, you may also continue to tithe, contribute to retirement accounts and pay for insurance products as long as they aren’t excessive, unreasonable and you were doing it before you filed bankruptcy. 

This is especially true in a Chapter 13 Bankruptcy.  In a Chapter 13, you’re required to pay all disposable income (i.e. what you have left over after all you necessities are paid) back to their creditors through the bankruptcy plan.  

The Chapter 13 trustee analyzes your salary, listed expenses and other items listed in your budget to make sure that everyone is being treated fairly.  

Because of this, it’s imperative that you have a highly experienced bankruptcy attorney on your side.  A good bankruptcy attorney can ensure that you don’t have to pay back one cent more than you’re legally obliged to.  

In a Chapter 7, your budget isn’t as heavily scrutinized since you’re not having to make payments to your creditors. However, it’s still a good idea to have an experienced attorney on your side.  If the Chapter 7 Trustee feels like you’re sitting on a large pile of disposable income, they can request that your Chapter 7 be forcibly converted into a Chapter 13. 

In Good Faith

You must file your bankruptcy case in good faith. Good faith essentially boils down to fairness.  If the bankruptcy code is going to be fair to you, it must also be fair to your creditors.  You can’t lie about expenses or hide sources of income.  This can result in your case being dismissed, converted or could even lead to charges of perjury.  This is yet another good reason to have an experienced bankruptcy attorney on your side.  

Before you file bankruptcy, you need to be cautious about spending great sums of money on things you don’t need.  It’s not unreasonable to go out to eat once in a while or go to the movies, but don’t treat yourself to a $5,000 shopping spree at Saks Fifth Avenue. Spending like this is considered a luxury and can draw the ire of the Chapter 7 trustee.

Trustees may argue that you did this with the intent to defraud creditors.  The same goes with transferring property or selling things for less than they’re worth.  If you engage in these types of behaviors, the trustee could sue the person you transferred the property to in order to recover the value of that for your creditors.  

If a debtor engages in these types of behaviors, the court can punish you by denying  your discharge, or worse.  

That said, bankruptcy is there to protect people who are honest and upfront about their troubles.  Paying for life’s necessities isn’t illegal and in reality, that’s what bankruptcy is there for.  

If you’re ready to take the first step in becoming debt free, call us

The Creditor Scam

SCAM

Every Creditor is not the same, and some aren’t even creditors at all, they’re scams. We live in unprecedented times.  By virtue of that, we also have an unprecedented number of money hungry creditors looking to scrape up every cent they think they can get their hands on.  

Frequently, debtors will find themselves in a situation where they are continuously being hounded by any number of creditors.

The debts they supposedly owe have been sold and resold so many times that the creditor isn’t really sure that the person they’re pursuing even owes the debt.

Frequently, debtors are not even sure who they owe funds to anymore either.

The problem is that this can make unsuspecting debtors vulnerable to scams. If a debtor receives communication from an aggressive creditor demanding payment, the debtor may not even take the time to figure out if they actually owe the debt.  

The Scam

This type of debt collection is what we like to call a scam.  Unscrupulous creditors (potentially even criminal organizations) will call people they think owe the debt.  Since they paid pennies on the dollar, if they recover anything, it’s a profit.  They’ll offer to settle the debt at a substantial discount if you pay right now.  You’re tired of being harassed and so without any investigation, you pay them.  

Now you’re out whatever you paid and it may not have even been a debt you owed.  

In these difficult times when debt changes hands so frequently, it’s best to be skeptical of debt collectors, even legitimate ones.  

With debt collectors calling you, mailing you nasty letters and even sliding up in your DMs, you need to be wary of everyone. Yes, creditors can contact you on social media.  The government allows it. 

The best way to combat this is to get a copy of your credit report.  The overwhelming majority of legitimate creditors will list things on your report.  

Additionally, if you’re skeptical (remember, you should be) ask the creditor for their contact information and use that to verify that they’re legit.  Call them back at the number they give you and do a little searching on the internet to make sure they’re legit.

Finally, under the fair debt collections act, you have the right to request proof that the debt is actually yours and that you owe it.  If they can’t provide this proof, tell them to go pound sand.  

How to stop it

Legitimate creditors will reach out to you in a variety of ways, but always be skeptical unless you’re absolutely sure you owe the money.  Do your research BEFORE you send money or else you could fall victim to a scam.  

This is especially true if the creditor is overly aggressive, abusive or hostile. Always remember your rights under the fair debt collections act.  

In the end, the only surefire way to eliminate debt that’s suspect is through the bankruptcy process. The full weight of the United States government and the federal court system is behind you.  It’s why it was created.  

If you have any questions about the bankruptcy process, call us.  We’ve helped thousands of people eliminate more than 1 billion dollars worth of debt.