Personal Finance Wellness.

You won't be free until you are financially free!

Foreclosure

Should I Buy A Short A Sale Or Foreclosre?

In this buyer’s market, some homebuyers ask themselves: Will purchasing a short sale or foreclosure end in disaster — or yield a jackpot? And which type is best to go all-in with: a short sale or foreclosure? “There’s really no cut-and-dry answer,” says Gwen Daubenmeyer, a certified distressed property expert with Re/Max in the Hills in the Detroit area. “It really depends on the buyer and what the buyer’s priorities are.” Before starting their search, homebuyers who want to play their cards right should know the benefits and drawbacks of buying either type of “distressed” property: foreclosures and short sales.

What is a short sale?

Short sales — which are typically recorded with the county recorder’s office — refer to the sale of a home for less than the value owed on the mortgage. The best-known example was during the Great Recession when thousands of homes sold for less than their mortgages after being “shorted” by homeowners who were underwater (that is, owing more than what the home is worth). The short sale has become a more popular option as home values have rebounded in recent years. “The mortgage crisis was so bad that there was really no other alternative [but to sell for less],” Daubenmeyer says.

Benefits of buying a short sale

Short sales are not foreclosures. For that reason, they don’t carry a big stigma. These transactions often take place quickly — typically between 30 days and 90 days, Daubenmeyer says — and they can save sellers a huge chunk of cash. “There’s nothing new about a short sale,” Daubenmeyer says. “It has been going on for years and years and years.” Generally, they require less time and paperwork than a traditional foreclosure — and they won’t increase a homebuyer’s likelihood of eventually being kicked out of the property. “A short sale can resolve all of the issues that typically would go on in a foreclosure,” Daubenmeyer says. What’s more, they may also be less expensive to buy.

Drawbacks of buying short sales

It can take longer: “If you’re trying to buy a short sale, it’s typically a much longer time period to work through,” says Daubenmeyer. Because the lender has the right to decide when the sale can close, buyers are forced to sit on the seller’s property as the sale proceeds. If they want to continue looking, they may have to sit out until the sale closes, potentially wasting precious time. (The timeline varies on the type of short sale or foreclosure, too: If the home is a foreclosure, buyers can expect the sale to close in 30 to 60 days; for a short sale, sellers expect it to close in 90 to 120 days.) Pay a higher price: While a short sale may offer the most bang for your buck, it may also involve paying a higher price than a foreclosure.

This post contains affiliate links. Please please read my Disclaimer for more information

What is foreclosure?

A foreclosure is a way for a lender to “own back” a property, usually foreclosed on from a foreclosure proceeding in the county where the property is located. “Lenders take over the rights to the property, and they can take control over it any time they feel like it,” Daubenmeyer says. A foreclosure often ends in the foreclosure sale — whereby the lender simply sells the home at auction to another buyer — or it may conclude in a repossession case, where the lender, which in many instances was then the original mortgagee, takes ownership of the property by executing a judgment. A lender may file a foreclosure lawsuit to foreclose on a home and seek control over it, but the process doesn’t always result in a sale.

Benefits of buying foreclosure

If you’re looking for a quick turnaround, mortgage lenders will look favorably on your purchase. Since these homes were in foreclosure, it’s likely that there are no negative encumbrances — like liens or standing water, which are usually a deal-killer. Many mortgage lenders will actually waive fees related to delinquent property taxes, to boot. (Under current law, borrowers in default are liable for their delinquent taxes until they pay them off.)

Drawbacks of buying foreclosures

Drawbacks of buying foreclosures include the tax hit on the closing, but there’s also a lot to consider. While a short sale can take months to get approved by the bank or lender and a foreclosure a few weeks, foreclosure purchases require a key component to be done before you close: buy a new title to the property. Once the new deed is secured, you can close on the short sale/foreclosure. While a short sale can take months to get approved by the bank or lender and a foreclosure a few weeks, foreclosure purchases require a key component to be done before you close: buy a new title to the property. Once the new deed is secured, you can close on the short sale/foreclosure. The tax hit: Remember, if you have capital gains on your investment, that money is taxable.

Purchasing delays

It takes time for a short sale to be processed by the bank that holds the mortgage, making it an “orphan” transaction. However, it will always be quicker to buy than to rent, which typically takes six to nine months on average. And, for the buyer, the wait will be well worth it: The seller can get their cash fast and the buyer won’t have to close escrow and bring in their downpayment. Buyers often prefer the speed of buying because they’re usually holding out for a better deal, says Daubenmeyer. “But I’ve been in a short sale when I was the one who had to sell [the home],” she adds. “They might not have gotten exactly what they wanted, but it wasn’t a huge hit to their credit, and there was less of a market disadvantage.

Additional Risks

Concerns about any real estate deal should be weighed, and, of course, every buyer’s situation is unique, notes Daubenmeyer. But it’s also important for buyers to consider that foreclosure buyers are usually required to jump through a lot more hoops to close the deal. Re/Max explains that for foreclosure properties, buyers must submit forms proving their creditworthiness, and once the seller “closes,” the seller is supposed to move out, and the buyer has to sign paperwork verifying that the keys have been turned over to the bank. While short sales often give sellers cash on the barrelhead, there is one major difference between a foreclosure and a short sale.

Potential Additional Fees

By law, when a property becomes a short sale or foreclosure, additional fees and costs are levied against the buyer. (The buyer must pay the mortgage lender, Realtor, attorney, etc., on top of what the home is actually worth.) These costs can include Mortgage Fraud, Agreement Fee (MFA), Mortgage recording fees, Bank charge-offs, Title Insurance, Mortgage Insurance, and Restrictions on the Sale of Property. Several of the above fees and charges can cause a short sale or foreclosure to be much pricier than it should be. And while not all short sales are as pricey as others, some Realtors have reported that in most cases, a short sale (no title insurance) will run between $30,000 and $100,000 more than a foreclosure (full title insurance) or short sale.

Conclusion

Which type of home you decide to buy may be dependent on which type of buyer you are. For many, buying a foreclosure, short sale or another type of “distressed” property might be the best decision available. But for others, looking at the wrong home is the key to disaster. The right type of property can be the difference between escaping foreclosure and losing your home.

“If you have any feedback about should I buy a short sale or foreclosure that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

1035 Exchange

What Is A 1035 Exchange? How Does It Work?

If you want to exchange your current life insurance, endowment, or annuity policy for a new policy, a 1035 Exchange just might be a great tax-deferred option for you to consider.

What is a Section 1035 Exchange?

1035 Exchange is the sale of a “qualified life annuity contract” (QLAC) in exchange for a qualified longevity annuity contract (QLAAC) or a qualified endowment contract (QEAC) in a Qualified Retirement Annuity Contract (QRAC) (both of which allow one or more death benefits to be passed on after the client dies). The current owner can usually access the money in the policy any time after the purchase is completed. If the owner needs to access the funds early, they can (subject to annual tax withholding). The account owner can’t use their gains to pay for living expenses while they are still alive. You can find more information in IRS Publication 590 (Circular 190) QLAC and QEACs allow you to defer up to $3,000 of gains each year on the sale of the policy.

How does a 1035 Exchange work?

Using a 1035 Exchange, you can complete the paperwork in conjunction with your insurance company, with a 1035 exchange form that can be completed in many different ways. In order to qualify for a 1035 Exchange, your current policy must have been purchased before 1993. Other conditions, such as being 25 years old or older, or having certain health conditions, may also prevent you from participating. In addition, any pre-existing conditions must be included in the 1035 Exchange.

When is a 1035 Exchange appropriate?

There are two situations when you might consider a 1035 Exchange: If you recently acquired a new life insurance policy, you can’t currently use it and don’t want to make a lapse of policy penalty when you change insurance coverage. If you are in the process of changing to another policy for the same reasons. There is no loss in cost to the government if you choose a 1035 Exchange, even if you’re in a higher tax bracket than the policy you are trading in. “Even in the current high-tax environment, a 1035 Exchange can provide tax benefits,” said Tim Dougherty, Senior Financial Planning Specialist at Raymond James & Associates in Denver. “The longer you hold on to the old policy, the more tax benefits you receive.”

This post contains affiliate links. Please please read my Disclaimer for more information

When is surrendering a policy better than doing a 1035 Exchange?

If you wait to surrender your existing life insurance policy to do a 1035 exchange, you’ll have to pay the gift tax (if you’re older than 59½) or you’ll have to file a 1041 Withholding Return. A 1031 exchange can also get you better tax-deferred treatment than a 1035 exchange. But waiting will also cost you more. The good news about surrendering to do a 1035 exchange is that you’ll usually avoid a penalty tax on the cash surrender value of the policy.

What are “like-kind” exchanges that qualify for 1035 Exchanges?

A like-kind exchange, or 1031 exchange, is one of the many ways to exchange real estate for something else, including stocks, bonds, commodities, foreign real estate, certain business interests, or cash. Keep in mind: The U.S. Treasury and Internal Revenue Service will not issue 1031 exchange applications on your behalf. If you are considering a 1031 exchange, you should work with a tax professional, independent broker-dealer, or other investment professional to make sure you do your homework.

Can multiple contracts be used for a 1035 Exchange?

You can generally only have one policy in a 1035 Exchange at any given time. It must be a life insurance policy, annuity or annuity contract, or endowment policy. It cannot be a long-term health plan or a deferred annuity. It cannot be a universal life or universal variable universal life policy. When can I use a 1035 Exchange? Once you sell your current life insurance policy, you may use your 1035 exchange to exchange your policy for a new policy. Generally, you must use your 1035 exchange before the life insurance policy expires.

Can the owner be changed during a tax-free 1035 Exchange?

Yes, the owner can be changed during a tax-free 1035 Exchange. This is called a non-forfeiture transfer.  Yes, you can change your beneficiaries. (However, you may need to keep them current.) Yes, the owner can be changed during a tax-free 1035 exchange. When you obtain a life insurance policy with a named beneficiary, it’s irrevocable. That means your original named beneficiary cannot be changed for 1035 exchanges. Allowing you to exchange or change the owner in a tax-free 1035 exchange means that you can avoid making one of the following: Identifying a named beneficiary, Paying any premium on a newly issued policy, and Applying for the new policy.

Can the insured be changed during a tax-free 1035 Exchange?

Yes. The insured is always eligible to choose a new policy that would be immediately cash available for that beneficiary to take over. Yes. A 1035 Exchange does not change a person’s life insurance contract for any reason other than as permitted by law. The most common reasons that a life insurance policy would be swapped for a new one is when the insured dies or if the insured’s beneficiary changes. Any exchange is complete upon surrender.

Will the new life insurance policy become a modified endowment contract?

The fact that a policy exchange becomes a Modified Endowment Contract, however, can cause some confusion. Basically, the new policy is no longer a contract to ensure you have a certain amount of cash in your account on your death or disability and instead becomes a life insurance policy. This is just another type of life insurance policy that you buy and take out on yourself or on your beneficiary(s).

Conclusion

There are more than enough tax benefits from saving for retirement to negate the tax-free gain that a 1035 exchange can create. And that is an important distinction to make! It’s important that you always consider the tax consequences of any financial transaction and act accordingly. Not only are the current tax rules in your favor, but you can maximize your retirement savings by contributing to your 401(k) or IRA. It’s also important to note that you can also make a traditional IRA contribution in conjunction with your 401(k). That way, you can immediately deduct the pre-tax contribution that you make to your 401(k) from your current taxable income and only the post-tax contribution that you make to your 401(k) will be deductible from your taxable income.

“If you have any feedback about what is a 1035 exchange that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

Charity

What Are Qualified Charitable Distributions

A qualified charitable distribution (QCD) allows individuals who are 70½ years old or older to donate up to $100,000 total to one or more charities directly from a taxable IRA instead of taking their required minimum distributions. As a result, donors may avoid being pushed into higher income tax brackets and prevent phaseouts of other tax deductions, though there are some other limitations.

How do qualified charitable distributions work?

The recipient of the QCD generally must be a 501(c)(3) or another recognized charity recognized by the IRS. The contribution must be in the form of U.S. cash or property, which means cash (or the equivalent in check or coin) or a current bank account, with a physical location of the charity. Non-cash contributions may include stock or other securities, or units in a qualified business enterprise (QBE). For 2016, the maximum cash deduction is $100,000, or 50% of the donation amount if the contribution is $100,000 or more. For tax years 2017 and 2018, the maximum is $100,000, or 50% of the donation amount if the contribution is $100,000 or more. For 2019, the maximum is $100,000, or 50% of the donation amount if the contribution is $100,000 or more.

Benefits of qualified charitable distributions

QCDs may be more valuable than ever because the income limits for the most current and future deductible contributions to traditional IRAs have increased. The IRS made these changes for all taxpayers except those with adjusted gross income (AGI) below certain limits. Donors will avoid having their basic exemption for the following tax year reduced from $0 to $10,000 for the first two qualified charitable distributions and $20,000 for additional distributions. The donor can contribute up to $13,000 to the same qualified charitable organization and avoid having the donor’s base income count towards their state and local income tax burden. The donor can avoid the greater than $1,050 state income tax for every $1,000 donated, and the $1,050 federal income tax.

Who can make a qualified charitable distribution?

QCDs may be made by a donor who is 70½ years old or older as well as anyone that is blind, disabled, or age 65 or older, although a retiree may be exempt from the requirement to take the distributions by taking the distribution on a spouse’s record. A qualified charitable distribution must be made from all of an individual’s lifetime RMDs, with the exception of RMDs taken before age 70½. In addition, a qualified charitable distribution is not considered a distribution from the estate, so there is no probate process or other tax consequences for making a qualified charitable distribution. Qualified charitable distributions must be made on an individual’s tax return, even if the individual is deceased, and are treated as ordinary income.

This post contains affiliate links. Please please read my Disclaimer for more information

Type of charity that can receive a QCD

The following are the types of charities that can receive a QCD. Generally speaking, a QCD will be made directly from a qualified charitable distribution to a charity of your choice. However, certain situations may lead to a partial or complete charitable distribution to a specific charity, rather than to any or all of the charities of your choice. Make charitable gifts within 60 days of the end of the calendar year. You do not need to wait until your retirement to make charitable gifts. If you want to make your QCDs after your retirement, you need to follow this three-step process. If you make a QCD, you can receive a tax deduction for the value of the transfer from the assets that are included in the QCD.

When might a qualified distribution not be effective?

When donations are paid out of pre-tax accounts, they count against the donor’s taxable income. That means that if the taxable income is too high, the donations may be more than the individual is required to pay in taxes. And there are some more unusual rules. For instance, you may not be able to make a QCD if your total IRA balance is less than $611,000, or if you are 55 years old or older, you may be required to pay capital gains taxes on a QCD.

Tax reporting

QCDs are reported on Schedule A of your 1040 and are subject to standard income tax withholding. QCDs are a bonus to charities and a bonus to taxpayers, but they can make or break the charities. Ask the charities to plan for this tax benefit by organizing tax-deductible contributions into their accounts, even though you cannot itemize donations. You will need to stay on top of your donations, though, as you might miss out on larger donations that can boost their fund-raising efforts.

What are the limitations of using QCDs?

They may be used to donate to any 501(c)(3) charity (or a local community organization), but they must go through a qualified charitable distribution representative to make sure all applicable tax rules and regulations are followed. Contributions must be made directly to a qualified charitable distribution representative, and QCDs cannot be used for church, nonprofit religious organizations, political parties, or other organizations that are not recognized charities. A charitable contributor is required to include a copy of the tax identification number for the charity in the QCD form.

How can I find out if I am eligible for a QCD?

The IRS allows individuals to apply for a QCD in one of four ways: filling out Form 8604, a form required to start or continue a QCD; writing a check to an authorized charity; scheduling a qualified donor meeting with an IRS representative, or initiating a transfer with a qualified charitable organization. These sources provide a helpful way to research your eligibility for a QCD.

What should I consider before making a QCD?

If you are 70½ years old or older and make a QCD, you must use the money to help individuals or families who are low income or otherwise in need. Generally, the first $100,000 you donate each year is tax-free, but there are some special restrictions that could apply to you. Here’s what to consider before making a QCD: If you donate QCD funds to a charity that doesn’t exist yet, the IRS can audit you, which might not be worth the potential tax benefits. In addition, charities that aren’t incorporated as charities may not be eligible for the QCD. If your QCD fund goes to a new charity every year, the value will eventually be below the $100,000 amount, and you will have to start the process all over again.

Conclusion

Tax reform is a significant benefit for taxpayers in many ways. Through new limits on itemized deductions and the elimination of most of the itemized deductions available to higher-income taxpayers, tax reform benefits taxpayers in several ways. The first step to taking advantage of these changes is to ensure you understand and have documented your tax situation.

“If you have any feedback about what are qualified charitable distributions that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

Cars

Should I Buy Or Lease A Car?

Choosing whether to lease a new vehicle instead of buying it largely comes down to priorities. For some drivers, leasing or buying is purely a matter of dollars and cents. For others, it’s more about forming an emotional connection to the car. Before choosing which road to go down, it’s important to understand the key distinctions.

What is a lease?

A car lease is a contract between the driver and a car dealer that agrees to cover the cost of a new car for a specified time (known as “lease term”). The contract guarantees that the buyer will return the car at the end of the lease, and makes sure that payments won’t go up during the duration of the lease. By contrast, a loan is more like a traditional, permanent loan from a bank. It provides the car buyer with a lump sum payment – known as the down payment – which is the amount the owner of the car will pay toward the purchase price of the car. If the car buyer decides that they do want to own the car at the end of the lease, they must pay the full price of the car upfront (called “forever payments”).

Advantages of Leasing a car

Leasing offers a lot of benefits for drivers who lease new cars: It’s a simple way to own a car. It’s easy to check-in and out of a lease. Because you don’t have the added cost of owning a car, there are fewer variables to manage. There are some tax benefits. There are many different ways to get car tax paid. Leasing is another option for those who don’t want to do the math to figure out how much tax they’ll owe. Leasing a car has many advantages as well. You can easily drop the payments on your lease, and you don’t have to worry about returning the car if you change your mind. Leasing is cheaper than buying a new car. Another advantage is the fact that you can own the car as long as you’re willing to pay for a maintenance contract.

Disadvantages of Leasing a car

It’s worth remembering that leasing can come with some major drawbacks. If you don’t pay down the balance of your loan, you’ll owe a monthly fee, even if the car is paid off at the end of the contract. For some drivers, leasing is a quick way to rack up high monthly payments, which eats into the budget. Leasing also means the car might not be the right size for your needs.

This post contains affiliate links. Please please read my Disclaimer for more information

Advantages of Buying a car

Buying a car has many advantages. There are no monthly payments to think about. You can buy as much or as little of the car as you want. You can always sell it if you decide it’s not working for you. Not everyone wants to deal with the hassle and headaches that come with ownership, though.

Disadvantages of Buying a car

Buying a car is not an inexpensive proposition. In fact, according to Edmunds, the average sticker price for new cars sold in the U.S. in 2017 was $35,558. However, there are some crucial costs to consider before making your decision. “Even with the best interest rate, financing isn’t always the best way to get the lowest price,” said Michael Hitchings, president of Car-Buying.com. “When looking for a car, you have to consider what you’re getting and what you’re giving up. Buying a car can cost $1,000 more or more than if you lease.” Also, dealers and private sellers offer a wide range of financing options. In fact, one survey by the financing comparison website CompareCards found that 63 percent of car shoppers who purchased a vehicle in 2016 did so with a loan or lease.

Maximizing Tax Deductions

A lease makes sense if you expect to keep the car for a long time. In addition, a car lease can take the pain out of paying car tax and registration fees. With that in mind, a car lease usually has a lower monthly payment than a traditional purchase and is often cheaper to finance as well.

Longer-Term Considerations

Leasing isn’t for everyone, but if you’re unsure about how much you’ll be using a car every year or two, and you don’t want to be locked into a long-term car payment, leasing might be your best option. It’s no secret that these days, leases on used cars are incredibly expensive, so you’ll want to have ample time to negotiate a lease deal that fits your budget. The biggest downside to leasing a car is the payment. For short-term, casual leasing, the up-front cost is more or less unavoidable. For example, you might not be able to trade in your car once you’ve been leasing it for six months or more. When the lease ends, you’ll have a huge payment to contend with – and there’s no option to extend the lease.

How to Find the Best Car Purchase Deals

Buying a new car is typically the most economical way to go. Compared with the lifetime cost of leasing a car, buying a new car is typically more affordable. The price of buying a new car is determined by how long you will own the vehicle, as well as how much you’ll pay in lease and maintenance fees.

Invest in the brands you love

When it comes to selecting a new car, consumers could have a narrow set of options when deciding on which brand to go for. When considering a sedan over a crossover, for example, consumers can typically go for a sedan because of its handling capabilities, comfort, safety features, reliability, and available options. This makes it a more straightforward choice than choosing between, say, the Audi A4 and A5. But this is only true when choosing an upgrade over an equivalent luxury car. It’s not easy to pick between two brands when it comes to choosing their next car, but for some drivers, their values and passions are tied to particular brands. Those with a passion for certain car brands, in particular, may be more likely to go with them over competitors.

Conclusion

Cars are extremely expensive and people are extremely fickle when it comes to their needs and requirements. It’s rare that you find a car that can satisfy all of your needs. Instead of making a hasty decision, think through your wants and needs. It’s best to spend a few hours researching each car on the market to ensure that it meets all of your demands and needs.

“If you have any feedback about should I buy or lease a car that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

Rising Interest Rates

How Do Rising Interest Rates Affect Your Finances?

Worried about all the ways the Fed interest rate could impact your finances? That’s totally natural, considering the Fed and its interest rate hikes have dominated headlines for months. Many people get spooked when interest rates come up. Rising rates can raise a lot of questions: Will rising interest rates impact your finances by making mortgages too expensive? Could you miss out on your chance to borrow while it’s still cheap to do so? These questions are valid when talking about rate hikes, but making decisions based on news headlines alone can be problematic.

What are interest rates?

Understanding what interest rates are, why they’re rising, and what that means for your finances can go a long way in helping you understand your financial future. Let’s say you’re shopping for a car. You probably know that interest rates can affect your monthly payments. One car loan’s interest rate might go up, while a different loan might offer lower rates than you’re used to. This is because each loan has different interest rates. This is called an interest rate “spread” — it’s the difference in the average interest rates for different loans. The higher the rate, the less you pay on your loan. After calculating the difference in your car loan interest rates, you’ll find out that you can expect a lower monthly payment if you take out a different loan.

Benefits of interest rates

Any time your investments or money grows, it’s generally a good thing. It just means the underlying investments, like your money in a 401(k), aren’t getting weaker. Similarly, the Fed rate hike will help keep the economy from getting too strong. Inflation will also be lower with a higher rate, meaning people can spend more money on the items they want without having their money go too fast. The point is that higher interest rates are, for the most part, good. Higher interest rates are good. On the other hand, interest rates are not always good. High rates can be bad for investors because of their potential effect on a retirement account. If you’re trying to put money away for the future, you want to make sure it stays as safe as possible.

How would interest rates increase

Rate hikes come in stages. Interest rates increase from 1% to 2% each year, but sometimes there are one-time increases. To illustrate how increases in rates work, let’s look at a real-life example. A 2% federal income tax rate — higher than the current top rate of 37% — is the rate most commonly used when discussing rising interest rates. If the top tax rate increases to 35%, your savings will effectively increase from 2% to 3%. This example isn’t meant to paint a rosy picture. There are several ways the federal government could increase tax rates (you can read more about this here) and the potential consequences could be disastrous for some people. Still, it provides a quick way to illustrate the basic concepts involved in increasing interest rates.

Effects of rising interest rates on finances

In many ways, it’s best to avoid making hasty financial decisions solely on the basis of the Fed interest rate hikes. Consider these key pieces of the puzzle: The Fed’s intent when raising interest rates is to slow down growth in the economy and bring interest rates up to more normal levels. The Fed believes that slowing down growth and slowing down interest rates are positive outcomes. When they’re behind the scenes planning interest rate hikes, they’re thinking of how rising rates will impact the economy in general. After all, rising rates only affect things that are tied to the economy, such as mortgages.

This post contains affiliate links. Please please read my Disclaimer for more information

Impact on mortgage payments

First, when it comes to purchasing a home, your mortgage interest rate affects the size of your monthly payment and how long you’ll need to pay it off. You may assume that it’s not high enough to change your monthly payment, but that’s incorrect, as shown in the analysis from Bankrate.com. According to that report, an owner of a $200,000 home pays on average $844 per month in mortgage interest. The percentage change in that mortgage rate over 12 months, would lower your monthly payment by $23 per month. That could be enough for you to pay off your mortgage earlier, although there’s no one-size-fits-all rule for the size of your monthly mortgage payment. Interest rate changes may make it more expensive to make a mortgage payment for the rest of your life.

Impact on Car loans

When interest rates rise, the average car loan rate in the United States tends to rise with it. But there are a few different ways rising interest rates could impact you if you’re buying a new car. First, let’s look at the latest Federal Reserve interest rate hike. In December, the Federal Reserve raised the Fed Funds rate from a range of 1.25% to 1.5% to a range of 1.75% to 2% after keeping rates at 1.5% for over seven years. This was the third interest rate hike in 2018, and the second of the year. Under this rate hike, some borrowers, such as people who currently have loans at 2.5%, will likely see their rate increase.

Impact on credit card rate

Credit card interest rates move in tandem with interest rates. When interest rates rise, the credit card interest rate (and associated fees and interest) also rise. Unlike mortgages and other loans, interest rates on credit cards typically are not fixed, so even a single percentage point change in interest rates will have a noticeable impact on the balance you owe. Changes in credit card interest rates depend largely on two factors: the Federal Reserve’s moves and the credit card issuer’s strategy. In general, issuers are more likely to increase rates when the Fed is raising rates and lower rates when the Fed is lowering rates. When interest rates are rising, issuers are most likely to lower rates on credit card balances.

Impact on Private student loans

If you borrowed money to go to school, you may have private student loans. Private student loans aren’t backed by the Federal Government, but instead by the investor. To gauge if your private student loan is affected by rising interest rates, ask: Are your payments going up? Will I get a new student loan, or another loan, with more favorable terms? If you have outstanding federal student loans, you may be looking forward to an exciting new federal student loan program. According to the Department of Education, there will be a new federal student loan for students that will allow them to borrow money to pay for their education without making payments for a set period of time.

Impact on Returns on savings

Not all people pay close attention to the Fed, but those who do have reason to be concerned. Here are the reasons why: While rising interest rates could theoretically be good for investors, it is still negative for savers. The chart below illustrates how fixed-income investors stand to lose money on fixed-income investments that are already priced relatively low by the market. Because the market rate is already higher than the interest rate on a savings account, a 1% higher market rate will make all savers poorer. On the other hand, many investors are at risk of losing their money in the stock market when rates rise, since the stock market is priced higher than it has been in a long time.


Conclusion

It’s a lot to think about when you look at all the variables at play. However, it’s critical to know how rising rates impact you. It’s often best to sit down and think about your needs, finances, and financial goals before diving into any decision. The more prepared you are, the more confidence you’ll have when making the best choice for you.

“If you have any feedback about how do rising interest rates affect your finances that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

Inheritance

What To Do With An Inheritance In The United States

Anyone planning on buying property in the USA will need to brush up on their knowledge of US inheritance law in order to protect the best interests of their loved ones. This is because, like most US laws, how things are governed will depend upon the state in which you’re located.

In the USA, inheritance laws govern how people receive their share of assets. They also govern which relatives have a statutory right to claim an inheritance even if they aren’t included in the express terms of the will. Each state either adopts a ‘community property approach or a common-law approach this essentially determines the way in which estates are divided and which members of the family are automatically entitled to their share.

What are the inheritance laws in the United States?

In the USA, there are three main areas to pay particular attention to probate, legacies, and in-trust issues. While many of the standard areas of probate will be the same across the USA, there will be different laws for different states – so we’ll only be looking at the most general matters. However, there are a number of other issues that are unique to the USA and require special attention. Why should you consider filing a probate case? Probate cases are typically used for handling inheritance requests from surviving family members, which are generally made by a written letter to the executor, or the closest relative who is a legal guardian.

How does inheritance work in the USA?

When you leave an estate to someone in the US, a strict set of rules apply. Like in most other countries, the general rule is that all money, property, or other assets passed down to beneficiaries are treated as the property of that person, even if they aren’t named in the will. In particular, a beneficiary isn’t entitled to a share of property that was acquired by means of another person’s will or other written testament. This means that you can’t leave all your money to a dependent, as this would amount to an indirect gift, which is not allowed. The test of heirship is key The proof of heirship required for an inheritance to pass through the hands of beneficiaries is often referred to as the “test of heirship”.

Inheritance Rules in the United States

The following are some examples of what can happen if you are considering an inheritance in the USA:

1. A disinherited child is entitled to claim a share of the estate, even if they weren’t involved in the will or executor.

2. A person can give away one-quarter of their assets, but if they die intestate (without a will) their heirs will be entitled to only one-sixth of the total amount.

3. If a loved one dies without leaving a will, they will not be eligible for a share of the estate, which will go to the nearest blood relative of the deceased.

4. If a parent has pre-existing debts of more than $20,000 at the time of their death, they may be subject to bankruptcy.

5. If a child inherits the entire estate, there will be a financial sibling that will receive a flat tax of 35 percent.

This post contains affiliate links. Please please read my Disclaimer for more information

Who has a right to claim an inheritance?

When an estate is placed in the trust, the executor, who is typically the trustee’s lawyer, is responsible for distributing the inheritance among relatives and even to charities. However, while heirs might receive some of the inheritance, the rest is administered by the trustee. If a person dies without leaving a trust, the entire estate will go to the state. It’s up to the state to distribute the assets. In this way, it doesn’t matter whether the person who will be receiving an inheritance actually exists. When to claim an inheritance If an heir (or in some cases, a trust or executor’s lawyer) is unable to reach the relative who is to receive the inheritance, they can go to court to fight for their rights to the money.

What to do with an inheritance in the United States?

There are a number of situations where it’s necessary to make provisions for what will happen to an inheritance once the person is no longer alive. This usually means leaving some sort of legal responsibility in place, even if the person whose inheritance you’re planning to leave to isn’t technically a relative. But it also means appointing a guardian or executor, if the person being left money is not mentally capable of making decisions. Depending on how you intend to dispose of an inheritance, it’s possible that you might also need to appoint a caretaker. If this is the case, you should be aware that you will need to spend money on their services for the duration of the person’s life, after which you’ll have to find some way to support them when they can no longer live alone.

Who is entitled to inheritance in the USA?

According to the United States courts, inherited assets fall into two broad categories: property and debt. Individuals who are deceased and had no interest in the family home or businesses generally don’t have the right to an inheritance and so their assets are entirely passed onto the executor of their will. After they’ve died, the property of a person who still has an interest in the estate passes to family members who were close to the deceased person. These relatives include grandchildren, siblings, spouses, parents, and others who were close to the person and who survived them. This means they can access any money they were entitled to before their relative died.

 What can you do if you don’t want to share your inheritance with other relatives?

Although the general inheritance laws of the USA dictate that a person may exclude others from receiving an inheritance, this is based on the fact that they didn’t expressly write about it in their will. A person may be able to specify in their will that other relatives should not receive any share in the property. But, this will only apply to property left to the descendants in a living will. If the person is deceased, the law dictates that it must go to the nearest living relative. What about Ireland? Although it’s a long way away, Irish inheritance law is very similar to that in the USA. The biggest differences arise when dealing with inter-family disputes, as there are different rules regarding who may act on the executor’s behalf.

How much can you inherit in the United States?

While it’s fairly common for an executor to receive an inheritance worth half of the estate’s value, estate lawyers will argue that that’s the maximum you’re allowed to receive. If you’re buying property in the USA, it’s worth noting that legal guardians may receive a “survivor’s share” in the case of a joint estate, which allows them to receive a larger proportion of the inheritance if they were unable to have a legal capacity to make decisions in the first place. It’s worth remembering that this is in the case of a common-law family. There are a number of reasons why a bereaved relative may need to raise a new child as a ward of the state in the USA.

Taxes for US Citizens

As a US citizen, you have an equal opportunity to inherit assets from an American citizen or an American company. As well as being able to inherit any personal estate and inheritance could be subject to inheritance tax (called ‘estate tax’ in the UK). It is in the US estate planning requirements that this tax is calculated at a rate of 15%. Inheritance abroad If you are looking to inherit assets abroad, you need to ensure that they are received overseas. If you are a US citizen, any assets you receive in a foreign country will be subject to a double taxation agreement between the US and the recipient country. The rules regarding inherited US property or goods abroad are detailed below. How can I protect my inheritance? A trustee is often used to hold the contents of the estate.

Conclusion

In the UK and most of Europe, you can leave everything to the government once your death has occurred. However, in the USA, it is important to know all of your options before making any decisions. This will give your family the best chance of obtaining the financial support that they may need in your absence. Have you ever considered the implications of leaving assets to the government?

“If you have any feedback about what to do with an inheritance in the united states that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

529 plan

What Is A 529 Plan? How Does It Work?

A 529 college savings plan is a specialized savings account that is used to save money for college. Each 529 plan account has an account owner, who controls the investments and selects the beneficiary and one beneficiary. The account owner and beneficiary may be the same person. The money in a 529 plan may be used to pay for the college expenses and K-12 tuition of the beneficiary, tax-free. Many families find that 529 plans work well, helping them achieve their college savings goals. 529 plans make it easier to save, with the option to schedule automatic investments as low as $15 or $25 25 a month transferred from a bank account or payroll check.

What is a 529 plan?

A 529 plan is the term used for a savings vehicle that allows families to save money for college. When you use a 529 plan, you are contributing and having your money invested for college. Contributions to a 529 plan are tax-free if used for qualified expenses. You can use a 529 plan to pay for qualified expenses only. A 529 plan is meant to help families save for their children’s education expenses. But even if you don’t use a 529 plan, contributing money can still help you achieve your college savings goals. A 529 plan may be used to save money for college. Contributing money to a 529 plan is the same as saving for a 529 plan. But in many cases, a 529 plan is used to save money for higher education expenses.

How does the 529 plan work?

There are multiple options for how to set up a 529 plan, but each offers a level of security and growth potential. The best choices depend on your financial situation and your family’s circumstances. To choose the best option for you, talk to an accountant or certified financial planner. A financial planner can discuss your unique situation, give you a hands-on, personalized assessment, and offer other considerations to consider.

Benefits of 529 work

Choosing a 529 plan that is good for your family is easier than you might think. The best choice depends on several factors. You’re looking for a plan that helps you put away money while your children are growing up. You want to know that your plan will provide as much interest as possible, and won’t run out of money. You’re looking for a plan that doesn’t require you to pay state and federal income taxes on any contributions or on earnings from the plan, or fees. Most 529 plans have low minimum contribution requirements, usually a few hundred dollars. For many families, this is more than they have to save. A 529 plan can help you and your family avoid getting hit with high state income taxes, which are often higher than the income taxes on their investments.

How to choose a 529 plan?

A 529 plan offers great flexibility and low transaction fees, so it makes sense to use a plan that is right for you. Learn about the different types of 529 plans and compare the fees associated with each one. Decide which kind of beneficiary you want – immediate or graduated – as well as the investment options you want for your beneficiary. Under the current tax laws, there are many different types of qualified savings vehicles, such as a Roth IRA, Roth 401k, Roth 403b, a traditional IRA, etc. The best way to choose a 529 plan is by figuring out what your assets are worth, and the degree to which you need the money in the future. If your assets are greater than $500,000 and you can devote at least 10% of your income to college expenses, such as tuition, fees, room and board, and transportation, then you may consider the cost to be more than a 529 plan could ever afford. This is because all 529 plans must invest at least 7.65% in stocks. For families who will need the money for many years, this would never be sufficient.

This post contains affiliate links. Please please read my Disclaimer for more information

How to select a 529 plan investment option

It is important that any 529 account investment is simple and accessible. Families who are considering using an investment option in a 529 plan should consider the investment options offered, the fees and costs associated with them, and consider the particular needs of their beneficiary. With some programs, investors are not the owners of their investments. The investment options in a 529 plan may be created, owned, or managed by the plan sponsor, state tax office, federal tax office, or charitable organization (local community college might offer their investment options in a 529). For example, state governments typically manage a 529, investing the money in a group of U.S. stock, U.S. bond, or money market mutual fund.

How to make contributions to a 529 plan

Individuals, families, or small businesses may contribute to a 529 plan in various ways. Some states have other, more complicated, methods of making contributions, including payroll contributions to specific bank accounts, but most employers already make contributions into a 401(k) plan for their employees, and most states make similar arrangements for K-12 tuition. Under some circumstances, individuals may also make contributions directly into a 529 plan. The person making the contributions must meet certain requirements, including that the contribution is in their own name, and that the contributions are invested in a state-sponsored 529 plan.

How Much Can I Contribute?

There are a lot of options for 529 plan contribution amounts. The savings limits are dependent upon the state and dependent on the number of years until college. For example, the New Jersey Tax-Free Savings Accounts annual contribution limit is $60,000 per beneficiary and the federal limit is $200,000. There are also a lot of calculators available online, that will help you decide how much you are able to save for college. Some of the online calculators may require a state or school login.

Will Having a 529 Plan Affect Financial Aid?

A 529 plan may affect financial aid in some cases. For instance, 529 plan deposits count toward certain financial aid formulas, such as need-based financial aid formulas for undergraduate students and merit-based aid formulas for graduate students. There are many options for financial aid, including FAFSA, work-study, grants, and loans. Your 529 plan may reduce the amount of financial aid you can receive. If you choose to use your 529 plan to pay for your children’s college, you may not be eligible for state-sponsored financial aid. The state could deny you financial aid. Other financial aid options may be available if you have the financial resources to pay for college. If you do not have access to financial aid, or you may not meet the financial aid eligibility requirements, it may be difficult to send your children to college. But you can still help your children get a college education, even if you do not have the financial resources to do it yourself.

How to Withdraw from a 529 Plan

You will usually be able to withdraw from your account and pay for your college expenses. The best way to manage this withdrawal is to start with a withdrawal that is large enough to cover the cost of your current college expenses and get used to making withdrawals in order to build up an emergency fund. This withdrawal will likely be about half the annual average cost of your college expenses. You can then apply the remaining funds to your emergency fund or to your 529 college savings plan. If you are not quite ready to make a withdrawal yet, consider borrowing from your 529 college savings plan. You can borrow $10,000 per year ($1,000 a month for 12 months) without paying any interest on the money.

Conclusion

Families should do all they can to make sure they are on track for college. If you are a couple and plan to save the maximum you can each year in a retirement account, consider making that college savings account as well. Or if your child is to be the beneficiary of a 529 account, contribute as much as you can. Savings in tax-free accounts like a 529 plan offer family members the option to save for college now, while tax-advantaged, and invest for growth and income in retirement. The best part about 529 plans is that the money can be used for any type of higher education.

“If you have any feedback about what is a 529 plan that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

W-4 Form

How Do I Fill Out A W-4 Form?

 

If you are switching jobs, you’ll soon find out that the W-4 form that every employee has to fill out in order to determine the amount of taxes that are withheld from each paycheck has changed. The Internal Revenue Service (IRS) says it has revised the form in order to increase its transparency and the accuracy of the payroll withholding system.

What is A W-4 form?

The W-4 form allows employees to fill out their tax information for both the employer and themselves. However, the IRS cautions that a W-4 form is not designed to be entirely accurate. The W-4 form should only be used for informational purposes and for filling out additional forms, such as your Form 1099-R. The W-4 form contains information about the number of dependents you claim, your personal exemption, and payments that should be withheld. Who is responsible for filling out a W-4? The responsibility for filling out the W-4 falls upon the employee and it is recommended that employees work with their human resources or payroll department to complete the tax withholding form. Some states do require employers to have this form completed by all employees as well, though.

Provide Your Information

The W-4 form you file is unique to you and your tax situation. You need to use your most recent pay stubs to fill out this form. When you file your W-4, you’ll need to be as accurate as possible when estimating your taxes. If you made a change in your name, for instance, you’ll need to adjust the information on your W-4 form. Some taxpayers may need to include their spouse’s wages to determine the correct amount of taxes withheld from their combined paycheck. Filing your W-4 form is not required of anyone but you. Anyone who receives a paycheck from a job that isn’t withheld correctly is required to fill out the form. A few employers are required to fill out the form, but not all.

Indicate Multiple Jobs or a Working Spouse

Employees who have multiple jobs or a spouse who has a job will likely benefit from the new form. This allows the IRS to calculate tax withholding by taking into account all applicable income, as well as any additional withholdings due from your side hustle. As for dependents, the W-4 now reflects an adult child, or another child in the home, who has a dependent, as well as the number of dependent children that are living at home. If you are filing your taxes for the first time or if you’ve recently changed jobs, the new W-4 form will ask you to include a new line for your name. This can be used as a backup name if you forget your Social Security number, or if you have moved and you don’t have a new home address yet.

Add Dependents

Taxpayers can now choose the “above the line” or “below the line” method when filling out a W-4 form. Above the line:  This method requires you to include the number of your dependents (the first 10) on the front of the W-4. Since you don’t have to provide any additional information, all of your dependents will be listed. This method requires you to include the number of your dependents (the first 10) on the front of the W-4. Since you don’t have to provide any additional information, all of your dependents will be listed. Below the line: In this method, you can list additional dependents that aren’t on the front of the W-4. For example, you can list a spouse or dependent children, legal guardians, and a full-time student on the front.

Add Other Adjustments

In order to fill out a W-4 form, you’ll need to add all of the following adjustments: Medical expenses – If you have a health insurance plan that doesn’t provide coverage for all of your medical costs, you’ll need to add this amount. Income taxes withheld – You’ll need to make sure you include the amount of taxes that you’re withholding from your paycheck. Outstanding debts – You’ll also need to add amounts that you owe to creditors in order to receive a write-off. You should also include any overpayment to your mortgage company. You’ll also need to subtract any losses from any income that you’ve earned, or that you’ve not yet been able to claim. This can be applied to the income you’ve paid during the year. You can then claim this as a deduction.

This post contains affiliate links. Please please read my Disclaimer for more information

Sign and Date W-4 Form

The IRS notes that employees can still fill out a previous version of the form and sign it so that if there are changes made, the changes can be properly applied. As for the newly revised form, there are some important rules to keep in mind: Changes to your W-4 should be made when the first paycheck is issued. The old form can be reprinted, but make sure the signatures on it match the name on the pay stub. In the revised form, your employer must include the employer’s name and the amount of withholding they want to do. Some employers have raised the amount withheld on the W-4 form and some have not. In any case, if your employer has increased your withholding, you’ll need to update your tax withholding status with your new employer.

Special Considerations When Filing Form W-4

The new form removes certain personal tax details from the top portion of the form. Instead, the new W-4 form requires employees to list the names of all employers, along with the numbers of hours worked by the business, for the current tax year. An employer may require that this information, along with the number of weeks worked and dates and amounts of overtime worked, be given for any previous tax year. An IRS spokesperson stated that this will make it easier for employers and employees to complete the form, particularly for a small business employee who is working at multiple locations, in order to ensure that withholding is being applied to all possible deductions or credits.

Get comfortable fiddling with your withholdings.

The new forms, known as the W-4, are available as of Jan. 1, 2018, and can be used as of Jan. 1, 2019, but some individuals may get their 2017 forms as early as Jan. 1. While you can use the new W-4 forms as of the start of the tax year, you might need to start looking at your withholdings earlier in order to meet your withholding needs during the first half of the year.

File a new W-4 form when life changes.

If you have kids in school or enrolled in college or if you have changed jobs since the last time you filed the W-4 form, the new form might benefit you. This form comes with different options in order to update personal information with the IRS. For example, let’s say you did not have a dependent who went to college last year but you now have a dependent who is in college. In this case, your parent tax credit is adjusted to account for your student-tax credit. You can request a new W-4 form from the IRS if you changed your name or address or if you went from being a single person to a married person or divorced. Consider filing your W-4 form online. If you do not have access to a computer at home, you can submit a form electronically through the IRS.

Conclusion

A big part of the rise in stocks is due to the growth in the U.S. economy. Much of the growth that is taking place is on the consumer side. Consumption is one of the most important factors in the overall economic growth of a country. With most consumer products being manufactured overseas, it is nice to know that companies are making investments in the manufacturing process in the U.S. This should result in jobs being created here in the U.S.

“If you have any feedback about how do I fill out a w-4 form that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

Medical power attorney

What Is The Medical Power Of Attorney?

A medical power of attorney (or healthcare power of attorney) is a legal document that lets you give someone legal authority to make important decisions about your medical care. These decisions could be about treatment options, medication, surgery, end-of-life care, and more. The person you name in your POA to make these decisions is called your healthcare agent or proxy. We never know when something unexpected could happen to us, like a sudden injury or illness. With a medical power of attorney, you’re creating peace of mind for yourself and your loved ones by choosing someone you trust to make important decisions for you in the event you’re unable to.

When creating a medical POA, most people choose to make it durable. Having a durable medical POA means your agent’s authority to act on your behalf continues if you’re incapacitated — meaning you’re unable to communicate your wishes. Your agent would be able to make medical decisions for you during a time you’re unable to speak for yourself. Many courts assume a medical POA is durable by default, but it’s best to be explicit when writing your document.

When you name someone to make medical decisions for you, you gain peace of mind and control over your healthcare. It’s crucial that you have a healthcare power of attorney in place. You name someone in your healthcare power of attorney to make decisions regarding Your medical care, Your healthcare expenses, Your healthcare insurance, Your healthcare plans, Your right to make decisions regarding Your funeral arrangements, Your last wills and testaments, Your conservatorship, and Your Powers of Attorney (a common type of POA).

How to create a medical power of attorney

When creating a POA, you and your family members must work together to think about the issues that you need a power of attorney to make decisions about. (You need to do this so your agent can be named in the POA.) You may also want to consult an attorney to make sure your POA will be enforceable in court. Medical powers of attorney are, basically, a blueprint for how you want your medical decisions made. Deciding who can make those decisions in your absence can be a difficult and stressful thing to do. However, it is important to do this so you can rest assured that your wishes will be honored. It can also be helpful to give your healthcare agent permission to make decisions for you without your permission if you are unconscious or unable to make the decision yourself.

This post contains affiliate links. Please please read my Disclaimer for more information

Choosing your health agent

You can designate someone as your health agent by filling out a Health Agent Registration Form or by visiting your local probate court in the state in which you live. Your health agent should be someone who you trust with making important healthcare decisions on your behalf. To be your health agent, you must be of legal age (usually 18 years or older), have a physical or mental disability that causes you to be unable to make your own health care decisions, and not is a sibling of your POA. For example, your brother can’t be your health agent. Health agents make decisions about your medical care, health insurance, and/or medical treatment and require information to do so.

What does your healthcare agent have to do?

A healthcare agent has the legal authority to make decisions on your behalf. If you’re older than the age of 18, you should also name a healthcare proxy to make medical decisions for you. Make sure you know who your healthcare agent and proxy are before making any changes. You can use a medical attorney or CPA to help you. A CPA can act as a medical agent, guardian, or trustee. A CPA can provide support or advice to your healthcare agent or proxy and serve as an independent witness

How does my loved one benefit from having a medical power of attorney?

A medical power of attorney gives your loved one the ability to make important decisions about your care. But don’t take our word for it: see for yourself. Your healthcare agent or proxy will have complete decision-making authority over your medical care and treatment. That means they can make important decisions on your behalf, without you being able to intervene. This power of attorney will be separate from any other powers of attorney that you have for property, credit, or anything else.

What documents do I need?

You need to be able to name a healthcare agent or proxy and fill out a few legal forms. How do I become a legal POA? You should take responsibility for your health care decisions. Be sure to Become and remain a legal adult. Make sure you’re not under the influence of alcohol or drugs, mentally or physically incapacitated, or if you or a minor child are incompetent.

How to revoke your medical power of attorney

You can revoke your medical power of attorney (or change your POA) at any time by filling out a form. The document can be revoked at any time. But if your healthcare agent has made a decision for you in a healthcare emergency, it may be difficult to revoke that decision. Revoking a medical power of attorney will usually require a court hearing or a court order. In either case, you may need to pay the costs of that hearing or court order upfront.

How to Get a Medical Power of Attorney

To make sure that you or a loved one has access to your medical information in case of an emergency, it’s essential to have a medical power of attorney. A legal document signed by you (or your agent) creates the legal framework for someone else to make decisions about your medical care. Having a medical power of attorney in place will help you or your agent communicate your wishes if you become incapacitated and can no longer speak for yourself. There are two types of medical power of attorney: living and medical. The living power of attorney is what you’re probably familiar with, but the medical power of attorney is a more comprehensive document that’s signed by your agent.

Benefits of having Medical Power of Attorney

Benefits of Medical Power of Attorney include: Let your loved ones make important decisions about your medical care, Protect your decision-making rights, Keep your healthcare decisions secret, and Give your proxy the power to make certain medical decisions if you cannot. If you’ve decided to get a medical power of attorney, the best time to do it is now. You don’t need a legal representation right away, and anyone you name as a healthcare agent will need to have one. If you have questions about what’s involved or want more information, then call today at 1-800-283-1015. Find out more about medical powers of attorney and other life insurance questions you’re often asking about by calling 1-800-283-1015.

Conclusion

Healthcare decisions are hard to make, especially if you’re not comfortable talking to your doctor or you don’t like the way your symptoms are affecting you. When you create a healthcare power of attorney, you give someone else the power to make the decisions you may not feel able to. This lets your loved ones help you make the right decisions, whether that’s deciding on a treatment plan for a medical condition, picking the right hospice care, or deciding whether you’re able to live at home or in a care facility.

If you have more questions about setting up a healthcare power of attorney, you should talk to an experienced healthcare attorney. They’ll review the legal documents you’ll need, discuss your options, and guide you through the process.

“If you have any feedback about what is the medical power of attorney that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

Power of Attorney

What Is The Financial Power Of Attorney?

Chances are, you wonder what will happen if your aging parent loses their ability to make health or financial decisions. How can you or others in your friend and family circle help them in that situation, or know what to do? These questions are all part of an ongoing conversation you may already behaving as a caregiver – and part of the answer might lie in a legal document called a power of attorney, or POA. A POA gives someone the legal ability to make decisions on behalf of another adult, such as an aging parent or loved one.

Often, the term “financial power of attorney” gets a bad rap because of the complexities involved, but what most people don’t know is that a POA is really just a legal agreement. It is a document that you design with your loved one and one that they and you sign. It is legally binding. This document is much like a will, but unlike a will, a POA is not a legal document that needs to be probated or get a signature from a judge. Instead, it is an “empowering” agreement, meaning that it does not give anyone the legal power to act on your behalf. The document is often described as giving someone the “ability to act for another.” That’s actually quite misleading because a POA does not give someone the legal right to act on your behalf.

How Does a Financial Power of Attorney Work?

A POA allows someone to designate you or another trusted family member to make important financial decisions on their behalf. For example, you might name your aging parents or loved ones as beneficiaries to their IRA or 401(k). Or, you might designate that your spouse or other adult relative make decisions on their behalf when they can no longer manage financial matters for themselves. The POA can specify that the financial decision-maker make payments to another person (like a relative) to manage other matters that may be needed in addition to what they are handling. Most banks and financial institutions allow you to designate another individual to make certain financial decisions for you.

When Does a Financial Power of Attorney Take Effect?

With a POA in place, one of the two persons listed in the document may make decisions for the other person until the first person has become incapacitated (committed to a hospital or nursing home). (The term “committed” means a person is “committed” to one of these places, so if the person is still physically able to care for themselves, they may choose to stay at home or even return to work.) This person could then assign a caregiver to handle all financial matters on the person’s behalf until they are no longer able to do so. Once you’ve created the POA, you can access and use it when the time comes. However, as with any legal document, some of the details matter when it comes to interpreting the POA.

This post contains affiliate links. Please please read my Disclaimer for more information

When Does a Financial Power of Attorney End?

What are some ways that an adult child can go about creating a POA? Well, it depends. For starters, an adult child may use the power of attorney document to get paid on a parent’s behalf. The parent may not be able to make payments directly, and the person with the POA can authorize the bank to make the payments. This may involve such things as paying the utility bills, etc., so your family member may want to make sure that they can sign an I.D. card at the bank and authorize the payment on their behalf. A parent can also ask their family member to act on their behalf, to make financial decisions for them in the event of illness or in their absence. This power of attorney is named for the “Guardian,” who can be a family member, the POA itself, or a trusted individual.

Who should have a Financial Power of Attorney?

There are a few questions to consider before you get the POA document. How old is the person you’re making a POA for? Are they capable of making decisions? Who do you trust with the POA? Your financial advisor, a lawyer, a healthcare professional, or someone who has special knowledge of your parents or loved one’s financial situation? If you are feeling lost about whom to ask, here are a few factors you’ll need to consider. Do they have the means to make decisions for themselves? If the person you want to help you with a POA isn’t able to make decisions for himself, you need to make sure he or she can do so, at least in a way that won’t put them in danger of financial ruin. Some of the most common choices are to use a combination of advanced medical directives and a POA.

How to Make Your Financial Power of Attorney Form

Who needs to be named as a family POA? There are only two people you should be naming as family POA: 1) the person who is directly affected (e.g. the parent, spouse, adult child) and 2) someone who is unrelated to the direct affected person (e.g. your mom’s best friend’s brother’s friend). In the event the direct affected person has a mental health issue, this person should be named as a conservator. Why is a POA necessary? All of these POA forms should be reviewed annually. One example is: if you are named as a POA for someone who is over 65, check your POA to see if you need to update it if their age changes.

Pros of Financial Power of Attorney

POA powers provide peace of mind. POA gives you legal control over the things that are important to you. As the adult in the room, you don’t want to leave these decisions to chance – you want to make the most important decisions yourself. Of course, depending on what you want your family and friends to do, the POA could be an important step to protect them, and perhaps your loved one. But to get this, you need to be clear and set the stage with your family and friends. It takes time, but it is well worth the effort. For example, to provide financial power of attorney, you may want to delegate the management of your family’s financial affairs to a trusted individual, whether a friend, lawyer or accountant.

Cons of Financial Power of Attorney

There are a few reasons to avoid a POA for your aging parent, such as concerns about not knowing the answer to certain questions. For example, a POA might give the agent power over the terms and conditions of Social Security and Medicare, or they might own certain invehttps://my.wealthyaffiliate.com/content/edit/814888#stments, such as mutual funds. You may not want to give away these investment options to another person.

Conclusion

As a family member, advocate, or friend who wants to help out an aging family member or friend, this quick and easy guide is designed to answer many of the questions you might have. If you’re already seeing your family member or friend needing to make decisions, or if you’re in the middle of a complex family dispute about their care, I’d recommend you read these documents, along with a care checklist for seniors, that will help you as a family member. It’s much more challenging for family and friends to take care of loved ones as they age, and you can help each other.

“If you have any feedback about what is the financial power of attorney that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.