Legal and Estate Planning
Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in private and public life have been the consequences of action without thought.
BERNARD BARUCH
You've seen the motto "Plan Ahead" on a friend's desk or on the wall of an office. The last few letters are crowded into the space, proving that the creator of the motto failed to take his own advice. That describes a lot of people who look to their senior years without having planned ahead properly to assure them of needed resources.
ASPECTS OF ESTATE PLANNING
Perhaps no area requires sound advice more than that of estate planning, which is a subject of paramount importance in a person's middle years. Your estate is the sum total of all that you own, plus all that is owed to you, minus all that you owe. Upon your death, your estate becomes a legal entity in
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its own right: the estate of John or Jane Doe. The estate then consists of all the assets and debts you had while alive.
Estate planning helps you to plan for the use or distribution of your assets according to your needs and desires. Putting your financial and other assets in order is a good idea, no matter what the size of your estate.
Careful estate planning should enable you to do the following:
Most important, careful estate planning provides you with peace of mind about the welfare of your family after your death.
There are two essential elements in estate planning: (1) arranging your assets so that they can be distributed with maximum ease and minimum cost, and (2) setting forth binding instructions so that your assets are distributed and your other wishes are carried out as you desire. Step one involves understanding your present and future financial status and making modifications as needed. Step two requires defining just what it is you want to accomplish.
Spread out before me just now are booklets, magazines, official reports, computer printouts, and brochures from of-
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ficial sources and from my friends. They all say essentially the same thing: start early, get expert advice, and make
"Careful estate planning provides you with peace of mind about the welfare of your family after your death." |
necessary changes as you go along to keep your estate in apple pie order. Of specific help have been the American Association of Retired Persons, the Special Committee on Aging of the United States Senate, the United States Department of Health and Human Services, and the Pension Benefit Guaranty Corporation in Washington, D.C.
Steps in Estate Planning
Gather information on your current income and expenses.
Develop a budget for today.
Develop a statement of net worth.
Estimate your retirement income and expenses.
Plan your retirement budget.
Your Estate Planning Team
Estate planning requires time and study. Don't expect it to be easy or quick. While you may feel competent to do this work yourself, you would be wise to seek professional advice. A team approach to estate planning is usually best. The mem-
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bers of the team might be a lawyer, an expert accountant, a banker, and an insurance agent.
The lawyer is probably the most important person on your team. He or she can help you to determine which of several devices — will, trusts, gifts, and so forth — would be best for protecting and eventually passing along wealth to your survivors. The lawyer can also prepare the relevant documents and see that they are properly signed and witnessed.
The task of selecting a lawyer is a lot like choosing a doctor. You will want someone in whom you can confide, who will sympathize with your problems, and who will respect your pocketbook. In many situations you may need a lawyer who specializes in a particular field. Here are some suggestions for choosing your lawyer.
As soon as you sit down with your lawyer, determine what the fees will be and what manner of payment will be expected. Demonstrate confidence in your attorney by freely discussing all necessary information. Time is of the essence in most legal matters; more complications can arise with each passing day. The earlier you see your lawyer and the more
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you cooperate, the more likely you will be to achieve satisfactory results.
A tax accountant will help to minimize your estate tax liabilities. It is wise to confer with your accountant before retirement to learn the specifics about tax breaks after retirement. If you plan to work after you become eligible for Social Security, you can consult a tax accountant to help you determine how working will affect your after-tax income and your Social Security benefits. A tax accountant can also determine the advantages of tax-deferral investment plans, such as a Keogh plan for the self-employed, an Individual Retirement Account (IRA), or a 401 (k), among others.
A banker's advice can be useful in formulating your overall plan, and such advice should be sought specifically when it comes to trust arrangements. An insurance agent can help you review not only your life and health insurance needs in retirement but also your liability, homeowner's and auto insurance, all of which are necessary to help protect your assets.
Recently, a new practitioner has come on the scene: the financial planner. Many financial planners have been trained in matters relating to estate planning and can offer sound advice, though a lawyer should still provide the final guidance. Some financial planners, however, are more intent on selling financial products such as insurance policies, mutual funds, and tax-sheltered programs, for that is how many of them earn their living.
The field of financial planning is virtually unregulated, and you could be in serious jeopardy if you wind up in the hands of an unscrupulous person who calls him or herself a financial planner. So it is absolutely essential to exercise the utmost care in retaining the services of a financial planner. Check background, personal references, and professional references. Before you buy any product from a financial planner, it would be wise to get a second opinion from someone who isn't selling anything.
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Anyone can call him or herself a financial planner, qualified or not, ethical or not. The following organizations represent people who offer financial planning services. You can learn more about the credentials of a so-called planner by inquiring of these associations.
American Association of Financial Professionals
P.O. Box 1928
Cocoa, FL 32923
(305) 632-8654
College for Financial Planning
9725 E. Hampden Ave.
Denver, CO 80231
(303) 755-7101
Institute of Certified Financial Planners
Two Denver Highlands
10065 E. Harvard Ave., Suite 320
Denver, CO 80231
(303) 751-7600
International Association for Financial Planning
Two Concourse Parkway, Suite 800
Atlanta, GA 30328
(404) 395-1605
Dealing with a representative from any of these associations does not guarantee that you will be satisfied. But it can be better than dealing with someone who has no such credentials.
The Cost of Professional Advice
Attorneys at law might set their fees according to the time devoted to the job, the difficulty of the job, your ability to pay, or a combination of these factors. Many lawyers charge by the hour, including both research and consultation time. In some cases a lawyer may base charges on a percentage of the
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amount at stake, such as in personal injury matters or real estate transactions. Court costs, filing fees, and other out-of-pocket expenses are usually added to the hourly or percentage fees a lawyer charges.
Time is the key element in legal fees. Wasting a lawyer's time is costly. It's a good idea to find out in advance what information you need to bring so that you have the relevant facts and figures in hand when you visit your lawyer.
Accountants usually charge on a per-hour basis. In some cases they may charge a set fee. Always determine the fee structure beforehand. Insurance agents usually don't charge for their counsel. A good agent should be willing to talk to you for a reasonable time knowing that you are comparison shopping. Remember, though, insurance agents earn a commission from the company with whom they place a policy.
Bankers also do not charge for counsel. Seek out and cultivate a rapport with one. Obviously, you should be a customer of the bank; all you have to do is open an account. If you contemplate a trust arrangement, confer with your banker about charges for such services.
A financial planner may charge anywhere from $500 to $5,000 or more for a master financial plan. Some financial planners will provide advice on specific topics, rather than a whole plan, for $50 to $150 or more an hour. While some planners charge a set fee for their work, others earn their living from commissions on the financial products — such as stocks, bonds, mutual funds, and insurance — that they sell their clients in connection with their planning. Planners working on commission may be less objective in their recommendations than those who do not earn such commissions.
In choosing any of your advisors, it is wise to seek recommendations from others who have used their services.
How Estates Are Taxed
The Economic Recovery Tax Act of 1981, which took effect the following year, gradually phases out estate taxes for all
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but a very small percentage of the population. Nevertheless, you should know that the following tax liabilities are possible.
Taxable transfers. The unified federal estate and gift tax is levied on so-called taxable transfers: money and real or personal property that a person has passed along, either in the form of trusts and gifts while alive, or through estate distribution after death.
Gross estate. An estate is usually valued as of the time of death, but under certain circumstances, it may be valued six months after death or at close of probate. The gross estate generally consists of all that the individual owned, plus all that was owed to him or her. This can include a home, investments, proceeds of life insurance policies owned by the decedent, personal property, money due under pension and profit-sharing plans, and business interests. Jointly owned property may still be included in the gross estate under certain conditions. One-half of property owned jointly by husband and wife is usually included in the gross estate.
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Taxable estate. From the gross estate are subtracted the debts of the decedent as well as expenses such as funeral and burial costs, charitable bequests, and the costs of administering the estate. When the appropriate deductions (discussed later) are subtracted, the result is the taxable estate.
There have been major revisions to the federal estate and gift tax laws in the last few years. Of particular importance are the revisions effective in 1982. It is advisable to review any wills, trusts, or other forms of estate planning that were completed before those changes were made.
Estate Planning Devices
Certain devices help you to reduce the taxable portion of your gross estate. It is important that you check current tax laws as they apply to your own estate situation.
Marital deduction. The marital deduction consists of gifts and bequests to the surviving spouse. For deaths occurring prior to 1982, there were limits on the maximum allowable marital deduction. But for deaths in 1982 and after, those limits were removed. (This change is not automatic; a will must be changed for the estate to benefit from it). Remember, though, that when the surviving spouse dies without having remarried, no marital deduction will be allowable.
Unified tax credit. After the marital deduction, a substantial portion, if not all, of a remaining taxable estate may pass tax-free as a result of the credit against taxes on gifts and estates. The credit increases yearly until 1987, when a taxable estate of as much as $600,000 will be tax-exempt.
For example, an individual dies, leaving a taxable estate of $600,000 after all allowable expenses and deductions have been subtracted from the gross estate. The tax due, before credit, would be $192,800. On deaths occurring in 1987 or later, there is a maximum credit of $192,800 allowed against the taxes. The credit thus exactly offsets the amount of the
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tax, so no taxes are payable on the estate. (The credit cannot exceed the tax due).
Gifts. The unified tax credit also applies to gift giving. By making tax-exempt gifts, you can reduce the size of your estate and thereby minimize potential estate taxes. You can make gifts of up to ten thousand dollars per person per year to as many persons or organizations as you wish without having to pay federal gift taxes. If spouses join in making gifts, the annual tax-exempt limit per recipient is twenty thousand dollars.
If you make gifts in excess of the tax-exempt allowances, the excess will be considered a taxable transfer; and if it exceeds the unified credit, it will be subject to tax. Your estate will not be tax-exempt at time of death if you apply the unified tax credit to gifts given during your lifetime. However, spouses can make unlimited gifts to one another without federal gift tax consequences, although there might be state gift tax consequences.
Tax-exempt gifts and other strategies should be considered seriously by single persons, since a single person's accumulated wealth may be taxed far more heavily upon death than that of the married person whose spouse survives. It is wise for those who are single to discuss their estate tax situation with their lawyer or other advisor.
Life insurance. The role of life insurance in your overall planning changes as your children become adults and as you approach retirement age. If you have a good retirement income that will continue to support your spouse after your death, you need not carry a lot of life insurance. Rather, you should carry just enough life insurance to pay for the expenses involved in settling your estate. It is a good idea to review with professional advisors how much insurance will be needed to cover these expenses and what is the best type of policy for that purpose.
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Remember, too, that life insurance policies you own will be included in your estate for estate tax purposes. Consult your advisers as to the best way to set up insurance policies to minimize or eliminate taxes and delays.
Other types of insurance — liability, homeowner's, auto — also play an important role in your estate plan. They serve to protect the various assets that make up your estate.
Property Ownership
There is no single best form of property ownership. It all depends upon your possible exposure to estate taxes and your wishes as to who should receive the property after the joint owners have died. The best solution is to discuss the matter with an attorney to determine what is right for your needs, and then to take whatever steps seem wise with regard to your overall estate plan. Consider the following four types of ownership.
Community property. Each spouse owns half the property acquired during marriage. Holdings each spouse owned separately before marriage or inherited individually after marriage are not considered community property. Eight states have community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. In states other than those, two or more persons may own property by tenancy in common, by tenancy by the entirety, or by joint tenancy with right of survivorship.
Tenancy in common. Two or more persons own shares in the property. When one dies, that share passes directly to his or her heirs, not to the other tenant. For example, if a husband and wife hold property as tenants in common, the surviving spouse does not automatically receive the deceased spouse's share. That share is subject to probate.
Tenancy by the entirety. This form of joint ownership is limited to husbands and wives and is sometimes further
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restricted to real estate. Neither spouse can act alone in disposing of the property.
Joint tenancy with right of survivorship. Two or more persons hold property jointly. If one person dies, that person's interest automatically passes to the other joint tenants. For example, husband, wife, and son might purchase property as joint tenants. Their reason for doing so might be to have the property pass to the surviving spouse and son, and eventually to the son alone.
Seek professional advice about the type of ownership best suited to your estate needs.
Trusts — A Valuable Tool
Trusts are among the most important tools used in building an estate plan. For the right people in the right circumstances, trusts can be an ideal way to pass wealth from one generation to another. Basically, a trust offers a plan by which a trustee (often a bank) holds your assets for your benefit or that of your beneficiaries.
You may wish to transfer thirty thousand dollars to one of your children, but you are concerned that the child might not handle the money prudently. If you want to pass that money along now, not later, you can establish a trust. If you do so with a bank as trustee, for instance, the bank/trustee will hold the money for your child in accordance with written instructions, which you may wish to have your lawyer prepare. If you want the income from the fund to be paid to your child annually, the bank will see to it. If you want the money paid out in installments or in a lump sum at any stated time (such as when the child reaches a certain age or upon your death), the bank/trustee will see to that, too. The trustee receives a fee, and you receive the satisfaction of knowing that the matter is being handled properly.
Trusts may be living or testamentary, revocable or irrevocable. A living trust is one that is set up and takes effect while
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the parties are living. A testamentary trust, which is created by will, takes effect upon death. For example, your life insurance proceeds could flow into a trust fund upon your death and subsequently be managed by the trustee, who may or may not be a beneficiary.
A revocable trust can be revoked or canceled by the person who established it. An irrevocable trust cannot be terminated.
Two living trusts to consider in estate planning are a life insurance trust and a Clifford Trust. A life insurance trust is set up to receive the proceeds of life insurance policies. It makes cash available to the executor so that he or she can begin settling an estate and provide income for the family of the deceased during probate. The creator of the trust can give discretionary power to the trustee, who then can make the principal available to the family to meet its needs.
A Clifford Trust is an irrevocable trust that is generally set up for a specific purpose, such as to pay for a child's education. At the end of a ten-year period, the trust's assets are returned to the creator of the trust to be included in his or her gross estate. The 1986 Tax Reform Act severely limits the tax benefits formerly available through Clifford Trusts. Check with your own tax adviser for details.
Trusts are not for everyone. An estate should be large enough to justify the payment of trust management fees. Furthermore, the initial costs of establishing certain kinds of trusts can be substantial. The offsetting benefits should be discussed in detail with your attorney and the trust officer of your bank or your financial adviser before you take action.
SPECIAL CONSIDERATIONS IN ESTATE PLANNING
The facts are simple: women generally outlive men. So the odds are strong that most married women will eventually be widows for a period of time. Sweet peace, the gift of God's
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love, coupled with good financial planning can make it easier to cope with widowhood.
Women in the World of Investment
"My husband took care of all our financial affairs while he was alive. But since his death, I have not known what to do!"
It is a fact of life that women outlive men and that women have not always shared in the duties of family financial management. As a result, widows are all too often left in dire straits, both psychologically and financially. They can be easy prey for swindlers and victims of well-intended but poorly informed friends who urge them to invest their money unwisely.
Start now to work with your husband toward a common end. Find out how the death of either partner would affect income flow and how it would affect expenses.
You may be widowed and alone after many years of marriage. You may be single, well into your twenties or thirties, or beyond, as you build your own career. You may be happily married but a breadwinner in your own right.
Married or single, most women today hold paying jobs. Some 55 percent of all married women were in the work force in 1985, up from 41 percent in 1971. Working wives, overall, contribute more than 28 percent of their family's total income; wives who work full-time contribute an essential 39 percent.1
Managing money need not be complicated. If you take it one step at a time and seek expert advice when necessary, you will be able to take charge of your own affairs. It's particularly important that you take the time to manage your money well because you, as a woman, have special needs.
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differentials than others, but a woman, on the average, earns about sixty-eight cents for every dollar earned by a man.
"It is a fact of life that women outlive men and that women have not always shared in the duties of family financial management." |
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Many wage-earning women, as a result, find that Social Security pays them no more in retirement benefits than they would have received if they had never worked outside the home.
The Social Security benefits you receive on your husband's earnings record may be inadequate. Under current Social Security provisions, at age sixty-five, wives of retired workers are entitled to 50 percent of their husband's benefits. Widows may receive 100 percent of their husband's benefits at age sixty-five. But benefits claimed before age sixty-five are actuarially reduced.
If you separate from your spouse and have not worked outside the home, you will be particularly in need of financial know-how. One study found that a woman's standard of living declines by 73 percent in the first year after divorce, while a man's standard of living increases by 42 percent.
Whether you are currently married or single, in your twenties or in your fifties, you need to know how to manage money in an increasingly complex world. You need a financial plan. First, however, you have to know what you want and what you already have.
The grief and confusion at the death of a spouse can cloud the common sense of a newly widowed person, which in turn can interfere with financial well-being. Sometimes widows are faced with the need to manage a fairly large sum of money, and some may not be prepared for the task. For example, statistics indicate that the average widow spends her husband's life insurance proceeds in about two years. There are several reasons for this.
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It might be a good idea for a newly widowed person to take a very conservative position in financial matters for at least a year or two, until there has been a chance to regain full composure and also do some homework on how to make the money work best. The newly widowed should choose federally insured savings plans or other safe investments rather than taking advice from those who would put their money to work at greater risk.
Having Joint Bank Accounts
While there is much to be said for a joint bank account, certain considerations should be kept in mind concerning its place in your estate. Since the money in the account legally belongs to either one of the joint owners, either one can empty the account. If a single person's relationship with his or her co-owner goes sour, or a husband or wife wants out of their marriage, either partner can take the money and run.
Even if you and your co-owner maintain a good relationship, there might be problems upon the death of one owner. With the passage of the Economic Recovery Tax Act of 1981, each spouse is assumed to own half of any joint asset. But the surviving co-holder spouse may find him or herself temporarily short of funds, since some states require that an account be frozen pending processing of estate matters when one co-holder dies. It would be wise to see what the procedure is at your bank.
For co-holders whose relationship is not that of husband and wife, the total sum in a joint account belongs to the first
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to die, and the total is counted in the valuation of the estate for estate tax purposes.
A Will Shows the Way
Your will is the keystone of your estate plan. This legal document — when properly prepared, witnessed, and signed — makes certain that the courts will respect your wishes. A will directs how you want to distribute your assets. If you die without a will (intestate), the state in which you had your principal residence at the time of your death will determine how your assets will be distributed — perhaps against your wishes.
When a person dies intestate, the court appoints an administrator to oversee and manage the affairs of the estate. The administrator's duties can include distribution of assets and naming of guardians for children or the elderly. The administrator is someone of the court's choosing, not yours. The court may require the administrator to be bonded to ensure proper performance of the duties. The price of the bond, plus the administrator's fees and other legal fees, can cost your estate dearly — as much as 5 to 10 percent of your probated assets.
On the other hand, when a person draws up a will, he or she names an executor (in some states, called a personal representative) to carry out the responsibilities of estate settlement. The executor is someone you choose, and you may elect to have him or her serve without bond. Powers granted to the executor (such as the right to sell property) can ease the processing of estate matters and minimize court appearances and costs.
The duties of an executor can be extensive, especially if the estate is complex. Choose an executor with care, making certain the person chosen is both willing and able to serve. It is sometimes wise to designate co-executors — an individual or individuals in whom you have personal trust and a bank or an attorney with the needed legal and financial expertise.
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To be valid, a will must comply strictly with every requirement of the law of your state. This includes the language, the way it is signed, and the number of witnesses (two in some states, three in others).
"If you die without a will,... the state in which you had your principal residence at the time of your death will determine how your assets will be distributed — perhaps against your wishes." |
Preparing your children. The shape of your estate plan can help shape your children's lives and their subsequent estate plans as well. How much do you want to provide for them, now or in the future? How much can you afford to provide without cutting into your own pleasures, comforts, and security? You should answer these questions in your own mind and then communicate your thinking to your children. Children who anticipate an inheritance that never materializes, or who did not expect one that in fact does materialize, might shape their lives differently if they had known what to expect.
A will for each spouse. If you are married, both you and your spouse need to draw up valid wills, because both of you own property: your home, car, personal possessions. One of you having a will does not eliminate potential problems. For example, a husband and wife are in a car accident. The husband dies instantly, leaving everything to his wife. She
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dies several days later without a will. Her estate will be distributed according to state intestacy law. If the couple has no children, the estate will probably go to the wife's relatives.
Hazards of do-it-yourself wills. Don't attempt a do-it-yourself will, either one you write yourself (holographic) or a printed form. Only about half of the states recognize such wills, many of which contain imprecise language that breeds misunderstanding. A close family member who has been disinherited may be able to successfully attack a homemade will in court and have the entire document declared invalid. The estate may thus end up being distributed according to the laws of intestacy, and the person the decedent wanted to disinherit may receive a large portion of the estate!
The cost of having a lawyer prepare a simple will need not be expensive. In terms of peace of mind alone, it may be well worth the investment.
The proving of a will. Except for jointly owned property passing to the survivor, life insurance proceeds payable to named beneficiaries, United States savings bonds with designated beneficiaries, and certain trusts, all the belongings of the deceased are subject to a process known as probate. Probate means to prove the will — to prove that the document bearing your signature is a genuine statement of how you wish your estate distributed.
In the probate process, the survivors may have to go to probate court (also called orphans or surrogate court) to present the will. Witnesses may be called in to testify to the will's execution, and the executor must satisfy the court that all bills have been paid, that state and federal death taxes (if any) have been paid, and that creditors of the estate have been notified and given an opportunity to present their claims.
Once the probate procedure has begun, the court may grant the survivors an allowance drawn from the assets of the estate. Beyond that, assets, including savings accounts
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and safe deposit boxes, may be frozen until the probate process is completed. This process could take a year or more. Only after all outstanding bills are paid and the executor has satisfied the court that all other costs and taxes have been settled can final distribution of the estate be made to the heirs.
You can't beat probate unless you don't leave an estate, or unless you have distributed your assets while alive. Even joint ownership does not always exclude assets from probate. Probate costs money for attorney's fees, appraiser's fees, court costs for filing papers, and bonding fees (unless the executor is authorized to serve without bond). Added to these expenses are any federal and state estate taxes, which are paid from the proceeds for the assets of the deceased; some states levy inheritance taxes, which are paid by the recipient of the inheritance.
Where should you keep your will? People have stored wills behind paintings and under rugs. Unfortunately, if the originally executed document can't be found, the court may decide that you destroyed it, intending to revoke it. You may want to have your lawyer keep the original will or even a copy. Keep copies in your safe-deposit box or with a relative. Be aware, however, that some states require that a safe-deposit box be sealed at the renter's death.
A living will. With the growth of medical technology, a document known as a living will is growing in popularity. In a living will, a person states, while competent to do so, that he or she does not want life prolonged by artificial, extraordinary, or heroic measures. This type of will must be signed and dated before two witnesses to ensure that it was signed of the individual's free will, not under pressure. The living will is a document separate from your regular will; it does not involve disposition of your property. You should give a copy of the living will to your doctor as well as to anyone likely to be involved if a situation such as that described in the will should arise.
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Thirty-four states and the District of Columbia have passed legislation making living wills legally binding. It's a good idea to review your living will once a year, redating and initialing it to show that your wishes are unchanged. Some states require that this review be done within a specified number of years.
Estate Planning Checkups
Once you've made a will, don't put it away and forget about it. Review it from time to time to make sure that a revision of tax laws or a change in your status or the status of your assets or heirs won't affect the terms of your will. For instance, you may need to modify your will if you can answer yes to any of these questions:
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Have you changed your mind about any of the beneficiaries? (In some states, if you fail to mention an heir, that heir may still be entitled to a share of your estate.)
OTHER LEGAL CONSIDERATIONS
While most considerations thus far in chapter seven have been concerned with estate planning, there are many other activities and situations that require some understanding of the law. Even if you think you know the specific law that applies to your situation, you might wish to ask a lawyer's help in interpreting and applying the law properly. Following are some common and not-so-common situations that have legal ramifications.
Making a Contract
The most common legal involvement for most people concerns contracts. A contract is made when (1) someone makes an offer and (2) someone else accepts. For a contract to be enforceable, the participants must agree to exchange something of value — money for services, for example. The details of that agreement are usually spelled out in a written, typed, or printed document.
When we sign contracts, our legal rights and obligations become firmly established. Contracts can include insurance policies (life, health, property, auto); banking arrangements (savings and checking accounts, safe deposit boxes, loans, savings certificates); charge accounts and credit cards; and agreements to buy, sell, or lease property.
Under the laws of most states, the following types of contracts must be in writing to be fully and legally binding on both parties.
A contract extending for more than one year (such as guitar lessons for fifteen months) or one that is lifelong (such as lifetime support of someone).
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An agreement made in preparation for marriage (a prenuptial agreement).
A loan contract with a bank or finance company.
An agreement to establish a trust or an agreement conveying or assigning a trust in personal property.
An agreement to employ the services of a real estate agent.
Any contract for the assignment of a life, health, or accident policy or a promise to name someone beneficiary of such.
A contract to sell any interest in real property or to lease it for more than a year.
Never sign a contract without filling in or crossing out the blanks. (In some states an installment contract with blank spaces is illegal). A form can be changed after it has been filled out, provided that both parties agree to such a change. If a contract is altered, both parties should initial the changes made on the form.
Obtaining Consumer Credit
Learn what your rights are when you finance the purchase of expensive items such as cars, major appliances, or furniture. Usually, the seller will retain a security interest in that property if the buyer defaults in payment. In other words, the seller may be able to take back the goods if you don't meet your payment obligations.
Most states have adopted, with some variations, the Uniform Commercial Code. This code sets forth the rights of both seller and buyer. The seller retains a security interest in property purchased on time. In most cases the lender, banker, or merchant should be able to give you an adequate explanation of your obligations and rights. But if you have any unanswered questions, consult an attorney.
In addition, Congress has passed a number of laws designed to protect consumers, and some of them are designed
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especially to protect women. The Equal Credit Opportunities Act (ECOA) requires that a woman be given equal footing with a man (income and credit history being equal) when she is considered for credit-worthiness. Further, the law prohibits an individual's being denied credit because of race, religion, or national origin.
In addition to several provisions enabling married women to establish credit histories in their own names, the law contains two other important provisions. First, creditors cannot terminate your credit automatically because of a change in your marital status. They can, however, ask you to reapply. Second, the law says creditors cannot take away your credit cards when you turn sixty-two, as some credit card companies have done in the past.
| "Never sign a contract without filling in or crossing out the blanks." |
If for any reason you are denied a credit and feel you are being discriminated against, here are some steps you can take.
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File a complaint with the appropriate federal regulatory agency. This could be the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) for complaints against banks, or the Federal Trade Commission (FTC) for action against stores and finance companies. If they feel you have a valid complaint, these agencies will either put pressure on the creditor or tell you that you have good cause for a lawsuit.
The Truth in Lending Law requires lenders and others who extend credit to quote all financing costs in terms of annual percentage rate (APR). This is true for almost all common financing transactions. Prior to enactment of this law, interest costs were quoted in a variety of ways, so that it was difficult to compare them. When you shop for a loan, be sure rates are being quoted in terms of APR if you want to keep borrowing costs as low as possible.
The Truth in Lending Law also offers protection to parties signing loan papers. In some cases borrowers now have the right to cancel a contract. In other words, if you sign the papers and then want to back out, you can do so if you take appropriate action within three days.
The Fair Credit Reporting Act gives you the right to examine your credit history at your local credit bureau. If you find that there is erroneous or misleading information in your file, the law sets forth the steps you can take to correct these mistakes. A glance at your credit file every two or three years is wise. Errors may sneak in, and a credit file with bad marks on it can weaken your credit record.
The Fair Credit Billing Law allows you to stop a creditor's demands for payment if you have a valid objection to your bill. Certain steps for accomplishing this are prescribed by law. Firms that bill you for credit accounts (credit card companies, department stores, and so forth) are required to provide you with copies of the law from time to time.
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Remember, your rights are set forth in these laws, but it's up to you to pursue them. Also keep in mind that successful assertion of your rights often hinges on whether you act promptly.
| "Remember, your rights are set forth in these laws, but it's up to you to pursue them." |
Establishing a Credit History is not difficult for most people with a record of steady employment and prompt payment of debts. But what about the single individual — a widowed or divorced person who has to start from scratch to establish a credit rating? Here are some suggestions.
If you've got a steady job, ask your employer to put in a good word for you with the creditor (the Equal Credit Opportunity Act eliminates the need for anyone to co-sign your transaction). Another alternative is to open several charge accounts with local department stores and pay your bills on time. The best method for establishing credit reliability, however, is to borrow five hundred dollars or so from a bank or finance company and pay it back on time. Put your borrowed money in a savings account. This method will cost you a modest sum in interest payments, but it will provide you with a solid recommendation for future borrowing.
Setting Up a Business
If you establish a small or at-home business, you might be affected by several local laws — zoning restrictions, licensing fees, labeling and food laws — as well as federal laws, particularly federal tax laws. Your lawyer can help you interpret these laws and explain how they apply to you. If you don't
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find the right professional assistance at the right time, you could be throwing money away. You will need a lawyer to help you wade through leases and contracts; you will need an accountant to help you determine the financial feasibility of any given proposal; you will need the help of your banker to determine how much you can afford to invest in a given venture; and you will certainly need the services of an insurance agent to guide you through the maze of liability hazards and other business-related risks. Even with all that professional assistance there is no guarantee that a business venture will succeed. But without this kind of planning, success is even more elusive.
Obtaining Pension Information
Pension plans today are many and varied. Employees should be aware of the provisions of their company's plan and any changes that may occur in it. The Employee Retirement Income Security Act (ERISA) requires employers to provide their covered employees with a simple explanation of their plan. If you have questions, see your company's benefits manager.
Entering a Second Marriage
If you marry late in life or for a second time, your present heirs and your new spouse might be concerned as to how the marriage will affect their inheritance. One way of settling such matters may be to draw up a prenuptial agreement — a written contract between you and your prospective spouse signed before, and in contemplation of, marriage. Such an agreement can spell out precisely who owns what and can also allay the concerns of children of previous marriages.
For the best protection of all concerned, both parties to a prenuptial agreement should be represented by separate legal counsel; and a full disclosure of each party's financial status should be made to the other party. Lacking these
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precautions, a disgruntled party could more easily challenge and upset a prenuptial agreement at a later date.
Caring for an Ill or Incompetent Person
If you have a relative or friend who is unable to handle personal affairs because of illness, injury, mental weakness, intemperance, or drug addiction, you may petition the court to appoint you as a guardian or conservator. Different state laws set forth specific rights and duties and define how one might qualify for either a guardianship (for a child) or a conservatorship (for an adult).
Depending on the circumstances, your duties and obligations may include handling the financial affairs as well as the personal needs of the individual. Considerable responsibility may be involved. Your decision to care legally for another should not be made until all legal and personal ramifications are totally understood. Conservatorship and guardianship end when the ward regains the ability to handle his or her personal affairs, or when that person dies.
Another way to help relatives or friends is to have them sign legal documents (drafted by a lawyer) that allow you to act as an agent in certain matters. A special power of attorney limits you to one specific purpose; a general power of attorney authorizes you to transact business in general for the person.
Usually, a power of attorney terminates when the person who gave the power dies or becomes legally incompetent. In some states, though, it is possible for a durable power of attorney to be created that will continue in force (or begin to take effect) even if the giver of the power becomes incompetent.
Becoming Incapacitated Yourself
A power of attorney can be an especially valuable tool for single persons in the event of extended disability. If, for whatever reason, you are unable to act on your own behalf, someone you trust should be able to take care of matters
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important to you. These matters could be as simple as writing or endorsing checks or as complex as selling real estate.
A power of attorney can be given to anyone you choose, not just to a lawyer; but a lawyer should definitely draw up the documents. A power of attorney can be specific or general in scope. Since a general power is very broad, it should be given only in the most compelling circumstances.
Your welfare or that of a close friend or relative is too important to leave to guesswork. If the need for care arises, discuss with your legal and financial advisers beforehand the advisability of a power of attorney or a form of guardianship.
If You Can't Afford a Lawyer
If you can't afford a lawyer, contact your local legal aid society. Many communities have legal aid societies and clinics (check the telephone directory) that provide lawyers to persons who could not otherwise afford them. In some cases you might be asked to pay court costs. Also, federal and state governments fund legal services to provide legal help for those below an established income level.
Check local law schools. Some law schools maintain legal clinics where students (under proper supervision) serve the public.
Contact the government. City, state, and federal agencies oversee many aspects of our day-to-day affairs, such as wage and hour boards which see that fair labor practices are observed by employers. Other agencies assure and protect our rights in areas such as banking, commerce, and trade.
Make use of small claims courts, if necessary. Small claims courts in most localities can assist individuals in pursuing their rights and getting their money when amounts below an established (usually modest) dollar level are involved.
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Check local human resources agencies. If you are receiving assistance from a public agency, that agency might be able to provide you with legal services. Also, numerous organizations exist to protect the rights of older persons, women, and minority groups.
Where to Write for Vital Records
To provide access to data and information relating to the health of the nation, the National Center for Health Statistics produces a number of publications containing reference and statistical materials. For information write:
National Center for Health Statistics
U.S. Department of Health and Human Services
Public Health Service
Centers for Disease Control
National Center for Health Statistics
Hyattsville, MD 20701
