People with heavy debt loads often become desperate, making them prime targets for these scams. These fraudulent schemes charge fees without delivering results, leaving you no better off and potentially in a worse situation. Understanding the tactics of debt scammers is essential for protection. In this article, we’ll explore common scams and strategies to avoid them.

Breaking Down the Scams

There are several scams to watch for. Keep in mind that scammers may not always proposition you directly. They may put out very convincing, carefully crafted ads online or through social media promising relief services that inspire you to reach out for help.

A company isn’t legitimate just because it buys ads!

Debt Relief Scams

A company is claiming that they can get you out of debt by negotiating with creditors on your behalf. They promise that they can get your debts lowered or forgiven if you provide some personal information. They claim an impressive track record and present dramatic testimonials claiming that they reduced or eliminated debt for other clients. It sounds like a great deal, but it’s time to be careful.

These companies will charge you up front, take your money, then disappear without taking any action on your behalf at all. Some may “try” to get your debt reduced using very basic, inefficient methods just to be able to say that they offered services, even though they know their techniques are useless. Most of what they do (if they do anything at all) you could do yourself at no cost.

Auto Loan Scams

If you’re overwhelmed by car payments, companies that promise to help you work out a loan modification for your auto loan may seem appealing. These companies target people who are at risk for vehicle repossession. Unfortunately, the story is almost always the same. The victim will pay a fee to the scammer before realizing that the scammer has vanished into thin air. Some may stick around to try to extract more money from you under the guise that they are still “working on your case”.

Credit Repair Scams

Credit repair scams prey on your desire to build back your credit after encountering some financial hiccups. Scammers will often promise customers that they can remove legitimate negative information from credit reports. In reality, this is impossible to do.

Victims of these scams pay scammers money in the hopes that they can boost their credit scores and their access to credit. They end up discovering that their credit reports remain unchanged and their money is gone.

How to Spot #DebtRelief and #CreditRepair Scams

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Repairing damaged credit takes a long time and anyone who promises quick and easy solutions is probably a scammer. Instead of falling for credit repair scams you should focus on legal and effective methods of rebuilding damaged credit that actually work.

Telltale Signs of Debt Scams

While debt scammers can be subtle, they often display some red flags that are easy to catch if you know what to look for. Remember that you have every right to ask questions before you agree to work with a company. Any sense that you’re being rushed is a big red flag. Unrealistic promises are an even bigger red flag. Watch out for these tactics.

• The company contacts you. Most legitimate services do not initiate contact with potential clients.
• The company refuses to send you the specifics of the services being offered to you until you provide personal financial information. Scammers often want access to your bank account numbers, credit card numbers and available balances.
• The company asks you to pay fees ahead of time. This means you’re making payments before you’ve received any actual relief.
• The company tells you to stop communicating with creditors entirely.
• The company appears to use the same one-size-fits-all technique for every client. Real credit relief should be tailored for the needs of each person.

Some scammers may try to get you to pay upfront costs by saying that they are charging for “counseling” services for your debt. This is still a red flag. Legitimate counseling services will offer introductory sessions at no cost. Some scammers will present the upfront fees as “voluntary payments” to make it seem as though they aren’t pressuring you because they know you are likely to feel obligated to pay for services.

How Can You Avoid Debt Relief and Credit Repair Scams?

Awareness is the first step to avoiding scams. If you know they’re out there they are easier to spot.

Debt Relief

You don’t necessarily need help from a professional to try to get out of debt on your own. Here are some steps to take if you’re having difficulty with making debt payments:

• Learn about legitimate debt relief and debt settlement options.
• Decide whether you want to pursue debt relief on your own or seek outside help.
• If you decide to seek help, try a reputable credit counseling service first. Most offer free initial sessions so you have nothing to lose.
• If you decide to use a for-profit debt relief or debt settlement company, check the company’s reputation first.
• Ask for a written disclosure detailing all setup fees, service fees, maintenance fees, and any others.
• Look for information on legitimate companies using the National Foundation for Credit Counseling’s website.

There’s no easy road to debt relief, but facing facts and getting started will do you more good than falling for impossible promises!

Credit Repair

If your focus is on repairing your credit history, start by pulling your credit report for free once per year from each of the three main credit-reporting agencies (Equifax, Experian and TransUnion). You can get negative information removed from your credit report if that negative information is erroneous or inaccurate. You can do this yourself. Your credit report will contain instructions for filing a dispute. You can also open a dispute with the business that made the inaccurate report against you.

It is impossible to have a legitimate mark on your credit history removed. Anyone who promises that they can remove a legitimate negative item from your report is not being honest.

Credit reporting agencies do not need to have an original signed contract or any other such document, and you cannot get legitimate items removed from your report with a so-called “609 dispute letter” or any other magic trick.

Most negative information stays on your credit reports for seven years from the date that the account first became delinquent and was not subsequently brought up to date. Credit scoring models place more weight on recent information, so your negative records will have less impact on your credit as years go by.

In some cases, you may be able to petition your creditor to remove negative information from their reports tot the credit reporting agencies. You may be able do this by offering a payment in exchange for a deletion. If you’re unable to pay, you may be able to convince a creditor to retract the negative information as a goodwill gesture. The decision is entirely up to your creditor in both cases. There is no guarantee that the credit reporting company will remove any prior record of the account.

How Much Is Too Much to Pay for Debt Relief Services?

A company is not necessarily fraudulent just because it charges fees. Asking for a large amount of money is a sign of trouble, especially if the company wants payment upfront. The US Department of Justice, citing the Consumer Federation of America, says consumers should only be paying about $50 for setup fees. Maintenance fees for an ongoing account should not exceed $25^[1].

What Can You Do if You’ve Been Scammed?

What should you do if you’ve lost money to a debt scammer? If you encounter debt relief and credit repair scams, consider reporting the company. You can help to prevent scammers from harming anyone else. Always keep copies of your reports. If the scammer’s actions have created additional problems with your creditors the documentation may help you resolve them.

Here’s where to report your information.

• The Consumer Financial Protection Bureau (CFPB).
• The Federal Trade Commission (FTC).
• The attorney general’s office in your state.

You can also consider reporting a scam to your local police. This may not get you very far if the scammer communicated with you over the phone or the Internet. Companies that operate debt scams are not always located in the United States. This can make it very difficult for local authorities to track them down.

If you think you’ve been scammed, it’s important to check in with your creditors to see if any extra damage has been done. In many cases, scammers will advise their victims to stop making payments on their debt. This can mean that you’re even farther behind in payments than you realized.

If you’ve been targeted by one scammer, you’re likely to attract others. Your name and contact details may be on a database of potential targets. These lists are often sold to multiple scammers. Be aware and be careful.

If you provided personal information to a scammer, such as an account and credit card numbers, you may be at risk of identity theft. Consider placing a fraud alert on your credit reports (which you can do for free) or retaining a credit monitoring or identity theft protection service (which will cost money).

The Golden Rule

Avoiding debt and credit repair scams is not much different from avoiding any other scam. The golden rule still applies:

It may be nice to hear that someone can make your debt “magically disappear” if you pay a large upfront fee, but that doesn’t mean it will actually happen. It may not be so nice to hear that you’re going to have to cut your spending, try to increase your income, and apply a lot of discipline for quite a bit of time to get out of debt, but the person giving you that message is being much more honest and is much more likely to have your interests in mind. Sometimes the news you want to hear isn’t the news you need to hear!

The post How to Spot Debt Relief and Credit Repair Scams appeared first on FinMasters.

Most mortgage lenders use criteria designed for traditional employees with fixed salaries. Mortgage lenders may have a hard time evaluating the creditworthiness of workers who don’t fit this pattern.

The good news: there’s nothing impossible about getting a mortgage while self employed. You will need to understand the constraints, and prepare for them. A bit of persistence will help as well!

Where do I Start?

Before you can even begin the process, you must know your credit score and your debt-to-income ratio. You’ll need to know how to calculate your average income, and you should have an idea of how large a down payment you’ll be able to make. These are the core criteria that lenders will use to evaluate your application.

Your Credit Score

Credit scores range from 300 to 850. The higher your credit score, the better your chances of getting a mortgage while self employed. A higher credit score doesn’t just mean you’re more likely to be approved: if you have better credit you’ll get better terms, and even a small reduction in your interest rate can mean major savings.

Different lenders have different minimum scores for mortgage lending.

• FHA loans allow 3.5% down payments with a credit score of 580 or above. If your score is between 500 and 579, you can still qualify for an FHA loan, but you’ll have to put 10% down.
• There is no set minimum credit score to get a VA loan. In 2020, average scores were between 711 and 720. The mid 600s is the minimum allowable for most VA loan lenders.
• There is no set minimum for a USDA loan, but lenders will often streamline the credit process if your score is over 640.
• 620 is the minimum for conventional loans, but many lenders require higher scores for approval. The average score for approved conventional mortgages in the first six months of 2020 was 756.

Know Your Score

You can get one free credit report every year from each of the three major reporting agencies. Examine these reports carefully and make sure all the information on the reports is correct. If there are mistakes, take the necessary steps to correct them. If your score is low, there are things you can do to improve it.

• Pay all your bills on time. This affects your score more than any other factor.
• Reduce your credit card balances to 30% of your limit or less. This is the second most important factor affecting your score.
• Don’t close credit card accounts, especially older accounts. The age of your credit history may be adversely affected.
• Improve your credit mix. If you only have credit cards, consider another type of loan to show a more diverse repayment history.
• If you don’t have enough credit, consider a secured credit card or a credit-builder loan.

Understanding your credit score and how it’s generated is one of the most important steps you can take toward getting a mortgage while self employed. The more you know about your credit, the easier it will be to improve it.

Debt-to Income Ratio

Your debt-to-income ratio is the percentage of your monthly income that you use to pay debts. Monthly debt payments include things like credit card minimum payments, auto and student loans, rent or mortgage payments, child support, alimony, and personal loan payments. Monthly debt payments do not include utility bills, cable, insurance, food, entertainment, and phone bills.

Lenders generally look for debt-to-income ratios of less than 36% with no more than 28% going toward your mortgage. 43% is usually the highest debt-to-income ratio lenders are willing to accept. The FHA will allow a 50% debt-to-income ratio but only for those with a credit score of 580 or more and additional cash reserves and income.

There are two ways to lower your debt to income ratio: increase your income or decrease your debt. You can use one, the other, or both. Getting your debt-to-income ratio within a lender’s criteria will raise your chances of getting a mortgage on competitive terms.

Calculate your DTI using our online Debt-to-Income Ratio Calculator

Calculate Your Self-Employment Income

When lenders review your income, they look at more than just the last twelve months. They add up the two previous consecutive years income and divide it by 24 to get your average monthly income.

In addition to the numbers, lenders are looking for consistency.

Lenders have a great deal of discretion in approving loans. Slight discrepancies in income may be acceptable, especially if there are mitigating circumstances like time taken off to care for an ailing parent. In these instances, underwriters may require applicants to submit three years of tax returns instead of two.

Know Your Down Payment

Mortgages with low or no down payments have been gaining popularity, but there are real advantages to making a substantial payment up front. A down payment can cut your monthly payment and lower the total cost of your loan. It can keep you going underwater on your loan (owing more than your home is worth) if home prices fall. A large down payment can keep you from having to buy private mortgage insurance. It can also cut your interest rate and boost your chances of getting approved.

The ability to make a substantial down payment can be a major factor in convincing lenders that you are ready to buy a home. Many experts recommend 20% of a home’s value as an ideal down payment. Saving that much can take time and effort, but it can get you a significantly better deal.

Getting a #Mortgage When Self Employed: The Complete Guide

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What Loan Options Do I have if I’m Self-Employed?

The sources of loans are largely the same whether you’re getting a mortgage while self employed or with a regular job. You can apply for the same loan packages as traditional borrowers. These include conventional, FHA, VA, and USDA loans. Some requirements may be different.

What Documents Will I Need?

You should be prepared to present the following:

• Your credit reports from the three major reporting agencies.
• At least two years of federal tax returns, including business returns if you have your own business.
• Your latest profit and loss statement (must include net income, expenses, and revenue).
• Bank statements.
• Business license.
• Verification that you have been in business for at least two years.
• Your client list.
• Insurance policies.
• Professional organization memberships.

If you’ve been in business less than two years, you’ll have to show verification that your business has been operational for at least twelve consecutive months plus show two years of employment before starting your business. Your education, experience, and training will be important factors in determining the stability of your business.

If you don’t qualify for one of these loans because you don’t meet the income requirements, you still have some options, including low or no documentation loans.

Low or No Documentation Loans

Low and no documentation loans don’t require you to provide standard income documentation to prove you can repay the loan. Instead you may be allowed to use other evidence like bank statements and investment records. Individuals who benefit from no documentation loans include:

• Those with a high net worth and no job.
• Borrowers with irregular income.
• Those with declining income.
• Those who file multiple federal tax returns.
• Those with large business write-offs.
• Real estate investors.

The requirements for no documentation loans include:

• Excellent credit. Your credit score will have to be higher than what is necessary to qualify for a traditional loan.
• Substantial down payment. You will probably have to make a 20% down payment in order to qualify for a no documentation loan.
• Proof of ability to repay. You will need items like bank statements, substantial assets, or rental income from investment property to prove you have the necessary resources available to repay your loan.
• Higher than normal interest rate. Because no documentation loans carry a higher degree of risk than traditional loans, you should expect to pay a higher than average interest rate.

Today’s no-documentation loans are safer than the stated income loans that preceded them. Lenders have to follow federal guidelines for repayment verification.

You still risk losing your home if you default on your loan, so you’ll need to use the same caution that you would apply to any mortgage.

Look at It From the Lender’s Perspective

Lenders who impose extra requirements on self-employed workers are not conspiring to keep you from buying a home. They just want to be sure you’ll pay them back. They are used to evaluating people with conventional jobs and unconventional situations make them nervous. It’s your job to calm those nerves by showing convincing evidence that you have the ability and the will to make your payments. These suggestions are a starting point, but any financial records that show a steady, reliable income and good financial management will help.

If you’re self-employed and you see a home in your future, you can help yourself by keeping good records, building your credit, and keeping your debt-to-income ratio below 36%. Planning ahead and building the kind of financial track record that lenders want to see are the keys to getting the mortgage you want at terms you can afford!

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You’ll need to be patient and plan ahead if you intend to apply for a mortgage after a bankruptcy. Let’s look at some hurdles you’ll have to overcome and some steps that can help you put the keys to a home of your own in your hands.

Mandatory Waiting Periods

Many mortgage lenders and loan guarantors impose a mandatory waiting period that has to expire before you can think about buying a house after bankruptcy. These are not punishments. Waiting periods give you a chance to recover from your bankruptcy before extending yourself. There’s nothing you can do about these; you just have to wait them out. Some lenders or guarantors may reduce waiting periods if you can prove that factors beyond your control caused your bankruptcy.

If you were forced into bankruptcy by medical bills, a job loss, or similar circumstances you may qualify for a reduced waiting period.

Conventional Loans

Fannie Mae and Freddie Mac impose identical waiting periods after bankruptcy:

• If you filed for bankruptcy under Chapter 7 you’ll have to wait four years before applying for a mortgage. This can be reduced to two years with extenuating circumstances.
• Chapter 13 filers will have to wait two years after discharge or four years after dismissal. There is no reduction for extenuating circumstances.

These institutions don’t make mortgage loans but they are major buyers of mortgages made by banks and other lending institutions. Most conventional mortgage lenders follow their criteria. You can expect to encounter these requirements at any bank or other mortgage lender.

Government-Supported Mortgages

Mortgages backed by other government agencies may have shorter waiting periods. Let’s look at the requirements of the major government mortgage programs.

FHA loans are one of the most attractive routes to buying a house after bankruptcy. The waiting periods are more lenient than those of conventional loans. You’ll have to wait a minimum of two years after the discharge date of a Chapter 7 bankruptcy. Some loan servicers may impose longer waiting periods. After a Chapter 13 bankruptcy you may qualify for an FHA mortgage in as little as a year. You’ll have to comply with your payment plan and get the approval of your bankruptcy trustee.

If you qualify for a VA home loan you’ll have to wait two years after the discharge of a Chapter 7 bankruptcy and one year after filing a Chapter 13 bankruptcy. The waiting period for USDA rural home loans is three years after the discharge of a Chapter 7 bankruptcy and one year after filing a Chapter 13 bankruptcy. In both cases, you’ll need to have a good payment record and the permission of your trustee to get approved after a Chapter 13 bankruptcy.

Once the waiting period is over you’ll be able to apply for a mortgage. That doesn’t guarantee that you’ll be approved.

It’s important to use the post-bankruptcy waiting period to get your finances and credit score in order. That will help you prove to lenders that you can uphold a mortgage agreement.

Focus on Repairing Your Credit Score

Bankruptcy can pummel your credit, and you’ll need to whip that score into shape to get a mortgage. If you’re planning on buying a house after bankruptcy you’ll need to get your newly decimated credit score up to a lender’s minimum requirement.

You’re typically looking at minimum scores of 580 for VA and FHA loans, 620 for conventional loans and 640 for USDA loans. Explore the credit score you need to buy a house for each different type of home loan.

If you can push your score higher you’ll have more options for lower down payments and favorable interest rates.

Rebuilding credit following bankruptcy is harder than building credit from scratch. Your bankruptcy discharge means you don’t have to pay some loans, but they will stay on your credit report for years. You can’t change that, so you’ll need to focus on reestablishing credit using new accounts.

Buying a House After #Bankruptcy: The Definitive Guide

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Try a Secured Credit Card

The first step is to apply for a secured credit card. This is a financial tool available to people with poor credit or no credit history. You’ll put down a deposit and the amount of the deposit will become your credit limit. The issuer has your deposit, so their risk is minimal. Each time you make a monthly payment on time you take one small step toward better credit.

Stay aware of your credit utilization ratio on any card you’re using. Using less than 30% of your credit limit will help your credit, and even less is better.

Your credit limit on a secured card is likely to be low, so you’ll want to keep a tight watch on what you put on your card.

Use a Credit Builder Loan

You may also consider a credit builder loan. Many banks and credit unions offer these products. The lender places the money you borrow in an account. You make the payments, and when the loan is paid off you get the lump sum in the account. The lender reports the loan as an installment loan, which helps you build credit.

You’ll also have access to a lump sum at the end of the payment period. That can be useful if you’re saving for a down payment!

Watch Those Bills!

Focus on paying every single bill on time. Keep a strict calendar to ensure that you’re making monthly payments. If you have a history of missing bill payments, use automatic payment options. Remember that even bills that don’t end up on your credit report can be sent to a collection agency if you don’t pay. The collection agency will report them and they will harm your credit score.

Pay your rent on time, every time, and keep your receipts. Mortgage lenders will want to see evidence that you’re handling your housing budget responsibly.

Monitor your credit score and reports. You don’t want to have errors dragging down your score when your record is already shaky. Look for incorrect details regarding closed accounts, outdated information and debt discharged by bankruptcy that’s still being listed by a creditor. You’re entitled to a free credit report once every year from each of the three main credit bureaus.

Bankruptcy probably left your credit in ruins, but since you have to wait anyway, you can use the waiting time to build it back.

Remember that newer information gets a higher weight in your credit score than old information. If you stay aware of your credit and work on improving it your score will recover.

Watch Your Debt to Income Ratio

Mortgage lenders pay close attention to your debt to income ratio. This is the percentage of your monthly income that you use to pay debts. When you emerge from bankruptcy your debt to income ratio is likely to be low, since many of your debts will be discharged. If you’re considering a mortgage, try to keep it low.

Most mortgage lenders will not lend to a borrower with a debt to income ratio higher than 43%. They generally prefer to see a ratio below 36%. Keeping your total debt level low will help your chances of getting a mortgage. Be aware of your debt to income ratio and try to keep it at the level that mortgage lenders want to see.

Calculate your DTI: Debt-to-income Ratio Calculator

Build Your Savings

The post-bankruptcy period presents a good opportunity to build your savings. You won’t be buried in debt payments, so you should be able to set money aside. A large down payment makes mortgage approval easier. You’ll also have lower monthly payments and possibly a lower interest rate. Having a savings cushion can also prevent you from having to take on new debt if a financial emergency comes up.

The key to building savings is to have a budget and stick to it. Be sure to budget as much as possible for savings.

Think of the money you save as a payment to yourself, and pay yourself first.

Draft a Letter of Explanation

Buying a house after bankruptcy involves the same process that someone who has never been through bankruptcy uses. You’ll need to fill out applications, submit personal financial information, negotiate with a seller’s agent, make an offer and have a home inspected before heading to closing. A letter of explanation of bankruptcy can boost your chances of being approved.

Lenders are always taking a risk when they approve a mortgage. You’re going to look like a riskier risk with a recent bankruptcy in your history. Building up your credit, paying all bills on time, keeping your debt to income ratio low and saving up a nice down payment are the most important things for getting yourself in the approval zone. A letter of explanation of bankruptcy is an extra step that can help to prove that you can be trusted to repay your mortgage even though there is a pretty big red flag in your history.

How to Write a Bankruptcy Explanation Letter

Provide details about your bankruptcy in the letter. Address issues directly and don’t make excuses. Explain what caused your bankruptcy and all of the financial changes you’ve made since then. Acknowledging past mistakes is a good way to get ahead of the question that will definitely be looming in the mind of the person reviewing your loan application. Any information you can share regarding long-term employment, a large emergency fund and a “perfect” payment record for all current bills can be useful. If circumstances beyond your control caused your bankruptcy, describe them. Be ready to provide evidence if the lender asks for it.

Learn more about bankruptcy: Personal Bankruptcy 101

Get Pre-Qualified for a Mortgage

If you’ve finished your mandatory waiting period and your credit is strong enough to support a mortgage application, it’s time to move into the pre-qualification phase. This is a time to reach out to lenders to see how large a mortgage you can expect based on your current financial standing.

Pre-qualification serves two important functions. The first is to give you a good idea of your budget as you shop for your new home. The second is to prove that you’re qualified and prepared to make an offer.

If lenders offer you high interest rates, it might be worth it to delay your purchase and devote yourself to building up your credit. Better credit will generally get you a lower interest rate.

Even a fraction of a percent reduction in your interest rate can save you tens of thousands of dollars over the lifespan of a mortgage.

You Can Buy a Home After Bankruptcy

Buying a house after bankruptcy will not feel like a walk through a rose garden. You will have to wait. Remember that the waiting time requirements aren’t there to prevent people who have filed bankruptcy from ever owning homes. They simply provide a buffer that allows you to build up your credit and finances and prove that your past mistake really is in the past. They are there to protect you from overextending yourself too soon.

You will face suspicion and you’ll have to work hard to address it. Don’t blame the loan officers for being extra careful with your application. Put yourself in their shoes and think about what you’d want to see and hear if you were the one looking at your application. Of course they’re concerned about your creditworthiness. Anyone would be. It’s up to you to show that things have changed.

Bankruptcy is not a financial death sentence. Many people who have come out of bankruptcy go on to become successful, satisfied homeowners. If you make the right moves you can do it too!

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Without a clear, legally valid will, the disposition of your assets may not be what you want it to be. In most states, death without a will means that you have died “intestate.” When this happens, intestacy laws in the state where you live will dictate what happens to your property, bank accounts and assets after your passing. This can become a true headache for the ones you’ve left behind. The law may not actually divide your estate in a way that gives those closest to you what you intended for them to have. The probate process may also take more time.

Love and Responsibility: Why Estate Planning Is Important

There are many advantages to being proactive and thorough when planning your estate.

• Estate planning protects your beneficiaries and loved ones by leaving them with a legally binding, carefully planned process for executing your will.
• Knowing that you’re preventing any contentious situations that could arise among family members if your estate is ambiguous is often reason enough to get every last detail planned.
• Good planning can also reduce the tax burdens your beneficiaries will have after inheriting pieces of your estate.
• If you’re a parent of minor children, there is also the added incentive to make arrangements for the care of your children in the event that you should pass away before they reach 18 years of age.

How to Start Planning Your Estate

You may need to bring in a legal professional to help finalize your estate plans down the road, but you can actually begin setting the stage for an airtight estate right now.

Take a Complete Inventory of Your Assets

You can’t know what you’ll be giving away until you know what you have. Leaving a will behind means dividing up bank accounts, trust funds and savings among heirs. Start by listing all of your assets to get a picture of the decisions you’ll be making.

You may also want to make specific provisions for valuable and sentimental items. Parents of adult children can ask their children about items that they hold near and dear.

You can consider “assigning” specific heirlooms or jewelry pieces to specific members of the family that have sentimental attachments.

Begin Thinking About Your Beneficiaries

Choosing beneficiaries is obvious for some people. Others need to do some deep soul searching to decide who they would like to name.

You may choose to leave all that you have to a spouse or child. If you have several children, your estate can be evenly divided. There really are no rules governing who you can choose as a beneficiary. Some people decide to include extended family, friends and neighbors in their wills.

In fact, your beneficiary doesn’t have to be a person at all! Some people prefer to leave all they’ve accumulated in life to charitable organizations.

Review the Estate Tax and Probate Laws in Your State

Clarity and legal validity are the two big factors to focus on when drafting a will. It’s important to focus on using language that will ensure that your will is a legally binding, valid document based on estate tax and probate laws that exist in your state. You’ll need to know exactly what those laws demand before planning your estate.

Make sure you’re signing your will according to the rules for establishing a legally valid will in your state. A will may need to be signed by a witness in a situation that demonstrates that you are clearly not under any type of duress to ensure that your intentions will be ironclad in court.

Keep in mind that the slightest ambiguity or “weakness” in your will could let a family member contest what you’ve written. This is where it’s helpful to work with a wills and estates attorney who can help you to create a document that can be easily executed.

Become Familiar With the Commonly Used Directives in “Wills and Estates” Speak

Estate planning comes with its own language. It will be important to know what some of these commonly used directives are. This quick review of the most commonly used terms in estate planning should give you a head start:

• Will/Testament: A legal document expressing a person’s wishes regarding how property is to be distributed after their death. A will should also name a single person to manage all property until final distribution.
• Trust: An arrangement allowing a third party (trustee) to hold assets on behalf of a beneficiary.
• Power of Attorney: A legal document permitting another person to act on your behalf.
• A Medical Care/Health Directive: A legal document designating a specific person who is permitted to make health care/medical decisions on behalf of another person if they become unable to make decisions.
• Living Will: A written statement detailing a person’s specific desires regarding medical treatment in the event that they can no longer express informed consent.

Asset distribution is often the focus of estate planning, but you should also consider provisions regarding your health care.

There are hundreds of terms that lawyers use throughout the course of constructing an estate plan. You don’t need to know all of them, but you should at least feel comfortable with your knowledge of what the basic terms mean.

If you don’t understand a term that your adviser is using, ask for clarification. The assets you’re discussing are yours, and you need to know exactly what the plan is.

Keep Track of Account Beneficiaries

Many bank and investment accounts allow you to designate a beneficiary. If you have a “payable-on-death” beneficiary included on an account, that account will usually not be listed on your will. Many people prefer to designate beneficiaries for specific accounts because these accounts will not be included in the probate process and can be transferred much more quickly after your death.

If you have designated beneficiaries on any of your accounts, be sure to review them and keep them up to date. If you’ve divorced and remarried, you may not want your 401(k) to go to your ex!

Common Estate-Planning Pitfalls to Avoid

The biggest estate-planning pitfall to avoid is not planning your estate! You can solve most estate issues simply by putting a clear, legally binding will in place. Here’s a look at some common pitfalls to steer clear of when you sit down to draft your will:

• Forgetting to update or refresh your will every few years. Family changes and additions can easily cause a document to become outdated.
• Failing to update your will when you move to a new state. Varying tax and estate laws could put the validity of your will in jeopardy. You’ll also want to review your tax strategy based on tax laws in the state you’ve moved to more recently.
• Not considering how the arrangement of your assets could stick your heirs with big tax burdens. For instance, IRAs and 401(k) accounts left to children at the peak of their earning potential can create tax burdens that could be avoided if assets were shifted.
• Not making plans in the event that a beneficiary passes away before you do.
• Failing to name a contingent beneficiary on retirement accounts and life insurance policies.
• Naming ultra-specific investments. While being specific in your will is a good thing, being too specific about some things can create unintended consequences. For instance, you might delegate 100 shares of a particular stock to a grandchild. If you sell those shares before your death, your estate may need to cover the cost of buying them back at present-day value.
• Adding too many nitpicky variables and stipulations that can create unnecessary red tape or legal conundrums.
• Leaving assets to a minor directly without addressing guardianship.
• Not adding a residuary clause that covers anything you may have forgotten to specifically name in your will.
• Not adding provisions for your own health care/end-of-life wishes.

The last time you ever look at your will doesn’t necessarily have to be the day you sign it. It’s wise to take your will out of the drawer every once in a while to evaluate what has changed since the day you had it drafted. Everything from new marriages to long-distance moves can necessitate alterations to your will.

The Pros and Cons of Seeking Professional Help With Estate Planning

Should you hire a professional to assist with planning your estate? In most cases, it’s a smart idea.

The laws and language related to estate planning are complex. Most of us don’t know enough about wills and estate laws to know when we’re making a mistake. That can mean leaving out something important or adding something that will have the opposite impact from what we intended. It’s always wise to at least have a professional look at your estate plan. You may have overlooked issues that could cause problems down the line. It’s also possible to have someone help you plan your estate step by step.

When using a professional to plan your estate, you’ll need to set aside time to meet. You’ll also need to pay for estate-planning services. If you have a relatively simple estate, that often means being billed for just a few hours of work. However, the cost is still a detracting factor for a lot of people.

The benefit of doing your own will is that you only have to pay for the cost of filing your document with your local probate court. The cost of making your own will is a lingering sense of uncertainty and fear that you might have made a mistake. Professional assistance may cost something, but it can buy peace of mind for both you and your heirs.

The post What Is Estate Planning and Why Is It Important appeared first on FinMasters.

1. Review Your Insurance Policies

If you’re still paying premiums on the same insurance policies you relied on a decade ago you may be overpaying every month. Our coverage needs to change once we hit retirement age, but few people take the time to review their long-standing policies. If you’re retired without any debt, it may be time to cut ties with a pricey life insurance policy. You may also find that you’re spending hundreds or thousands of dollars each year on disability insurance you don’t really need. These policies may have been a sensible choice during your working years, but your needs have probably changed. See if you can trim the fat by streamlining your policies!

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 2. Take a Senior Driver Safety Course

Seniors in many parts of the country can get discounts on their auto insurance if they complete a short, simple “senior safety” driving course. Insurance companies are eager to give retirees discounts because they commute less and usually have fewer accidents than younger drivers. Put in a call to your insurance company to see if taking a course that’s offered through a recognized provider like AARP or AAA can get you a discount. While each course will cost a few dollars, your savings should be greater than what you spend.

You can usually complete one of these very simple courses online from the comfort of your home!

3. Shop on Tuesdays

Making Tuesday your shopping day can save you thousands of dollars each year! That’s because Tuesday is the nearly universal “senior discount day” at retailers around the country. Remember that not every retailer celebrates seniors on Tuesdays. A handful of stores choose Wednesdays, and others give special senior promotions only on the first Tuesday of the month. Keeping a running calendar of the senior days at all of your favorite stores can bring you significant savings.

It’s smart to ask if there’s a senior discount available whenever you’re at a checkout counter.

4. Take Advantage of the Silver Sneakers Program

If you’re a Medicare member, you can get actual workouts for free, building your muscles and your savings at the same time! All adults age 64 and up enrolled in select Medicare plans are eligible for Silver Sneakers benefits. This program offers access to gym memberships at more than 16,000 gyms around the country! You’ll also get access to thousands of online workout videos and classes.

5. A Library Card Can Chop Your Entertainment Bill

Library cards aren’t just for students! It’s easy to forget about your local library when you’re occupied with work and other obligations. If your last visit to your local library was to help one of your kids with a school report years ago, you should know that a lot has changed at libraries.

Today’s libraries have large racks of DVDs that are loaned out free of charge. There’s a good chance that you’re going to be able to catch up on some great flicks, documentaries, and TV shows for free. That can leave you free to cancel some of those premium movie channels that are bulking up your cable bill.

6. Get on Your Town’s Facebook Page to Learn About Tag Sales

If you’re not on your town’s Facebook page, you could be missing opportunities to do some prime secondhand shopping right in your own neighborhood. This is where people tend to post about upcoming tag sales. Some people even post free or cheap items right on the page to entice local residents to pick up what’s available.

7. Make Extra Cash Doing Something You Love

If you’re retired, you have a lot of freedom to pick up a little extra work to earn some extra money. There are probably people in your neighborhood who could really use just a little bit of extra help with some simple tasks. For instance, a young couple who travels for weekend getaways frequently may be eager to pay someone to watch their beloved dog a few times a month. There may also be a working parent on your street who gets home from work just an hour after the bus drops their kids off from school! That parent would happily pay to have a trusted neighbor help the kids off the bus to watch them for a short period.

Start letting your neighbors know that you’re available for these simple tasks that will allow you to make some easy cash without straying far from home!

8. Save Through Prevention by Accident-Proofing Your Home

Americans 65 and overspend over $50 billion a year on medical costs related to falls. According to the CDC, roughly $12 billion of that is paid by private or out-of-pocket payers[1]. The monetary cost of a fall can be very stressful, and the physical toll can be devastating. It’s worth your time to evaluate any and all trip hazards that may be lurking in your home. Things like loose floorboards, loose rugs, trip hazards, leaking pipes, and slippery stairs can all put you in danger of a bad fall. Many older adults find that adding rubber mats and grip bars to bathrooms can make bathing much safer! You might also want to consider adding better lighting in some areas of your home’s interior or exterior to help prevent falls!

9. Invest in a Deep Freezer

Buying in bulk often doesn’t make sense if you don’t have a home full of people. That means you’re often paying more for less. One of the ways to take advantage of the perks of bulk buying, even if you’re not feeding a whole household, is to invest in a deep freezer. You’ll save money, and you’ll enjoy the convenience of always having backup food waiting even if you can’t make it to the grocery store every week.

Does investing in a deep freezer sound like a bit too much? Take a look at the extent to which some people will go in their quest to save in our article on 60 weird ways to save money.

10. Control Your Thermostat

Letting energy costs creep too high is like letting money fly right out the window! You don’t need to invest in a new high-efficiency heater to slash your monthly energy costs. There are some simple ways to insulate your home that will cost practically nothing while saving you money each month!

If your home has a fireplace that you barely use, you can avoid drafts by having your chimney plugged. You can also avoid heat loss by hanging heavy curtains over your windows during the winter. Using natural “solar” heating by opening curtains during the day to trap in heat before shutting them before dark is a great way to keep a home naturally toasty.

Make sure all of the filters on your heating and cooling systems are being changed regularly to ensure maximum efficiency!

11. Read Your Credit Card and Bank Statements

Every year millions of American seniors are victims of identity theft. If you routinely throw away bank and credit card statements, you could be overlooking the early signs of an expensive crime. Always read every entry on every statement, and be sure you know what it’s for. Reading statements can also help you spot recurring charges for subscriptions, memberships, or services that you no longer use. The amounts may seem small, but they add up. Canceling those unwanted costs puts money in your pocket!

You Can Live Well and be Frugal

As you can see, it’s easy to live a full and active life while still saving money. Being frugal doesn’t mean you have to sacrifice or that you have to give up the luxuries you love. It really just means tapping into your own creativity to save dollars whenever you can! Your lifetime of wisdom combined with a few timely money-saving tips for seniors can help you keep more of your money throughout your golden years.

The post 10+ Easy Ways for Seniors to Save Money appeared first on FinMasters.