Have You Thought About Creating A Trust?

You’ve probably heard or seen the word “trust” and know the conversation isn’t about trust in people. When it comes to finances and protection, a trust is a legal process that allows you to add something specific to an estate plan. In general terms, you can add things to your trust via a will like money, jewelry, and even a house. The idea is to protect your assets when you’re incapacitated or pass away so that outside entities can’t touch it without a person called a trustee that you name to manage your assets when you’re no longer capable.

by Joshua Hoehne on Unsplash

There’s two kinds of trusts; revocable or irrevocable, and within those two types of trusts are other types of trusts, which we don’t get into here. The main difference is that anything you put into a trust that you might want to remove later on is a revocable trust, whereas anything put into an irrevocable trust means nothing can be taken out until you can’t control it any longer, even by you, but also by pretty much no one else can either, which means it’s perfect for protecting your assets and for potential long term care issues.

For instance, if you put jewelry, money and things like that in an irrevocable trust and later on you go into the hospital or a nursing home, “most” of those assets can’t be touched by anyone, depending on the state. Nursing homes will bill your estate for the costs of you staying there until your insurance coverage runs out, and as long as there’s enough money in a bank account, all is good.

But at a certain point, Medicaid will come into the picture, and even within the irrevocable trust, depending on the state, a certain amount of assets might need to be used to reach the amount that the states require for you to be allowed to be covered by Medicaid. Nothing else can be touched in the trust after that point until you’re deceased, in which case the trustee you’ve selected will be able to follow the rules of the will and dispose of items as requested. In this instance, “dispose” doesn’t mean throwing anything away; it means following the requests of a will as to who gets what, and how much.

Just to clarify, the owner takes care of everything within a revocable trust, but the trustee takes over when the owner can’t do it any longer, whereas the trustee is the only one who can remove anything from an irrevocable trust once it’s created. This means you’ll want to make sure you pick someone you trust implicitly.

Many times, if you engage the services of a lawyer when you want to create a will, they’ll add language creating a trust at the same time, sometimes at no cost. After that, you can talk to your lawyer about how you might want to use your trust, but it also helps to speak to a financial consultant or a tax consultant to determine what’s more important to you based on your current financial state and what you might want to protect for others.

For instance, putting assets into an irrevocable trust allows you to protect a large dollar of assets that can’t be touched, but should only be used if you still have enough left to keep paying for everything else while you’re alive. A revocable trust allows you to keep changing which assets and how much you want to keep in there, along with making it easier for your trustee to handle your affairs when needed.

To learn more about trusts, here’s a link to information about revocable trusts and another for irrevocable trusts.

Don’t Fear Potential Credit Score Problems

Less than a year ago, we talked about the importance of having a good credit score. We still hold the belief that it’s important to do what you can to keep it as clean as you can; however, there are times when you have to take action that benefits you in the here and now.

Here’s the thing about credit score; they’re not absolute. This means five things: it can change depending on your finances; higher income, paying down debt, increasing debt (this one’s scary); what you’re trying to use credit for.

It’s time someone addressed this thing about credit scores and why so many people are scared about them falling. In some ways, we believe that credit scores are worthless. What is it about credit scores that seems to scare so many people, and why do we give them a lot of importance?

1. People worry that a bad credit score will keep them from getting new credit. That may or may not be true. It really depends on what you want credit for.

The truth of the matter is that if you can afford to buy things, you really should be looking for new credit anyway. If you are looking to buy a house, you should be trying to put away as much money as you can so you can afford a nice down payment. A bad credit score means almost nothing if you have a nice down payment of at least 25% or more.

If you have a bad credit score and you know it (if you’re getting your annual free credit report you should know it), then you should know better than to be trying to get a new credit card in the first place. Even so, you can probably still get a credit card; the interest rates might be higher, but interest rates are going up anyway and they’re going to pick on people whether you have good credit or not… unless you’re trying to get another card from the same creditor.

2. People worry that a bad credit score will keep them from getting a new job. There are certain jobs for that might be true, but the overwhelming majority of positions that are out there in the world are looking at credit scores at all. If you have great qualifications, even those jobs that check credit scores are probably going to hire you anyway.

What those employers are looking for when they look for credit scores are any indication that an employee’s recent debt of gotten so far out of hand that you might possibly be thinking about doing something illegal. Most employers won’t ask to look at your credit score if the position you’ve applied for doesn’t involve handling cash. By the way, you can always deny employers the option of looking at your credit score; even if you don’t get the job because of it, at least you’ll have kept your privacy.

3. People worry that a bad credit score will keep them from getting a new apartment; unfortunately, that sometimes happens in some nice complexes. If you have enough money for a down payment, most apartment complexes aren’t even going to check your credit report. But if they do, it’s a different animal than having them check your credit score. However, if your credit report looks bad, they might want to see more information before accepting you.

4. People worry that a bad credit score is an indictment against the type of person they are. Very few people care what your credit scores are like. A bank might care about your credit score if you trying to get a loan from them, and you might have some difficulties with car dealerships trying to get a brand new car if your credit score is pretty bad and you can’t afford a good down payment.

The truth is that most of the time you’ll still get a car, even if the interest rate is higher, but the more money you can put toward your car the last interest rate is going to be. Car dealerships work differently; if you don’t keep up with payments, they’ll just repossess your car. That’s embarrassing, but it’s not seen as criminal.

Banks are a different story, especially after the ups and downs of the economy over the last few years. Banks are being a little more cautious with how they’re loaning out their money. Here’s a couple of things you may not know.

One, you have more than one credit score. There are three credit reporting agencies, and each one has different credit scores. Experian and Equifax provide 16 different FICO scores to lenders, while TransUnion has 21. That’s because they all have different criteria for what they report, and sometimes, if you get all three credit reports, you’ll see something on one that’s not on other, and that will affect your credit score.

Two, many credit reports are wrong in some way. They might have names misspelled, addresses totally wrong, cards that show as open when they were paid off and closed years ago, wrong employers, and wrong addresses for those employers. When you know what people are looking at, and you do this when you’re getting credit reports on your own, you know beforehand what’s going on in your credit report and you should get any errors fixed that might affect your financial standing.

The way people obtain credit these days has already changed, and it’s probably never going back to the days when we were used to receive 14 to 20 credit card offers a day in the mail. We’re exaggerating a bit, but it certainly felt that way. People who supposedly have good credit scores these days are finding it hard to get some banks to give them loans for homes. If someone with a credit score of 750, which is considered really good, can’t get a loan, why is anyone else worried about their credit score? You know what supersedes a credit score?

Cash! If you don’t want to worry about credit scores or credit reports, learn how to budget your money and start putting money away for purchases of things that you want. If you can build your bank account, you’ll find that you can pay for most things you need, and for those things that you end up not having enough money for, you’ll find that if you probably be given options so you can get what you need to get things taken care of; just do some research so you don’t get scammed!

Don’t allow yourself to feel like a victim to credit scores. Take back your financial power, be in control of your own finances, and have some peace of mind.

4 Tips On Investing Money For Profit And Reducing Taxes

For most of us, trying to figure out investing sounds complicated. It’s not as easy as trying to buy something on the stock market, then sitting around hoping it makes money for you. It takes risks, being patient, and in many cases asking for help. If done right, you’ll not only make money, but reduce your yearly taxes for a while.

Here are 4 steps to consider; some of these are ideas we’ve covered here before, so hopefully if you’re a regular reader you’ll be ahead of the game:
Continue reading 4 Tips On Investing Money For Profit And Reducing Taxes

Do You Need To Borrow Money? Try Your Life Insurance Policy

At some point most of us find ourselves needing a quick cash boost. Something many people don’t know is that if they have a life insurance policy, there’s a possibility that you can borrow against the cash value you’ve accumulated over time.

First, let’s talk about the difference between what you’re life insurance policy amount is for and what cash value means. If you purchase a life insurance policy for $20,000, if something happens to you after a certain amount of time, your beneficiary will be paid the amount you took the policy out for, as long as you continue paying your monthly insurance payment.
Continue reading Do You Need To Borrow Money? Try Your Life Insurance Policy

Business Expenses You Should Think About Tracking

Even though tax season is almost over, it’s a good time to think about the types of information you’ll want to have available for your accountant next year. Hopefully you’ve taken care of some of the information that’s pertinent since the beginning of the year. If not, you might have lost some of your possible deductions and expenses. Here’s a few examples and ideas for how to handle these items.

business burger

Business Burger!

Let’s look at meal expenses. Whether you’ve had meals with clients or meals when you’ve been traveling, it’s always a good idea to try to save your receipts. Everything you do isn’t covered unless you can indicate why it might be pertinent.
Continue reading Business Expenses You Should Think About Tracking

Accounting & Financial Advice from the Syracuse NY area