Wednesday, January 23, 2013

Agency Announces New Rules to Protect Distressed Homeowners

Government efforts to make the housing market safer for consumers continued as regulators announced rules intended to protect borrowers facing foreclosure.
The rules, expected to be introduced on Thursday by the Consumer Financial Protection Bureau, are intended to prevent many of the failings and abuses that occurred after the market downturn.
In its latest rule-making effort, the agency, which was created in response to the financial crisis, has focused on mortgage servicers, the entities that collect the loan payments and are supposed to help struggling borrowers. During the foreclosure crisis, many servicers lost critical paperwork, relied on faulty documents, and made mistakes on loan modifications. Regulators have contended that such practices led to wrongful evictions.

Friday, January 18, 2013

5 Colleges You Can Go to for Free

It's all too easy to be a victim of student debt. According to the College Board, the average price of tuition, fees, room and board for an in-state student at a public college or university is $17,860 for the 2012-13 school year.

For out-of-state students, average costs jump to $30,911 while private nonprofit colleges charged $39,518 on average for a single year of education. With sticker prices skyrocketing, it's no shock that student debt levels and loan default rates are up.

The good news is that you don't have to be a victim. These tuition-free or tuition-reduced schools are easy on the wallet and high on value.

Monday, January 14, 2013

Does son get taxed with Mom's life insurance?

Dear Insurance Adviser,
I recently transferred ownership of my permanent life insurance to my son. I cannot afford the whole life policy anymore, and he doesn't want to pay for it. I paid $79 a month for the past 15 years. I took out a couple of loans over the years. Right now, the cash surrender is less than $4,000. I say there are no taxes due. I have paid more into my policy than the loans I have taken out and the dividends that have been paid to me. My son wants to know if he is going to be stuck paying taxes. I want to pay for my cremation with the money from cashing in the policy. What form should he use on his tax return? I have researched, and I say there won't be any taxes due. Please help. Thank you so much.
-- Disappointed Mom
Dear Disappointed,
What you describe is a tough situation. You can't afford to continue paying premiums, and your son, who apparently can afford them, doesn't want to pay. Kind of a Catch-22!
Unfortunately, because you transferred the ownership to your son, only he can make a decision as to what to do about the policy. He can drop it. He can cash it in and take the $4,000 tax-free. The only mistake you made was not talking to a life insurance expert, who could have explained your options better, before you transferred the ownership.
Your life insurance policy will not be taxable. First, because your cash value is less than the premiums paid, there should be no taxes on the cash if you surrender the policy. And dividends are always tax-free. Second, if you keep the policy, there is no taxation of life insurance benefits paid to the named beneficiary, which I assume is your son.
Besides surrendering the policy, here are some other options that might make sense. They're available to you with a whole life policy, and you don't have to make another premium payment for the rest of your life. (Hopefully your son will go along with your wishes.)
  • Extended term life insurance. You can trade in the cash and receive a prepaid term life insurance policy for the same death benefit as you now have that will cover you for several years into the future. This is a good option if you are not in good health.
  • Reduced paid-up whole life insurance. You can exchange your existing policy for another whole life policy for a lesser death benefit that will be paid up, without any further premiums due for as long as you live.
Now that I have answered your questions about taxes, I have a question for you: Since the purpose of life insurance for you is just cremation expenses, why not take the cash and dividends, and use them to pay for a prepaid cremation? (Hopefully, your son will do the eulogy at no charge!)
Good luck!

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Thursday, January 10, 2013

10 tips about mortgages and refinancing in 2013

If you've been sitting on the sidelines, waiting for the best time to refinance or get a mortgage to buy a home, think of 2013 as your last chance to act.
With good credit, persistence and some shopping skills, you can still snag phenomenal deals this year -- even if you are underwater on your loan.
Here are 10 mortgage tips to help you with your mortgage decisions in 2013.