Business

Five Hidden Reasons You Need a Will

Most people don’t appreciate the full importance of a will, especially if they think their estate is too small to justify the time and expense of preparing one. Even people who recognize the need for a will often don’t have one, perhaps due to procrastination or a disinclination to broach this sensitive subject with loved ones.

The truth is, nearly everyone should have a will and here are five good reasons why.

Reason 1: To Choose Beneficiaries

Intestate succession laws of the state in which you live determine how your property will be distributed if you die without a valid will. For example, in most states the property of a married person with children who dies intestate (i.e., without a will) generally will be distributed one-third to the spouse and two-thirds to the children, while the property of an unmarried, childless person who dies intestate generally will be distributed to his or her parents (or siblings, if the parents are deceased).

These distributions may be contrary to what you want. In effect, by not having a will, you are allowing the state to choose your beneficiaries. Further, a will allows you to specify not only who will receive the property, but how much each beneficiary receives.

Note: If you wish to leave property to a charity, a will may be needed to accomplish this goal.

Reason 2: To Minimize Taxes

Many people feel they do not need a will because their taxable estate does not exceed the amount allowed to pass free of federal estate tax. These assumptions, however, should be reviewed given the current state of change in the federal estate tax laws because in most cases a properly prepared will is necessary to implement estate tax reduction strategies. It is important to review and update your will on a regular basis. Most wills were originally written with the existence of a federal estate tax at a certain level.

In addition, your taxable estate may be larger than you think. For example, although life insurance, qualified retirement plan benefits, and IRAs typically pass outside of a will or estate administration, retirement plan benefits and IRAs (and sometimes life insurance) are still part of your federal estate. As such, they can cause your estate to go over that threshold amount. Also, in some states, the estate or inheritance tax differs from the federal laws.

Tip: Changes in the estate tax laws and in the size of your estate may warrant a re-examination of your estate plan.

Reason 3: To Appoint a Guardian

If for no other reason, you should prepare a will to name a guardian for your minor children in the event of your death without a surviving spouse. While naming a guardian does not bind either the named guardian or the court, it does indicate your wishes, which courts generally try to accommodate.

Reason 4: To Name an Executor

Without a will, you cannot appoint someone you trust to carry out the administration of your estate. If you do not specifically name an executor in a will, a court will appoint someone to handle your estate, perhaps someone you might not have chosen. Obviously, there is peace of mind in selecting an executor you trust.

Reason 5: To Help Establish Domicile

You may wish to firmly establish domicile (permanent legal residence) in a particular state, for tax or other reasons. If you move frequently or own homes in more than one state, each state in which you reside could try to impose death or inheritance taxes at the time of death, possibly subjecting your estate to multiple probate proceedings. To lessen the risk of this, you should execute a will that clearly indicates your intended state of domicile.

If you need guidance with your will, just give us a call. We are happy to assist you.

Financial Troubles? 5 Ways to Improve Your Situation

If you are having trouble paying your debts, it is important to take action sooner rather than later. Doing nothing leads to much larger problems in the future, whether it’s a bad credit record or bankruptcy resulting in the loss of assets and even your home. If you’re in financial trouble here are some steps to take to avoid financial ruin in the future.

If you’ve accumulated a large amount of debt and are having difficulty paying your bills each month, now is the time to take action–before the bill collectors start calling.

1. Review each debt. Make sure that the debt creditors claim you owe is really what you owe and that the amount is correct. If you dispute a debt, first contact the creditor directly to resolve your questions. If you still have questions about the debt, contact your state or local consumer protection office or, in cases of serious creditor abuse, your state Attorney General.

2. Contact your creditors. Let your creditors know you are having difficulty making your payments. Tell them why you are having trouble-perhaps it is because you recently lost your job or have unexpected medical bills. Try to work out an acceptable payment schedule with your creditors. Most are willing to work with you and will appreciate your honesty and forthrightness.

Tip: Most automobile financing agreements permit your creditor to repossess your car any time you are in default, with no advance notice. If your car is repossessed you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. Do not wait until you are in default. Try to solve the problem with your creditor when you realize you will not be able to meet your payments. It may be better to sell the car yourself and pay off your debt than to incur the added costs of repossession.

3. Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and health care) and optional expenses (such as entertainment and vacation travel). Stick to the plan.

4. Try to reduce your expenses. Cut out any unnecessary spending such as eating out and purchasing expensive entertainment. Consider taking public transportation or using a car sharing service rather than owning a car. Clip coupons, purchase generic products at the supermarket and avoid impulse purchases. Above all, stop incurring new debt. Leave your credit cards at home. Pay for all purchases in cash or use a debit card instead of a credit card.

5. Pay down and consolidate your debts. Withdrawing savings from low-interest accounts to settle high-rate loans or credit card debt usually makes sense. In addition, there are a number of ways to pay off high-interest loans, such as credit cards, by getting a refinancing or consolidation loan, such as a second mortgage.

Tip: Selling off a second car not only provides cash but also reduces insurance and other maintenance expenses.

Caution: Be wary of any loan consolidations or other refinancing that actually increase interest owed, or require payments of points or large fees.

Caution: Second mortgages greatly increase the risk that you may lose your home.

You can regain financial health if you act responsibly. But don’t wait until bankruptcy court is your only option. If you’re having financial troubles, don’t hesitate to call us. We can help you get back on your feet.

By Leon Clinton
February 8, 2013

How to Avoid Identity Theft During Tax Season

Consumers should protect themselves against online identity theft and other scams that increase during–and after–the filing season. Such scams may appropriate the name, logo, or other appurtenances of the IRS or U.S. Department of the Treasury to mislead taxpayers into believing the communication is legitimate.

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams, referred to as phishing, is to trick you into revealing your personal and financial information. The scammers can then use your information — like your Social Security number, bank account or credit card numbers — to commit identity theft or steal your money.

Scams involving the impersonation of the IRS usually take the form of e-mails, tweets, or other online messages to consumers. Scammers may also use phones and faxes to reach intended victims. Some scammers set up phony Web sites.

The IRS and E-mail

Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as passwords and PIN numbers, from taxpayers.

Most Scams Impersonating the IRS are Identity Theft Schemes

In this type of scam, the scammer poses as a legitimate institution to trick consumers into revealing personal and financial information – such as passwords and Social Security, PIN, bank account and credit card numbers – that can be used to gain access to their bank, credit card, or other financial accounts.

Attempted identity theft scams that take place via e-mail are known as phishing. Other scams may try to persuade a victim to advance sums of money in the hope of realizing a larger gain. These are known as advance fee scams.

How an Identity Theft Scam Works

Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as “Tax Refund,” “Inherited Funds,” or “IRS Notice.” Usually, the message will state that the recipient needs to provide the IRS with information to obtain the refund or avoid some penalty. The message will instruct the consumer to open an attachment or click on a link in the e-mail. This may lead to an official-looking IRS Web site. The look-alike site will then contain a phony but genuine-looking online form or interactive application that requires personal and financial information, which the scammer then uses to commit identity theft.

Alternatively, the clicked link may secretly download malware to the consumer’s computer. Malware is malicious code that can take over the computer’s hard drive, giving the scammer remote access to the computer, or it could look for passwords and other information and send them to the scammer.

Phony Web or Commercial Sites

In many IRS-impersonation scams, the scammer sends the consumer to a phony Web site that mimics the appearance of the genuine IRS Web site, IRS.gov. This allows the scammer to steer victims to phony interactive forms or applications that appear genuine but require the targeted victim to enter personal and financial information that will be used to commit identity theft.

The official Web site for the Internal Revenue Service is IRS.gov, and all IRS.gov Web page addresses begin with http://www.irs.gov/.

In addition to Web sites established by scammers, there are commercial Internet sites that often resemble the authentic IRS site or contain some form of the IRS name in the address but end with a .com, .net, .org, or other designation instead of .gov. These sites have no connection to the IRS. Consumers may unknowingly visit these sites when searching the Internet to retrieve tax forms, publications, and other information from the IRS.

Frequent or Recent Scams

There are a number of scams that impersonate the IRS. Some of them appear with great frequency, particularly during and right after filing season, and recur annually. Others are new.

Refund Scam: This is the most frequent IRS-impersonation scam seen by the IRS. In this phishing scam, a bogus e-mail claiming to come from the IRS tells the consumer that he or she is eligible to receive a tax refund for a specified amount. It may use the phrase “last annual calculations of your fiscal activity.” To claim the tax refund, the consumer must open an attachment or click on a link contained in the e-mail to access and complete a claim form. The form requires the entry of personal and financial information. Several variations on the refund scam have claimed to come from the Exempt Organizations area of the IRS or the name and signature of a genuine or made-up IRS executive. In reality, taxpayers do not need to complete a special form to obtain their federal tax refund. Refunds are triggered by the tax return they submitted to the IRS.
Lottery winnings or cash consignment: These advance fee scam e-mails claim to come from the Treasury Department to notify recipients that they’ll receive millions of dollars in recovered funds, lottery winnings, or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees. In reality, the Treasury Department does not become involved in notification of inheritances or lottery or other winnings.
Beneficial Owner Form: This fax-based phishing scam, which generally targets foreign nationals, recurs periodically. It’s based on a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. The scammer, though, invents his or her own number and name for the form. The scammer modifies the form to request passport numbers, information that is often used for account security purposes (such as mother’s maiden name), and similar detailed personal and financial information, and states that the recipient may have to pay additional tax if he or she fails to immediately fax back the completed form. In reality, the real W-8BEN is completed by banks, not individuals.

Other Known Scams

The contents of other IRS-impersonation scams vary but may claim that the recipient will be paid for participating in an online survey or is under investigation or audit. Some scam e-mails have referenced Recovery-related tax provisions, such as Making Work Pay, or solicited for charitable donations to victims of natural disasters. Taxpayers should beware an e-mail scam that references underreported income and the recipient’s “tax statement,” since clicking on a link or opening an attachment is known to download malware onto the recipient’s computer.

How to Spot a Scam

Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:

requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers, or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient;
dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey;
threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient’s funds;
gets the Internal Revenue Service or other federal agency names wrong;
uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers);
uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (http://www.irs.gov). The actual link’s address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.

What to Do

Taxpayers who receive a suspicious e-mail claiming to come from the IRS should take the following steps:

Do not open any attachments to the e-mail, in case they contain malicious code that will infect your computer.
Do not click on any links, for the same reason. Alternatively, the links may connect to a phony IRS Web site that appears authentic and then prompts for personal identifiers, bank or credit card account numbers, or PINs.
Do not respond to the email. Instead, visit the IRS website to use the “Where’s My Refund?” interactive tool to determine if you are really getting a refund.
Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov, and then delete the e-mail from your inbox. Alternatively, you can visit the IRS website and click on “Report Phishing” at the bottom of the home page.
Consumers who believe they are or may be victims of identity theft or other scams may visit the U.S. Federal Trade Commission website for guidance on what to do. The IRS is one of the sponsors of this site.

If you’ve received an email claiming to be from the IRS, call us to talk it over before taking any action. We don’t want you to fall victim to a scam.

By Leon Clinton
February 7, 2013