Why Credit Still Matters: Part II

In today's installment of "Why Credit Still Matters," we will illustrate the effect that interest rates have on auto loan payments. As discussed in the first installment of this series, the interest rate is typically determined by your credit score.

Sample auto loan payments based upon a loan amount of $25,000 and a term of 48 months.

A.)

Interest Rate

3.88%

Monthly Payment

$563.13

Total Interest

$2,030.48

Total Payment

$27,030.48

B.)

Interest Rate

7%

Monthly Payment

$598.66

Total Interest

$3735.49

Total Payment

$28,735.49

C.)

Interest Rate

15%

Monthly Payment

$695.77

Total Interest

$8396.90

Total Payment

$33,396.90

D.)

Interest Rate

20%

Monthly Payment

$760.76

Total Interest

$11,516.43

Total Payment

$36,516.43

Some of the options available to lower your interest rate and reduce your total costs:

1. 10-20% down payment.
2. Buy down the interest rate.
3. Manufacturer cash rebates.
4. Apply at your bank or credit union despite your credit history.

In the next installment of "Why Credit Still Matters," we will be discussing bankruptcy.

Why Credit Still Matters: Part I

This is the first installment in our "Why Credit Still Matters" series. We will begin with a breakdown of the credit scoring system and what credit score ranges generally mean when you desire to have more credit extended. Credit scores typically range from a low of 300 to a high of 900.

Credit Scores Description

800+- Excellent credit score. You should qualify for the best interest rate and loan terms.

730 – 799- Great credit score. There will not be any problem in getting a loan at a good interest rate.

680 – 729- Good credit score. You should qualify for a loan at a good interest rate.

580 – 679- Average credit score. You may qualify for the loan but not at a good interest rate.

500 – 579- Bad credit score. You will have a tough time getting a loan or a credit card.

Below 499- Very bad credit score. It is doubtful that you will qualify for a loan or a credit card.

Factors that may affect your credit score are the following:

1. Payment history
2. Amount currently owed
   
3. Credit balance to amount of available credit ratio
   
4. Foreclosure
5. Bankruptcy
6. Auto repossession
7. Child support order
   
8. Length of time remaining on current loan obligations
9. Credit history (i.e. how long have you been using credit)
   
10. No credit history
11. Late payments

In the second installment of the series, we will consider different monthly and loan lifetime payment scenarios based upon credit scores as well as options to lower payments when your credit is average and below.

Estate Planning Series: What are the "basic documents?"

The most basic estate planning consists of the following documents:
1. Will
2. Medical Power of Attorney
3. Directive to Physicians
4. Durable Power of Attorney
5. Legal Guardianship of Child after Death
6. Burial Insurance*

A very brief synopsis of these documents:

Will
The Purpose of a will is to pass on property upon the death of the testator. In Texas, if the testator is married, he/she may not pass community property to any person other than the surviving spouse without the spouse's agreement. A testator may pass separate property to anyone he/she chooses. Separate vs. Community Property will be discussed later in the series.

If a married person dies without a will, his/her property passes under the state's intestacy laws. In Texas, the decedent's part of the community property automatically goes to the surviving spouse provided that the decedent does not have any surviving children who are not also the children of the surviving spouse. If the decedent has a child who is not the surviving spouse's child, however, the decedent's part of the community property passes to said child. If same decedent has separate property, any child, whether born to or outside the marriage, gets 2/3 of the property and the surviving spouse gets the remaining 1/3.

If a will is handwritten, it must be written wholly in the testator's handwriting or it will be invalid. If drafting a typewritten will, a self-proving affidavit will make the probate process flow more smoothly for your heirs. A self-proving affidavit is a document notarized by 2 or more persons, over the age of 14, who witnessed the signing of the will. It is not necessary that they read the will, it is only necessary that they witnessed the signing. The witnesses should not be an attorney who drafted the document or the person who notarized the document.

Medical Power of Attorney
A Medical POA gives the designated person the power to make medical decisions on behalf of the person giving the power. In Texas, if there is no Directive to Physicians, the MPOA may also serve as the one who makes the medical decisions regarding life sustaining treatments.

Directive to Physicians
This document relays the wishes of the signor regarding the course of medical treatment for terminal or incurable illnesses. In Texas, it is not necessary to have both a Directive to Physicians and a Medical Power of Attorney. You should have both documents, however, if there is any possibility that you will move to another state that requires a Directive. Furthermore, you will need both documents if the person serving as the Medical Power of Attorney does not want the responsibility of making a possible life-ending decision about your medical treatment. Directive to Physician and "Living Will" are often used interchangeably.

Durable Power of Attorney
This document gives the designated person the power to make business decisions on behalf of the person giving the power. The DPOA either takes effect immediately or upon the incapacitation of the designator. The powers in the DPOA may be as broad or as narrow as the designator desires.

Legal Guardianship Child after Death
This document appoints the person (persons) who will obtain physical custody of your child(ren) upon death. If you are married, it is important for you and your spouse to come to a consensus and consider having identical clauses in your wills in the event of your simultaneous death. Please be aware that whether married, separated, or divorced, the surviving parent always has the first right of custody to the child if his (or her) parental rights have not been terminated.

Burial Insurance
In order to ease any financial burden that your family may face upon your death, you should obtain a burial policy or save for your burial expenses if they are not included in a life insurance policy.

The key is that it is vital to discuss your wishes with your loved ones and your attorney and put everything in writing. If you would like further information, you may contact me at nicole@nicolehuffman.com or leave a comment.

Money Matters: Part II

In the previous post, we touched upon a few basic questions and concerns regarding how to protect your family, and its individual members, in financial matters. Today's discussion will go more in-depth into some of the issues that were raised.


1. Do both parties have easy access to all information on all financial accounts (this includes banking, investment accounts, credit cards, mortgage or auto loans, etc.)?

In order to protect both parties in the case of a life altering event such as incapacity or death, both parties should have a copy of every page, of all documents relating to any financial account that is held in either spouse's name. All documents includes:

• The company's name, address, and the account representative (if applicable)
• A copy of the Original application
• Any and all addenda to applications
• Any and all communication from the company or person securing the debt
• Any and all legal notices sent concerning the debt
• Any and all financial statements regarding the debt

Please note that this is not an exhaustive list. Further, in addition to the two hard copies that you have, you may want to consider scanning the documents and saving them to a USB drive and sending them to your email address and the email address of a family member, friend and/or attorney in case something should happen to you and the information is needed.

2. Do you and your spouse have separate bank accounts? If so, do you have a Pay-on-Death, or other type of arrangement, that will facilitate your spouse being able to easily access the funds upon your incapacity or death?

If you and your spouse have separate accounts, in the event of death or incapacity, you will have neither quick nor easy access to the funds if you do not have something in place to give you legal access. Some of the options you may exercise:

• Payable on Death Account. This is not the best option, however, because the survivor still has to go through the burden of obtaining a death certificate for the financial institution.
• Statutory Durable Power of Attorney. This document gives your spouse the power to make financial decisions on your behalf in the event of incapacity. The power may be as broad or as narrow as you choose.

3. If you have any separate banking accounts with debit cards, have you exchanged pin numbers with your spouse in the case of a financial emergency? This is something that you may want to consider, because it comes in handy right after a death, and before you can obtain all the necessary paperwork for the bank to release funds from the account.

When you have separate accounts, obtaining a debit card and exchanging pin numbers with your spouse is the best choice in the case of your death or incapacity. This provides your spouse with immediate access to the funds without any further involvement of the bank.

4. Do you have any accounts (i.e. credit cards) of which your spouse has no knowledge? If so, do you live in a community property state? Did you include your spouse's name on the application?

If you live in a community property state, you are responsible for your spouse's debt- period. In the case of divorce, even if you did not know about the debt and the divorce decree holds only one spouse accountable for the debt, if the responsible party does not pay, you are responsible to pay the debt. The creditor is not bound by a divorce decree. Further, consider checking your credit report monthly to verify there are no accounts in your name to which you did not apply. If there are accounts, you have the right to ask the creditor to cancel the account. If the creditor will not cancel the account, even if your name is removed, you are still responsible for the debt.

5. Do you have enough life insurance? The amount of insurance you have depends upon your estate planning goals, life style, and personal philosophy on passing along wealth. That being said, if insurance is one of your major estate planning tools, it is crucial that you obtain the correct amount.

When making life insurance decisions, it is important to do the following:

• Calculate your debt. Please note that creditors CANNOT take money from a life insurance policy. Life insurance is a contractual agreement. The money passes to the beneficiary outside of the probate process. If, however, you desire to have all your debts paid, you need to know the total amount.
• How much money will it take for your spouse to maintain the current lifestyle while he/she adjusts to your loss of income?
• How long do you want to give your spouse to adjust to your loss of income?
• Do you have any children?
• How old are your children?
• Do you want to leave anything to your children?
• How much do you want to leave to your children?
• Do you want the insurance to cover college tuition costs? Do you have other accounts in place that are being used to cover college tuition?
• What type of policy do you want? A whole life, term, convertible term, etc?
• Have you talked to a financial planner and an attorney about life insurance and alternative methods of estate planning?

The next post will discuss basic estate planning documents.

Money Matters

As a family law practitioner, I encounter many persons with issues not relating to the two most common areas of divorce and/or child support. Many times, I am called upon to offer advice, and/or direction, on how to obtain critical information that protects the family, and its individual members, in financial matters. The purpose of today's blog is to discuss some of the common financial issues couples encounter and need assistance addressing.

I will begin with a few basic questions and concerns.

1. Do both parties have easy access to all information on all financial accounts (this includes banking, investment accounts, credit cards, mortgage or auto loans, etc.)?

2. Do you and your spouse have separate bank accounts? If so, do you have a Pay-on-Death, or other type of arrangement, that will facilitate your spouse being able to easily access the funds upon your incapacity or death?

3. If you have any separate banking accounts with debit cards, have you exchanged pin numbers with your spouse in the case of a financial emergency? This is something that you may want to consider, because it comes in handy right after a death, and before you can obtain all the necessary paperwork for the bank to release funds from the account.

4. Do you have any accounts (i.e. credit cards) of which your spouse has no knowledge? If so, do you live in a community property state? Did you include your spouse's name on the application?

5. Do you have enough life insurance? The amount of insurance you have depends upon your estate planning goals, life style, and personal philosophy on passing along wealth. That being said, if insurance is one of your major estate planning tools, it is crucial that you obtain the correct amount.

The next post will expand upon this current discussion.