Risk & Financial Management


1. Employee Benefits, Pension & Profit-Sharing Plans (Planning & Implementation) *SEE NOTES 1 & 2 BELOW
2. Long Term Planning *SEE NOTES 1 & 2 BELOW
3. Why You Should Use Our Services
   a) Negotiable Instruments
   b) Mortgages 
4. Insurance *SEE NOTES 1 & 2 BELOW

5.  How to Pay for a College Education *SEE NOTES 1 & 2 BELOW
6. Mortgages and Home Equity Loans
   a)  Real Estate & Home Loans
   b)  Home Equity Loans
   c)  Reverse Mortgages
7.   Credit Card Planning
8.   Getting Out Of Debt
9.   Surviving a Financial Crisis
10.   Business Restructuring
11. Bankruptcy
12. Other Borrowing Strategies
13. Divorce Planning
14. Succession Planning
15. Shield Assets From Creditors & Liability Lawsuits
16. Life Stages - Financial Guide




Employee Benefits, Pension & Profit-Sharing Plans (Planning & Implementation) 

Choosing and administering benefit plans for your employees is often a complex process. We can help you develop, implement, and administer your benefit, retirement, and profit-sharing plans with an eye toward maximizing tax advantages.

Please click here for a link to a helpful Retirement Calculator


Long Term Planning

My Accountant never mentioned Retirement Planning. Now I Can't Afford His Service.

Only 5% of all Americans are financially independent at Age 65.

A comfortable leisurely retirement in your "golden years" has become an integral part of the American Dream.

Many people believe they have the "right" to spend their last years in a deck chair on a cruise ship, or at least in a rocking chair on their front porch. Age 65 is the magic number. If you can afford to retire before 65, you win the grand prize.

But many Americans are finding that this part of the American dream is not what it is cracked up to be. To begin with, it's worrisome. Can you really afford to retire? Pensions are shrinking. Social security looks iffy. The cost of living keeps going up.

Many people who already have retired are finding that they actually miss work. Playing golf or puttering in the garden actually get boring when you do it all day, every day.

Some retirement experts are beginning to suggest that we need to rethink retirement. They point out that retirement is a relatively new phenomenon. At the turn of the 20th.century, most people worked until they died. The first Social Security check wasn't issued until 1940. Pension plans didn't take serious root until after World War II.

In those earlier times, few people reached age 65 and fewer still reached 70.

Today, if you're reading this, there's a 50-50 chance you'll live to age 85. Living into the 90's in not uncommon. That means a retirement of 20 to 30 years. It takes a lot of money to cover that span.

None of this is to say you should give up on the idea of ever taking it easy in your old age. What is suggested is that times have changed; not following a pattern geared to different circumstances. You must think things through. How will retirement effect you emotionally and physically. Experiment with partial retired life before calling the shots.

Apart from poor health, which can force retirement, often the operative factor in choosing between retirement and continuing to work is money. The larger your pool of retirement funds, the more options you have.

If retirement life suits you, and you can afford it, go for it. But don't put yourself on the bench just because you turn 65. People in their 60's and 70's are shattering myths about working when you're older.

Myths such as these cloud the issue: Employer's don't want them; there are no jobs available; older workers are less productive, have more on-the-job accidents and make mistakes; can't learn new ways; are unreliable and their children want them to retire.




Reasons To Keep Working

You may need to keep working because you can't afford not to, at least at the income level you would like. But there are also more positive reasons to continue to work; you find purpose and meaning in work, it keeps you young and healthy, you enjoy being with people and a "part of the world," you have much yet to contribute, you have personal dreams to fulfill.

Career Choices

Not retiring doesn't mean you have to keep plugging away in your current job. You can change jobs, change careers, go back to school, take special classes to learn a new career, volunteer your time, or start a new business.

Work Options

You don't have to work 9-5. You can work part time, work flexible schedules, or telecommute. You can work at home or on temporary assignments, interspersed with leisurely sabbaticals.

How We Can Help
We are CPA's, and Attorneys. We use computer programs to determine what you need to retire.

We guide you with advice on what is necessary to meet your retirement goals.

We handle all aspects of retirement planning and implementation.

Click here to access our Retirement income calculator.


Why You Should Use Our Services 

For our wealth management client services, including all types of securities products, annuities and insurance investment products, please visit us at www.SyFinance.com 

About Our Complete Certified Monetary Services Firm 

Sy Schnur CPA, PFS, BVAL, CVA (Business Valuer) & Insurance Agents Associated, was established during December, 1965. Our goal has always been to provide unequaled value for the services we render. Our success is a testimonial to our commitment to quality & service. Our client base encompasses services throughout almost every industry including manufacturing; wholesale, retailing; real estate; construction; not for profit; numerous unions; etc. The diversity of our practice bolsters our reputation for technical expertise & client satisfaction. 

As our profession continues to change we will always be, as we have in the past, on the cutting edge of technology. 

Consisting of four CPA's and three support staff we are a small firm. This gives us the ability to deliver high quality professional services promptly. We try to meet clients as often as possible to see if we can find ways to improve client cash flows and bottom line. 

Quality Peer Review 

The State of New York and the American Institute of Certified Public Accountants require a triennial review of firm procedures by another CPA to determine that its reports, quality control procedures, library and professional education credits are up to mandated industry standards. We are proud to have received the top level of certification, an unqualified report without any comments, for our triennial review. 

What Makes Our Firm Different From Other Firms? 

We are a "One Stop" Professional Services Firm.

  1. We provide a fully computerized service including internet portals, bookkeeping, accounting & tax preparation. 
  2. We recommend, evaluate, set-up & install computer systems, networks & software. Sy Schnur has earned a TCEA in supporting Microsoft Windows and Networking. 
  3. We provide a complete planning service, which includes estate and retirement guidance. We are fully familiar with all government, teachers & union plan options. Sy Schnur has earned a PFS License. 
  4. We will determine your casualty insurance loss & review commercial liability, business interruption, home owners, life, term, disabilities, major medical, Medicare options, nursing & home care insurance. We will recommend or reject insurance coverage's & suggest other cost-benefit options, as necessary.
  5. We will work with you to set up for criteria for your proper pension planning.
  6. We will work with you to review your overall planning.
  7. "Sandwich generation planning". We will work with you on your College & Medicare planning to maximize funds available while retaining as much assets within the family group.
  8. We will work with you to set up a partial or complete Estate Plan. As part of our consultation, we will work with both you & your heirs to maximize your total Family Wealth Preservation. Our function will consider your total assets (real prop., personal prop. & intangibles), health matters, and your true feelings in arriving at your individualized plan.
  9. Our attorney will prepare your will and all trust documents including Medicaid & Living Trust, Family Limited Partnership, Irrevocable Life Insurance Trust, Personal Residence Trust, GRITS, GRATS & GRUTS (transfer int. / principal or appreciation only to future generation). All of the above reduce estate taxes. We will also prepare your health & Economic Powers of Attorney.  
  10. We will also represent you as Trustee & Executor of your trust or estate to secure & or maximize your investment benefits & fund transfer to your heirs. 
  11. Finally, we will work with you towards a Business Valuation. This situation first arises when you are seeking to acquire a business. We will review the books & records including the cash records of the potential acquisition or merger target. We will advise you if we deem the purchase & price reasonable. We will also prepare a "Justification of Purchase" to determine if the price & terms are affordable by you. Sy Schnur is a Certified Business Valuer. 

We will also value your Business for Gift or Estate Taxes, Charitable Trusts, Buy-Sell Agreements, Financial Acquisitions, Strategic Acquisitions, Dissenting Stockholder Actions, Insurance Casualty Loss Amount, Claim Loss Amount, ESOP, Divorce Mediation (including Equitable Distribution, Community Property & GUADRO). 

 Our firm computer determines NYS Child Support and allocates alimony to maximize benefit to both spouses. 

For our wealth management client services, including all types of securities products, annuities and insurance investment products, please visit us at www.SyFinance.com.


Negotiable Instruments 

Funding of an enterprise with the expectation of profit from the efforts of other people; Any note, check, draft, warrant, traveler's check, letter of credit, warehouse receipt, negotiable bill of lading, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, valid or blank motor vehicle title; certificate of interest in property, tangible or intangible; instrument or document or writing evidencing ownership of goods, wares, and merchandise, or transferring or assigning any right, title, or interest in or to goods, wares, and merchandise; or, in general, any instrument commonly known as a ''Promissory Note'', or any certificate of interest or participation in, temporary or interim certificate for, receipt for, warrant, or right to subscribe to or purchase any of the foregoing, or any forged, counterfeited, or spurious representation of any of the foregoing. 18 USC 



Mortgage Market Origination of mortgage loans in the primary mortgage market and resale of mortgage in the secondary mortgage market, especially mortgage certificates that are bond-like securities backed by blocks of mortgage loans. Primary origination is conducted by mutual savings banks, savings and loan associations, mortgage bankers, commercial banks, and insurance companies. The same institutions are active in the secondary market with mortgage certificate issues directed to the general public and traditional investment groups such as pension funds. Mortgage loans represent first liens on real estate property which, unlike bonds, require periodic payment (usually monthly) of both principal and interest over the term of the mortgage. The federal government has assumed a major economic role in the mortgage loan market because real estate development is a major sector of the U.S. Economy. The Federal Housing Authority and the Veterans Administration promote primary mortgage originations by guaranteeing home mortgages. The government National Mortgage Association (known as ginnie mae) and the Federal National Mortgage Association (known as fannie mae) promote the secondary mortgage market in government-insured loans. The Federal Home Loan Bank Board regulates savings banks, which are the primary originators of home mortgages, and promotes the secondary market in government-insured mortgages, privately insured mortgages and conventional uninsured mortgages. 


How to Pay for a College Education 

We are consultants in college planning and we can help you minimize your
cost outlay utilizing your total family circumstances!
The earlier you start the planning the more you can save!

The cost of college education, including room and board, can present a formidable financial burden for the student and his family.  There is no question that undergraduate and graduate degrees increase the earning capacity of the graduate, yet paying for the credentials can often be more difficult than the student's actual course of study. There are several alternatives for paying the tab.  Some options are only available to moderate and lower income families, while other options are available to everyone.  Click here to view Tuition and Fees at Flagship Universities over Time.  Click here to see if you are eligible for the College Tuition credit. Click here to use a tool to calculate your potential College costs

We are consultants in college planning and we can help you minimize your cost outlay utilizing your total family circumstances!

The earlier you start the planning the more you can save!


Consider the following ideas when planning to finance a college education:

How Much Money Will You Need & How To Save It

  • Project the future cost of education with the assistance of your financial planner.  Given a five percent rate of inflation, the current cost of college education will double approximately every 14 years.  

Maria, age 13, wants to go to a private four year college when she reaches age 18.  Annual room, board and tuition is $ 50,000 a year in today's dollars.  Assuming these costs increase at 8 percent a year throughout her senior year of college, and assuming her parents can earn 4 percent after-tax on her college education fund, the amount needed when she reaches age 18 to pay for all fours years is $ 280,000


  • Establish a monthly savings plan for the accumulation of the targeted amount.
  • Consider establishing an Education IRA for each of your children.  You can make nondeductible contributions up to $ 11,000, per spouse (equal to the gift tax exclusion) , a year to each child's Education IRA.  Contributions, except for rollover contributions, after your child turns age 18 cannot be accepted. The annual contribution of $500 per IRA is phased out if your  Modified Adjusted Gross Income is between $95,000 and $110,000 and you are single, and  between $150,000 and $160,000 if you are married and file a joint tax return. 

Income earned within the account is tax-free.  Distributions are tax-free to the extent they are used for the payment of your child's qualifying higher education expenses. Higher education expenses must be reduced first by any tax-free scholarship, educational assistance allowance, or any other payment of college expenses (other than gifts or inheritances) that is not taxable. To the extent that annual distributions exceed the education expenses, a portion of the distribution will be taxable and will also be subject to a 10% penalty.  Distributions on account of the death or disability of an IRA beneficiary are not subject to the 10% penalty.  An Education IRA can be rolled over tax-free to another Education IRA for the same child or to an Education IRA of another eligible family member. When the Education IRA beneficiary reaches age 30, the entire balance of the account must be distributed to the beneficiary within 30 days.  The amount distributed will be subject to income tax and the 10% penalty.  Upon the death of an Education IRA beneficiary, the account must be distributed to the beneficiary's estate within 30 days. IRC 530  


  • Consider a lump-sum or periodic payments to a Qualified State Tuition Program (QSTP).   Funds saved through QSTP may only be used for the qualified higher education expenses of a beneficiary.  These expenses are tuition, fees, books, supplies, equipment, and reasonable room and board expenses of a student who is enrolled at least half-time, required for enrollment or attendance of a beneficiary at an eligible educational institution.  Income in the QSTP account is not taxed until withdrawn and then it is taxed to the beneficiary (student) who is usually in a lower income tax bracket than the person saving to the account.  Earnings not used for qualified higher education expenses are subject to a penalty tax of 10% in addition to regular income tax.  Funds saved in a QSTP are considered gifts that qualify for the annual exclusion for gift tax purposes.  A special rule enables a person to save five times the annual exclusion in one year with such gift being treated as having been made pro-rate over five years.  Although the funds are considered gifted for transfer tax purposes, they are still under the control of the donor and may be returned to the donor but there will be a penalty on earnings.  The funds may also be transferred to another member of the donor's family without tax or penalty.  IRC 529
  • Consider a Tuition Prepayment Plan at the university of your choice and pay for all four years of education at the freshman rate.  This technique is used as a hedge against rising tuition.  
  • Consider saving for a college education for your children by using some of the techniques found under TAX PLANNING: Ways to Shift Income to Family Members in Lower Tax Brackets.  However, if there is a good possibility that your child may qualify for financial aid, these strategies may be inappropriate.  See Applying For Financial Aid.
  • Consider setting aside funds for your child's college education within a account set up under the Uniform Gift to Minors Act or the Uniform Transfer to Minors Act to take advantage of your child's standard deduction and lower tax bracket if your child is 14 or older.  However, this strategy may back fire if you will be seeking financial aid.  Assets owned by college students reduce the amount of financial aid available to a greater extent than if the assets were owned by the parents.   
  • Consider the purchase of U.S. Series EE or I savings bonds to help fund the cost of college education.  Interest earned on U.S. Series EE savings bonds purchased after December 31, 1989 and Series I bonds, that are redeemed for the payment of college education for your spouse, your children, or yourself, is tax-free. IRC 135 and Publication 17




For 2011, the tax-free status is phased out on Adjusted Gross Income from  $83,650 up to $113,650 and you file a joint tax return, and from $55,750 up to $70,750 for all other filers.  Series EE  and I bonds redeemed for college education must be reported on IRS Form 8815.  

  • EE and I bond interest and principal must be used for tuition and fees.  Costs of rent and food are not included.
  • Qualifying education expenses used to compute the exclusion of EE and I bond interest must first be reduced by any education expenses taken into consideration  when computing the Hope Scholarship Credit or the Lifetime Learning Credit. IRC 135(d)(2)
  • EE and I bonds purchased for your child under the Uniform Gift to Minors Act will not qualify.  Likewise, bonds purchased by grandparents will not qualify unless the grandchild is their dependent.
  • Bonds must be purchased by an individual who has attained age 24 before the date of issuance.
  • To obtain additional information on Savings Bonds write:  Office of Public Affairs, U.S. Savings Bonds Division, Washington, D.C. 20226.  Request Publications SBD-1964.
  • If your income is too high to qualify for the tax-free income from Series EE and I bonds, consider purchasing Baccalaureate Bonds.  So called Baccalaureate Bonds are tax-exempt zero coupon municipal bonds that are generally non-callable, with very attractive yields, and with maturities from one to 30 years.  Some states redeem the bonds at an amount above their face value if the proceeds are used to pay in-state college tuition.  
  • Consider other sources of funding such as future inheritances, gifts, and assistance from extended family members.

Applying For Financial Aid

Click here to view the rules for college students being dependent or independent. 

  • College financial aid (grants, loans and work opportunities) is given based on the completion of the Free Application for Federal Student Aid.  To request the application call 800-433-3243, or download the application from the site given here.   If you applied for federal student aid for the 2001/2002 school year, you probably will be able to file a 2008/2009 Renewal Free Application for Federal Student Aid which is less time consuming to complete. Your 2008/2009 school year financial aid application must be received by July 1, 2010. The main purpose of this application form is to determine the net worth and income for you and your child, and how much you will have to contribute annually towards the cost of your child's education.  To gain a thorough understanding of how much you and your child must contribute towards the cost of college education, request the booklet Expected Family Contribution by calling 800-433-3243. The income you may have to contribute is based on the following factors: (1) Your prior year's Adjusted Gross Income plus certain nontaxable income such as Social Security, child support, IRA and 401(k) contributions, minus; (2) The prior year's U.S. Income tax, and allowances for state income tax, Social Security Tax, employment expenses, and future retirement income needs. 

Parents must contribute from 22% to 47% of their net income, while dependent children are required to contribute a hefty 50% of theirs.  In addition, parents generally must contribute 12% of their net worth and dependent children must contribute 35% of theirs. You can reduce your expected family contribution by reducing your reported income and net worth during the years you are required to submit financial aid applications by using the following strategies:

  • Don't sell investments that will generate capital gains.
  • Sell investments that result in a capital loss.  Losses in excess of gains may not exceed $3,000 in any given year.
  • If you work for a company, request that you receive more fringe benefits instead of cash compensation. Request that some of your compensation be deferred to future years.
  • If you are a business owner, consider reducing your salary and increasing contributions to corporate retirement plans.  However, contributions to IRA's, 401(k) plans and Self-employed Pension and Profit Sharing Plans must be added back to your income.  (See Business Deductions for a listing of ways you can reduce your taxable business income.
  • Use the strategies for deferring income and accelerating deductions found in Tax Planning: Common Year-end Tax Planning Moves.
  • Use cash in the bank and other investments to buy or make improvements to your home or to purchase personal property such as clothing, a new car, jewelry, etc.  Your home and personal property are not required to be shown on the financial aid application. You may even want to prepay a family vacation.
  • Business and farming assets including land, buildings, machinery, equipment, inventories, livestock, etc, valued at less than $400,000 are eligible for a reduction allowance of 40% to 60% depending on their total value less related debts.  As a result, consider using fully countable assets such as cash and other liquid investments to buy needed supplies, inventories, and equipment.  Also consider taking out loans secured by business assets to purchase personal assets such as a car.  Do not include the value of any building you use as a personal residence. 
  • Given today's real estate be careful not to overvalue your investment real estate.
  • Consider using cash and other investments to pay off loans such as credit card, auto loans, and other personal loans that aren't deductible on your financial aid form.
  • Because net worth contribution rates are stiffer for your child, think twice about shifting assets to your child prior to college in order to save on income taxes.
  • To reduce your child's net worth consider asking your child to spend down his bank accounts on things you might buy for him anyway.  These expenditures might include a car, clothing, airline tickets, etc. 
  • Your child may be able to apply for financial aid independent of you if your child is one of the following: (1) Born before January 1, 1978 (2) a U.S. veteran, (3) a graduate or professional student, (4) a married student, (5) a ward of the court or both parents are dead, or (5)a person who has legal dependents other than a spouse, 
  • Your financial aid administrator can adjust your reportable income for the following special circumstances: (1) medical expenses, (2) tuition expenses at elementary or secondary schools, (3) current unemployment, and (4) other extraordinary situations.  Be sure to bring these special circumstances to the attention of the officer.  In addition, if your situation warrants, the administrator can change the status of your child from dependent to independent.
  • File your financial aid form as soon after January 1 as possible.  Aid is available on a first-come, first-serve basis. If you are not positive what your previous year's income figures are, you can make estimates and make corrections, if necessary, later.
  • If your child is accepted by two or more colleges, play the colleges against each other to maximize the aid you can receive.

Apply for State Student Assistance. 

Early applicants often have a greater probability of receiving assistance since many state programs have limited funds that are distributed on a first-come first-serve basis.  Find out when the funds will be made available and make timely application.

Apply for direct aid from the college.  The aid can take the form of a tuition payment plan, a student loan, academic and athletic scholarships, and discounts for more than one student from your family. In many cases, expensive colleges are a better source of financial aid.

Have your child apply for direct aid and scholarships during a spring or summer term when the demand for financial aid is lower.


Apply for a Federal Pell Grant. The maximum grant is $3,300 a year and the grant does not have to be paid back.  

Eligibility for the grant is based on a financial needs formula.  The amount of the grant depends on your financial needs score, the cost of education at your child's school, whether your child is a full-time or a part-time student, and whether your child attends school for a full academic year or less.   Your 2001/2002 school year financial aid application must be received by July 1, 2002.

Apply for a Federal Supplemental Educational Opportunity Grant (FSEOG).  A  grant of between $100 to $4,000 a year is available to your undergraduate child who has an exceptional financial need as determined by the school.  How much aid your child will receive depends on financial need, the amount of other aid your child will receive, and the availability of funds at the school.  Unlike the Federal Pell Grant program, which provides funds to every eligible student, each school participating in a campus-based program receives a certain amount of funds.  When that money is gone, there are no more awards for that year.

Work study and The National Service Trust

Have your child apply for a subsidized job through the College Work Study (CWS) program.  Under this program your child can earn at least the minimum wage. 

Students hired through the Financial Aid Office who carry at least 12  credit hours and who work for 20 hours or less per week may not be subject to FICA tax .  In addition, if the student did not have any income tax liability for the previous year and doesn't expect to have any tax liability for the current year, he or she can avoid income tax withholding by entering the word "EXEMPT" on form W-4 If the student has investment income and can be claimed as your dependent, he or she should not claim exempt status if the total investment income and wages will exceed $750 in 2001.
Letter Ruling (TAM) 9332005

Have your child consider working in community service for up to two years through the  National Service Trust. The National Service Trust provides $4,725 a year for up to two years of community service in one of four priority areas: education, human services, the environment, and public safety.  Your child must complete 1,700 hours of service work a year.  Your child  can work before or after going to college, graduate school , or trade school, and the funds can be used to either pay current educational expenses or to repay federal student loans.  Your child will  receive a living allowance of at least $7,400 a year and,  if necessary, health care and child care allowances.   For more information call AmeriCorps at 800-942-2677.


Have your child consider making a commitment of four years to active military duty in exchange for a scholarship that pays all tuition, fees, books, and provides a monthly stipend.  The Army, Navy, Air Force, and Marine Reserve Officers Training Corps offer scholarships.

The National Guard offers up to $252 a month for 36 months in full-time tuition after completion of basic training and technical school under the Reserve GI Bill.  A six year commitment to active duty and a two year commitment to inactive duty is required.  (800-432-1810)

The National Guard also offers Federal Tuition Assistance up to 75% of tuition fees. Courses must be taken at an accredited college or university or at a community college and cannot exceed 15 credit hours per year. There is no time commitment, but requirements do include good standing in the National Guard.

Military recruits enlisting on or after October 1, 1998 are entitled to education funds under the Montgomery GI Bill as follows: two year enlistment: $15,444, three year and four year enlistment: $19,008. 

The U.S. Army has it own college fund starting at $20,000 for a two year enlistment, $25,000 for a three-year enlistment, and up to $30,000 for a four year enlistment.  To qualify you must be a high school graduate, score a 50 or better on the ASVAB test, and enlist to work in certain qualifying jobs within the Army.

If your child is the child or spouse of a deceased veteran, he or she may be eligible for college education benefits.


Up to $2,500 of interest paid on higher education loans in 2001 and thereafter is deductible as an adjustment to Gross Income.  The interest is deductible for the first 60 months in which the payments are required.  The loans must be for the costs of higher education for you, your spouse, or your dependent.  The interest deduction is phased out if your Modified Adjusted Gross Income is between $40,000 and $55,000 and you are single, and between $60,000 and $75,000 if you are married and file a joint tax return.  In addition, if you claimed the interest on Schedule A under another section of the Internal Revenue Code, you can not claim the interest as an adjustment to income. IRC 221

Family Loans

Consider an interest-free loan to your child in the amount of $100,000 or less.

The loan should be invested for your child in order to ensure that no more than $1,000 of taxable income is earned annually (low dividend paying growth stocks for example.) If the income exceeds $1,000 all of it will be deemed to be taxable to you and deductible by your child as interest paid.   The investment should also have appreciation potential to ensure that the child will have enough money to pay for college, to purchase a house, or to achieve some other financial goal.  Publication 550, IRC 7872(d) 

Federal Perkins Loan

Apply for a low interest Federal Perkins Loan.  Eligibility is based on financial need, and your undergraduate child can borrow $4,000 for each year of undergraduate study with an overall undergraduate limit of $20,000.  Graduate students may borrow $8,000 each year.  The total outstanding loan as a graduate student including amounts borrowed as an undergraduate cannot exceed $40,000.  If your child is attending school at least half-time, repayment begins nine months after your child graduates, leaves college, or drops below half-time.   If your child is attending less than half-time the grace period may be different.  At the end of the grace period you must begin repaying your loan.  You may be allowed up to 10 years to repay.  The interest rate is 5% and the money is borrowed from the school.  Repayment can be postponed and even cancelled under certain conditions. 

Federal Stafford Loans

Apply for a low interest rate Federal Stafford Loan.  Federal Stafford Loans are available through the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program. The terms and conditions of a Direct Stafford or FFEL Stafford are similar.  The major differences between the two are the source of the loan funds, some aspects of the application process, and the available repayment plans.  Direct Stafford Loans are made directly to the student from the U.S. Government, whereas FFEL program Stafford loans are available through banks, credit unions, and other lenders. A Federal Stafford Loan is made to students attending school at least half-time.  There are two types of Federal Stafford Loans: The Subsidized Federal Stafford Loan and the Unsubsidized Federal Stafford Loan. Qualification for the subsidized loan is based on family income.  Family income is not considered in determining eligibility for the unsubsidized loan.  The amounts of both loans are based on the difference between the cost of college attendance less the amount of all estimated financial assistance.   Unsubsidized loans are subject to higher origination fees, higher insurance premiums to cover default, and other restrictions.  

If your child is a dependent undergraduate student, he or she can borrow up to: $2,625 the first year enrolled for a full academic year; $3,500 if the student has completed the first year of study and the remainder of the program is a full academic year; $5,500 a year if the student has completed two years of study and the remainder of the program is at least one academic year.

If your child is an independent undergraduate student, or a dependent student and you are unable to get a PLUS loan, your child can borrow up to: $6,625 the first year enrolled for a full academic year (at least $4,000 of this amount must be in unsubsidized Stafford Loans) ; $7,500 if the student has completed the first year of study and the remainder of the program is a full academic year (at least $4,000 of this amount must be in unsubsidized Stafford Loans); $10,500 a year if the student has completed two years of study and the remainder of the program is at least one academic year (at least $5,000 of this amount must be in unsubsidized Stafford Loans); $18,500 a year if your child is a graduate student (at least $10,000 of this amount must be in unsubsidized Stafford Loans.)  The total Federal Stafford Loan debt cannot exceed $23,000 for a dependent undergraduate and $46,000 for an independent undergraduate (no more than $23,000 of this amount may be subsidized loans). Graduates cannot have a loan balance that exceeds $138,500 ($65,500 in subsidized Stafford Loans and $73,000 in unsubsidized Stafford Loans) including amounts received as an undergraduate.  Different loan limits exist for loans taken out before October 1, 1992.




If your child has a subsidized loan, the government pays the interest while your child is in school or in deferment.  Payments do not commence until six months after leaving school or when attendance drops below half-time. The federal government will pay the interest on the loan until the repayment period begins.  Any payments made by the student while in school or during the six months after leaving school will reduce the principal balance of the amount owed.  


If you have unsubsidized loans, you'll be charged interest from the day the loan is disbursed until it is repaid in full, including in-school, grace, and deferment periods.  You may choose to pay the interest during these periods or it can be added to the loan balance.  During the grace period on an unsubsidized loan, you don't have to pay any principal, but interest will be charged.  You can either pay the interest or allow it to accumulate.  

Payments on both subsidized and unsubsidized loans can be deferred or even cancelled under special situations.  If you are temporarily unable to meet your repayment schedule, but are not eligible for a deferment, you may receive forbearance for a limited and specified period.  During forbearance, your payments are postponed or reduced.  Whether your loans are subsidized or unsubsidized , the government does not pay the interest; you are responsible for it.  If you don't pay the interest as it accrues, it will be added to your loan balance.

Interest rates are variable but will not exceed 8.25%. 

To find out about Stafford Loans in your state call 1-(800)-4-FEDAID.

Parent Loans for Undergraduate Students (PLUS)

Apply for Parent Loans for Undergraduate Students known as a Federal PLUS Loan. For PLUS loans first disbursed on or after July 1, 1993, the annual loan limit is your child's cost of education minus any estimated financial aid received for the period of enrollment covered by the loan.  PLUS loans are make by financial institutions through the Federal Family Education Loan (FFEL) Program and directly  through the school's financial aid office via the Federal Direct Loan Program.  You do not have to prove financial need but you do have to have a good credit history.    Payments must begin 60 days after the last loan disbursement.  PLUS loans are eligible for deferment of principal payment only.  The interest rate charged on the PLUS loan is a variable rate based on the average rate of the one-year Treasury Bill over a 52 week period ending prior to June plus 3.10%.  The maximum rate that can be charged is 9%.  There is also a fee of up to 4% of the loan, deducted proportionately each time a loan payment is made.

Consolidation Loans

Consolidation loans allow a borrower to combine different types of federal student loans to simplify repayment.  (A borrower with just one loan can also choose to consolidate it.)  Both the Direct Loan Program and the FFEL Program offer consolidation loans.  

A Direct Consolidation Loan is designed to help student and parent borrowers simplify loan repayment.  Even though you might have several different students loans, you'll make only one payment a month for all the loans you consolidate.  You can even consolidate just one loan into a Direct Consolidation Loan, to get benefits such as flexible repayment options.  Most federal student loans and PLUS loans (including FFEL program loans) can be consolidated.  

An FFEL Consolidation Loan is available from participating lenders, such as banks, credit unions, and savings and loan associations. Most federal student loans and FFEL PLUS loans can be consolidated.   Direct Student Loans may not be consolidated under an FFEL Consolidation Loan.  A participating lender can give you a complete listing of eligible loans, interest rates, and payment options.

If you know you are in default on a federally insured loan, call the Department of Education (800-433-3243).  Ask the counselor to refer you to the Credit Management and Debt Collection Services office handling your loan.  Counselors can provide you with copies of your loan agreements and payment records and help you set up a payment schedule.  They can also help you deal with collection agencies and help clear your credit report.  

If you have a campus-based loan (as opposed to a federal loan) you may be able to avoid repayment if you accept a community service type job either before you start college or after you graduate. 

If you have exhausted other sources of funding and the pay-as-you-go  method is insufficient, consider taking out a deductible Home Equity Loan.

Other Strategies

If your child is having difficulty entering the college or university of his choice, consider encouraging him or her make application during a spring or summer term when the student population is typically lower.  

To reduce the cost of college education, consider having your child complete general education requirements at a local college or junior college.  Upon completion of the general education requirements, your child can then make application at the college or university of his or her choice and complete the undergraduate and/or graduate studies.

For more information on financial aid programs purchase the College Cost Book, published by the College Entrance Examination Board.  In addition, obtain a copy of The Student Guide published by the U.S. Department of Education.  This guide provides useful information on grants, loans, and work study programs.  To request The Student Guide call 800-4FEDAID. 

To defray the cost of room and board consider purchasing a rental property where your child attends school.  In addition, you can hire your child to manage the property.  You may also claim the costs of travel expenses to inspect the property.  You may claim depreciation and other expenses on that portion of the property for which you charge a fair market rental amount.

You can withdraw money from your IRA to pay for college education. The withdrawal will be subject to ordinary income tax.  If  you are under age 59½, you can avoid the 10% early withdrawal penalty if the withdrawal is used for qualified higher education expenses for either you, your spouse,  your child or grandchild.  Qualified education expenses are to be reduced by any tax-free scholarships, educational assistance allowances, or any other tax-free payments received during the year.  IRC 72(t)(2)(E) and IRC 72(t)(7)

If you or another family member routinely make gifts to your children as part of a strategy to reduce future estate taxes, consider making gifts in excess of  the annual $10,000 gift exclusion where the gift is used for college tuition and it is paid directly to the college by the donor.  IRC 2503(e)

Shop the best buys in college education by reading Barron's 300: Best Buys in College Education.


Your ability to borrow money is a critical factor to your financial flexibility and success.  Consider the following ideas in establishing credit and borrowing money:

Establishing And Maintaining Good Credit

Establish a long-term relationship with a bank to facilitate borrowing.

Provide your banker with a copy of your financial statements annually.

Establish good credit by obtaining and repaying short-term bank loans on a timely basis.

Good credit is established by:

A long employment history with the same employer

Home ownership or several years of renting at the same location

A good payment history on charge accounts

The size of your bank and savings accounts at the institution where you are borrowing

Once you have established a good credit relationship with a bank, think twice about shifting your business to another bank in exchange for a small reduction in interest rates.  Good credit relationships are built over a period of years.

Review your Credit Bureau files annually and correct or dispute any discrepancies or errors.  You can request a free credit report if you are ever turned down for a loan because of information in the credit report.  In addition, you can request a free report once a year from EXPERIAN  (800-682-7654), or request one any time from Equifax (800-685-1111) for $8.00.

Improve poor credit ratings by obtaining a collateralized Master Card or Visa.  The card can be collateralized by a savings account.

Determine the percentage of your monthly income that is spent to make debt payments.  Your debt payments should not exceed 35 percent of your monthly gross income.

Retirement Plan Loans

Consider borrowing from your company's Profit Sharing, Stock Bonus, Pension, 401(k) or 403(b) plan.  IRC 72(p)(2)

The maximum loan cannot exceed the (1) lesser of $50,000 or one-half of your vested accrued benefit and (2) the greater of $10,000 or one-half of your vested accrued benefit.  For example, if your vested accrued benefit is $80,000, the maximum you can borrow is $40,000. If your vested accrued benefit is $15,000, you can borrow a maximum of $10,000.  IRC 72 (p)(2)   Your particular plan provisions may be more restrictive.

If your spouse is the beneficiary of your plan benefits, he or she must consent to the loan.  IRC 417(a)(4)

The loan must be repaid in five years unless the loan was used for the purchase of your home.  If you default on payments, the unpaid balance may be treated as a taxable distribution. Plan loans are repayable if you change jobs, quit, retire or get fired.  If you are unable to make full repayment the remaining balance is taxable income to you and would also be subject to the IRS ten percent early withdrawal penalty if you are under age 59½ at the time.  If you plan on changing jobs during the repayment period, be sure you have other funds available to make complete repayment.  IRC 72(p)(2)(B)

If you are a shareholder-employee of an S corporation or an owner-employer you cannot borrow from your retirement plan.  A shareholder-employee is a person who owns more than 5% of the outstanding stock of the corporation.   In calculating whether the shareholder-employee owns more than 5% of the outstanding stock, the shareholder-employee must include the stock of his spouse, children, parents, and grandparents. Owner-employees must also include the ownership interest of brothers and sisters, and ancestors and descendents. IRC 4975(d). IRC 318(a)(1). IRC 401(c)(3) and IRC 267(c)(4)

If you are considered a key employee, borrow the money from a bank rather than your pension plan.  Key employees cannot deduct the interest paid on money borrowed from a pension plan regardless of the use of the funds.  IRC 72 (p)(3)

Interest you pay on loans against money you have contributed to your 401(k) or 403(b) plan will be credited to your account but will not be deductible.  However, an IRS letter ruling allowed deductibility of interest where the loan was secured by the principal resident of the borrower and not the 401(k) account.  IRC 72(p)(3)

Consider borrowing from your Self-employed Pension or Profit Sharing  retirement plan.

If you are an owner-employee, the loan would be considered a prohibited transaction and would be subject to an excise and income tax.  In addition, the transaction may completely disqualify the plan. Consequently, you should consider an alternative source of borrowing. 

Non-owner employees may borrow from the plan subject to certain restrictions.

For short term cash needs, consider the withdrawal of money from your IRA and then redeposit it within 60 days.  If you fail to redeposit (roll over) the money within 60 days, the withdrawal will be subject to income tax. In addition, the withdrawal will be subject to a 10 percent early withdrawal penalty if you are under age 59½.

Hardship Withdrawals From Retirement Plans

If your 401(k) or 403(b) plan does not permit borrowing, you may be able to withdraw your account balance if the money is needed for the following hardships: (1) deductible medical expenses, (2) purchase of a home, (3) payment of tuition for the next semester of post secondary education for you, your spouse, children, or dependent, (4) to prevent being evicted from your home, and (5) to avoid foreclosure on your home. 

The money withdrawn will be subject to income tax. If you are under age 59½, it will also be subject to a 10 percent early withdrawal penalty unless the funds were used to pay for (or reimburse) the cost of deductible medical expenses.  

You can  withdraw money you have contributed to your account but not the money your employer has contributed or any income your account has earned.



Mortgages and Home Equity Loans 

  • It is generally wise to opt for a 30-year home mortgage in order to have maximum payment flexibility.  If you believe the nation will continue to experience moderate inflation and your annual income will rise as a result of it, then the 30-year loan will allow you to pay a fixed debt with inflated dollars.
  • Consider reducing both the amount of interest you pay over the life of a home mortgage and the time it takes to pay off the mortgage by employing the following payment strategies:
  1. Consider obtaining a 30 year mortgage and then implementing a double-pay plan by making your regular payment plus the scheduled principal payment for the next month at the same time.  Using this strategy will allow you to pay off a 30 year mortgage in 15 years and almost cut in half the total interest over the life of the loan.  The monthly payments will gradually increase over time because more principal is scheduled to be paid as the loan ages.   The payments will start out lower than the payments on a 15 year loan, however, generally after about five years the payments will be larger.
  2. Consider reducing the amount of interest you pay over the life of your mortgage by making additional principal payments whenever possible.
  3. Sharon obtains a $100,000, 10 percent, 30 year loan.  The required monthly payment is $877.57.  Sharon decides to add $100 to each monthly payment.  As a result, Sharon is able to pay off the mortgage in approximately 19 years and 3 months.  She also saves over $90,000 in interest payments.
  4. Consider reducing the term of your mortgage and the lifetime interest paid by arranging to pay one-half of your mortgage every two week.  Because you will be paying your mortgage every 14 days, an additional payment will be collected each year.  The result is that the loan is paid off faster.
  5. Alex obtains a $100,000, 10 percent, 30 year mortgage.  The monthly payment is $877.57.  Alex arranges to pay one-half of the mortgage payment or $438.79 every 14 days.  As a result, he pays the mortgage off in approximately 21 years and saves approximately $77,000 in interest payments
  6. Consider a 15 year mortgage if the interest rate is lower than a comparable 30 year mortgage.  With a straight 15 year mortgage you will pay less interest over the life of the loan than with other prepayment strategies that cut the loan term to 15 years.  However, with a 15 year mortgage your monthly payments are higher and you lose the payment flexibility you have with a 30 year mortgage.

When choosing between a higher interest rate loan with no points and a lower interest rate loan with one or more points, equate one point with an additional 1/4 percent of interest and determine which loan has the lower rate.  For example, a 7% loan with two points would be equivalent to a 7½ percent loan with no points.  The lender is required to tell you the annual percentage rate (APR) which factors in the points over the life of the loan.  Because most home owners sell their homes before the loan is fully paid, the APR is usually higher than the rate the lender shows you.

Consider refinancing your existing mortgage if current fixed interest rates are two percentage points less than your existing rate.

The aim of refinancing is to reduce your monthly payment and save on interest paid.  The difference between your old house payment and your new house payment should enable you to recover the closing costs within three years. If it will take longer to recover, think twice about refinancing unless you are certain you will remain in the house beyond this period.  Closing costs consist of points, appraisals, title policies, and credit reports.  To determine the number of months it will take you to recoup the costs of refinancing, divide the costs by the monthly amount you would save by refinancing.

Consider the following types of loans for the purchase of real estate:

  • Fixed Rate Mortgage

This type of mortgage has a fixed monthly payment and a fixed interest rate. It is generally payable over 15 to 30 years, although payments can be accelerated.

  • Adjustable Rate Mortgage

With this type of mortgage the interest rate can change annually based on changes in an interest index. As a result, your payments can fluctuate annually.  The first year's payment is almost always lower than a fixed rate mortgage which may enable you to qualify for a larger loan.  Interest rates should have a cap of no more than two points annually and five points over the lifetime.  Annually verify that the new adjusted payment has been recalculated correctly or hire a service to do it for you.  Recent surveys have shown that about 30% of Adjustable Rate Mortgages are recalculated incorrectly.  For a professional service that recalculates the rate for you, consider calling Consumer Loan Advisors (262-367-4400) or Mortgage Monitor, Inc. (800-AUDIT-USA).

  • Graduated Payment Mortgage

With this type of mortgage the initial payments start out low, then gradually increase over a period of five to ten years at which point they remain fixed.  This type of loan may be suitable if you expect your income to rise annually.

  • Balloon Mortgage

With this type of mortgage the monthly payments are usually computed as if the loan were being paid over a 10 to 30 year period.  However, the balance of a Balloon Mortgage is required to be paid off in a lump-sum at the end of a shorter period, usually 5 to 15 years.  Payments may be for interest only

  • Shared Equity Mortgage




With this type of mortgage the monthly payments and interest rates are lower in exchange for a portion of the equity resulting from appreciation at the time of a future sale or at the end of a period of years. This arrangement enables you to purchase a home that you would not have otherwise been able to qualify for. Under a shared equity arrangement you share with an investor your right to a portion of the future appreciation in the value of the house.  The investor may provide a portion or all of the down payment, and you make the monthly payments.  At the end of a term of years the house is sold or refinanced.  Generally the appreciation in value is split 50/50.  Several variations to the arrangement can be structured to allow you to afford to purchase a house that otherwise would have been impossible for you to buy.

  • Fixed Rate Mortgage

This type of mortgage has a fixed monthly payment and a fixed interest rate. It is generally payable over 15 to 30 years, although payments can be accelerated.

  • Fixed Rate Mortgage

This type of mortgage has a fixed monthly payment and a fixed interest rate. It is generally payable over 15 to 30 years, although payments can be accelerated.

  • Fixed Rate Mortgage

This type of mortgage has a fixed monthly payment and a fixed interest rate. It is generally payable over 15 to 30 years, although payments can be accelerated.  

  •  Real Estate Contract / Deed of Trust

The contract or deed of trust is carried by the seller of the real estate.  The interest rate may be below the prevailing rates and a balloon payment may be due.

If you fail to make your payments, foreclosure proceedings are much swifter than with a conventional mortgage.

  • Assumable Mortgage

With this type of mortgage the payments can be assumed from the previous owner.  Interest rates are generally lower than prevailing rates.  You may not have to qualify for the loan.

  • Buy Down Mortgage    

With this type of mortgage the builder or developer makes a payment to the lender in order to obtain a loan for a prospective buyer. The loan initially has lower payments. However, at the end of three to five years the payments increase.  Qualifying is generally easier due to the lower initial payments.  Typically, builders pass the cost of the buy down to you via a higher purchase price for the real estate.

  • Wrap-Around Mortgage

With this type of mortgage the seller retains his original low interest rate mortgage and you make payments on a new mortgage payable to the seller.  The new mortgage is generally at a higher interest rate.  The seller uses a portion of your monthly payment on the new loan to pay the lender on the old loan.  The difference is pocketed by the seller as profit.

  • Growing Equity Mortgage

The Growing Equity Mortgage carries a favorable below-market fixed rate but has variable payments.  The loan is generally a 30-year loan that is paid off in half the time because payments increase with inflation.  Payments generally increase at 50 to 75 percent of the annual inflation rate as measured by some cost of living index such as the U.S. Department of Commerce Index. The increase in the payment is used entirely to reduce the principal balance.

  • PALM Mortgage

A Price Level Adjusted Mortgage or PALM is a mortgage with a principal balance that fluctuates with changes in the inflation rate.  In general the PALM payments are designed to be constant in purchasing power and, as such, the payment reflects the original amount borrowed, a stated interest rate, and inflation over the term of the loan.  The initial loan terms are usually very advantageous to the borrower but over time the payments increase to reflect increases in inflation.  Reg 1.1275-6T, Reg 1.163-11T(d)

  • Employer Provided Mortgage

Request an interest-free or low interest rate mortgage loan from your employer where the loan is secured by a mortgage on your new main home.  The new home must be purchased in connection with your move to your new place of work.  Reg 1.7872-5(C)

  • Employer-Provided Bridge Loan

Request an interest-free or a low interest rate bridge loan from your employer.  A bridge loan is temporary loan to allow you to purchase a new home while you are waiting to sell your old home.  The loan must be secured by a mortgage on your new main home that you purchase in connection with a move to your new place of work.  Reg 1.7872-5(C)       

  • Rent with the Option to Buy

Under this arrangement you sign a lease allowing you to rent the home and you agree to pay a premium for an option to purchase the house within a specified period of time at a prearranged fixed price.  Under some arrangements a portion of the rent you pay can be applied to the purchase price.  Renting with an option to buy allows you to lock in the purchase price and to buy time to accumulate sufficient cash for the down payment.  If interest rates are high at the time you enter into the arrangement, the option period will also allow you to wait and see if rates will drop to a more favorable level before you decide to purchase.

To qualify for a home mortgage, your mortgage payments, which consist of principal, interest, homeowners insurance and property taxes (PITI), generally are not allowed to exceed 28% of your total income.  In addition, your total monthly debt payments (home, car, credit cards etc.) generally are not allowed to exceed 36% of your total income.  Veterans Administration and Federal Housing Administration loans have more liberal ratios.  If your PITI and/or total debt payment ratios exceed the 28% and 36% limits, consider the following ideas:

Increase your total income by including overtime, bonuses, part-time business income, and all investment income.

Pay off your credit cards and other consumer debt before you submit your loan application.

Reduce the mortgage payment by obtaining a lower interest rate. You can obtain a lower rate by paying one or more points in exchange for the lower interest rate.  You can pay the points yourself or you can ask the seller of the house (unless you are refinancing the loan) to pay the points.  Another way to get a lower initial interest rate is to apply for an adjustable rate mortgage.

If the above strategies are not helpful, ask the lender to allow you to exceed the PITI and/or the total debt payment ratio by a few percentage points because of your good credit history, your employment stability and history of consistent wage increases.

If you are a first time home buyer, consider one of several federal and state programs that only require you to come up with a down payment of 5% of the price of the home.  For example, the Fannie Mae Community Home Buyer Program requires only a 5% down payment, and 40% of that can be a gift from a family member.  To qualify, your income cannot exceed 115% of the average income earned by residents of your community.  State sponsored programs are often more liberal and have lower interest rates. 

When shopping for a home mortgage, always compare the annual percentage rate (APR).  Call at least five lenders and select the one with the lowest APR and the best terms.

When shopping for consumer loans at financial institutions, always shop for the lowest annual percentage rate (APR) and not the lowest monthly payment.

To avoid the payment of mortgage insurance consider financing no more than 80% of the purchase price or appraised value of your home.

Deciding Whether To Pay Cash or Finance a Home

Frequently, retired homeowners and others with adequate resources are faced with the enviable opportunity to pay cash for a new home. The decision to finance the purchase is frequently based on an erroneous assumption that the payment of interest will produce an overall economic benefit. 

Consider paying cash if your estimated interest deduction, along with other Form 1040 Schedule A deductions, do not exceed the Standard Deduction.

If you think you might need a large sum of cash for any reason, consider financing the house and obtain a Home Equity Line of Credit at the time of purchase.  Interest is not charged until you borrow against the credit line when an emergency or other critical need arises.  You can pay off the loan as quickly as you wish and borrow again when you desire.

If you pay tax on your Social Security benefits because your income is over $25,000 if you are single, or $32,000 if you are married, consider paying cash for your home in order to reduce your investment income.

Real Estate & Home Loans 

15-Year vs. 30-Year Mortgage 

Two 35-year-old men buy a home and take a mortgage. Both get prices for a 15-year and 30-year mortgage. One takes a 15-year mortgage. Then, when the home is paid off, he puts the amount of the mortgage payment into a retirement account each month. The other decides to make the same total payment as the 15 year mortgage, putting the cost savings each month into a retirement account. 

At age 65, one has $1.17 million in his retirement account and the other has $791,000. Which one is the millionaire? 

It's the person with the 30 year mortgage!! 

How can that be? The interest rate for a 15-year mortgage is lower than for a 30-year mortgage, and the loan is paid off in half the time. This saves the homeowner thousands of dollars in interest over the life of the mortgage. 

These savings have made the 15-year mortgage increasingly popular, especially among higher-income homeowners. And as it turns out, they are the people who can realize the greatest benefit from an alternate strategy. 

"Individuals should not attempt to analyze mortgage decisions in isolation from their overall personal financial plan," Decisions should be made within context of plans for, insurance needs, tax planning and so forth. 

In this example, the following assumptions were used: a mortgage of $150,000, a combined federal and state tax bracket of 33 percent, a 15-year mortgage at 7.5% and a 30-year mortgage at 8% and a 10% return on the retirement savings. 

Under the 30-year mortgage scenario, buyer immediately begins investing in his retirement plan the cost savings between the higher payments of the 15-year mortgage and the lower payments of the 30-year mortgage. 

The result is that the homeowner with the 30-year mortgage builds a retirement account worth $1.17 million. The owner paying off the mortgage in 15 years builds a retirement account worth only $791,000. 

"The benefits of 30-year mortgage are the greatest for home buyers in high tax brackets buying relatively expensive homes. Yet these are homebuyers most apt to take out 15-year mortgages. 

In summary, the 30-year strategy works best when: 

  1. The buyer has the ability to make the higher 15-year mortgage payments. 
  2. The buyer has the willpower to invest the difference. 
  3. The buyer invests in assets, such as stocks, whose returns average higher than the mortgage rate over the long term. 
  4. The buyer is in a high tax bracket. 
  5. The buyer holds the home for the long-term. 
  6. Mortgage rates are relatively low. 
  7. The spread between the 15-year and 30-year mortgage rates is relatively small. 

Homebuyers in lower tax brackets that invest conservatively wont fare as well under the 30-year mortgage scenario. They may actually benefit more from a 15-year mortgage if they can comfortably afford the higher monthly payments. 


Home Equity Loans 

Consider obtaining a Home Equity Loan (HEL) in order to pay off personal consumer borrowing.  The interest paid on the home equity loan is generally tax deductible on a loan not exceeding $100,000.  

If you are using a home equity loan to consolidate your debts and bills you could be making a mistake for the following reasons:  (1) Some of your bills may be interest-free, however, once you  obtain a HEL you start paying interest; (2) You lose the ability to choose which loans or bills you are going to pay in the event you run low on cash. If things get tough you can probably negotiate payments with certain creditors.  If you have a HEL and you don't make the monthly payment, you stand to lose your home or at a minimum you will be subject to sizable late payment penalties; (3) You may end up stretching out the payments on your loans and bills over several more years because the HEL generally is for a much longer term--that means you'll pay a lot more interest and you may end up paying even more than if you didn't consolidate your loans and bills; (4) There is a tendency to run up more debts after obtaining a Home Equity Consolidation Loan because you think you just paid off all your debts.  

When you are considering a Home Equity Loan, analyze the following:

  • Is the use of the loan proceeds appropriate?  
  • What are the loan terms, interest rates, and fees?
  • Will you have the ability to repay the loan?
  • Is your plan for repayment consistent with the use of the proceeds?
  • If you use the loan to consolidate your debts, will it result in a lower overall monthly payment?
  • Are you keeping accurate records to document the use of the loan and repayment for tax purposes?


Reverse Mortgages 

What is a Reverse Mortgage?  

Click here for a link to an explanation of what a Reverse Mortagage is.

Click here for a Reverse Mortgage calculator

If you are a senior homeowner, you can convert the equity in your home into a monthly income or line of credit through a reverse mortgage.  Unlike a traditional (forward) mortgage where you make monthly payments and build up equity, with a reverse mortgage you convert your home equity into monthly income payable to you.  The beauty of a reverse mortgage is that repayment is not required until you die, sell the home, or permanently move away.    When you move out of your home, the amount of money you received plus accrued interest will be due.  Generally, the reverse mortgage is paid off by selling the home.   If the cash from selling the home is less than the loan balance, you or your estate can not be held responsible for the difference.  If the home sells for more than the mortgage balance, you or your heirs can pocket the difference 

How Much Can I Get? 

The payments you receive are based on the amount of the home equity you can borrow.  The amount you can borrow can range from 30% to 80% of the appraised value of your home depending on your age and the current interest to be charged on the loan. The older you are, the more you can borrow.  The amount of equity you can borrow also depends on the home equity conversion program you select.  The amount of cash you can receive and the expenses associated with the mortgage can vary among lenders.

Marge, a 75 year old homeowner whose home is appraised at $100,000, secures an 8% reverse mortgage. Based on her age, the interest rate, and the appraised value of her home, she is eligible to borrow $53,700.  

Federally Insured Reverse Mortgages

The two principal sources of  reverse mortgage money comes from financial institutions who make loans insured by the FHA or Fannie Mae.  The FHA program is known as the “Home Equity Conversion Mortgage” (HECM) and the Fannie Mae program is known as the “Home Keeper Mortgage”.

To compute the maximum appraised value that can be considered for determining the FHA Home Equity Conversion Mortgage is $219,849.  The maximum appraised value for the Fannie Mae Home Keeper Mortgage is $252,700.  These amounts may be lower depending on the cost of housing in the county in which you live.   With the HECM program, the loan limit can be increased monthly to take into consideration the effects of inflation. 

You must be at least age 62 and own a home that is completely paid off or close to being paid off.  If you still owe on your mortgage, the balance will have to be paid off with some of the cash you get from the reverse mortgage.

The costs of obtaining a reverse mortgage can be 10% to 20% of the amount of the mortgage and sometimes more.  The costs include the following items:  Interest, appraisal, title insurance, origination fees, surveys, servicing fees, mortgage insurance, and other closing costs. Before you secure the loan, you are required to receive independent counseling on the benefits and pitfalls of reverse mortgages.  As a part of the process, be sure you understand all of the costs associated with the mortgage and determine how much equity you will have remaining at the end of the loan.

Payment Options 

Once you qualify for a reverse mortgage, you can receive cash payments in one of six ways.

Tenure:  You receive equal monthly payments as long as you occupy your home.

Term: You receive equal monthly payments for a fixed number of years that you select.

Line of Credit: You receive a payment for any amount within the loan limit whenever you need it.

Modified Term or Tenure: You receive a line of credit for extraordinary needs and you also receive a fixed monthly payment.

Lump-sum Payment: You receive the maximum amount available in one lump-sum at the time of closing.

Combination Option: You receive a combination of a partial lump-sum, monthly payments, and a line of credit.

Line of Credit Options 

With the HECM “line of credit” option you can select a “fixed” line of credit or a “growing” line of credit.   With a fixed line of credit, the amount of the available cash is fixed at the time you sign the loan documents.  As you draw out money, your credit line decreases permanently.  With a growing line of credit, the remaining amount of cash available may increase by a given rate.  The rate is variable and may increase or decrease over time.    

Example:  Joan qualifies for a $100,000 HECM.  She selects the “line of credit” option and draws out $40,000 at closing.  The comparison of a fixed and growing credit line are shown below: 

                                          Fixed                 Growing  @ 7%  
Line of Credit                    $100,000           $100,000 
Initial Draw                        $40,000             $40,000 
Remaining Balance          $60,000             $60,000  
Balance 5 Years Later      $60,000             $84,153 


Shared Equity Option 

The Fannie Mae Home Keeper Mortgage has a shared equity feature that allows you to borrow more money in exchange for 10% of the equity in the home when the loan is paid off.   This arrangement should only be considered if the additional sum is absolutely required and if you plan on living in the home for several more years.  

Harvey, age 75, secures a Fannie Mae Home Keeper Mortgage on his home worth $150,000.  He agrees to share 10 of the equity in the home when the loan is paid off.  Under this arrangement he is able to borrow $72,369.  Had Harvey not agreed to the shared equity arrangement, the loan would have been limited to $53,635 

Home Equity Conversion Mortgage Vs. Home Keeper Mortgage Example:

Marge, age 75, owns a home free and clear valued at $100,000.  The benefits she could receive under the HECM and Home Keeper programs are shown below: 

                                                      HECM           Home Keeper 
Lump-sum amount                        $53,694         $50,137 
Line of Credit amount                    $53,694         $50,137  
Growing Line: Growth Rate           7%                 NA 
Unused line of credit in 5 years     $75,309         $50,137 
Unused line of credit in 10 years   $105,624       $50,137 
Monthly payment                           $383              $447 


Before you consider a reverse mortgage and incur the heavy costs of securing the loan, consider other avenues of generating cash for your retirement needs.  These avenue consist of (1) an outright sale of your home, (2) a sale-leaseback of your home, (3) renting a portion of your home, and (4) obtaining financial support from family members who will eventually inherit your home.  Obtaining a reverse mortgage should generally be the last option you consider.

Under a sale-leaseback arrangement, you sell your home to an investor who leases it back to you for your life or until you move.  The transaction can be structured so that you receive a down payment and monthly payments from the buyer that are greater than your monthly lease.  In addition, you will be relieved of the payment of property taxes, insurance, and maintenance.  The lease should contain a provision that places a ceiling on the maximum amount of rent that can be charged over the term of the lease.

Joan, age 70, owns a home worth $200,000.  She sells the home to Bob at a 25 percent discount to take into consideration her lifetime right to lease the home.  Marge receives a 10 percent down payment of $15,000 and monthly payments of $1,451 based on a term of 15 years and 10 percent interest rate.  Marge pays rent of $751.  The rent is taken out of the monthly payments leaving her with $700 a month.  The lease has a cap of 3 percent on the annual rent increase.

As a reverse mortgage borrower, you will continue to own your home.  Consequently,  you will be responsible for the payment of taxes, insurance, and upkeep.  Failure to be responsible for these items may cause the loan to be in default.

The cost of applying for a reverse mortgage should be less than $500.  Application costs  consist of the appraisal and a credit report.   

Before you enter into a reverse mortgage, be sure to compare the costs of different reverse mortgage lenders.  The costs can vary significantly.  Especially compare “origination” and “servicing” fees.  Ask the lender to show and explain to you the “TALC” rates.   TALC rates are the “Total Annual Loan Costs” that lenders are required to disclose under the federal Truth-in-Lending law.  TALC rates are not to be confused with “Annual Percentage Rates (APR)” disclosed in connection with “forward” or regular mortgages.  TALC rates reflect the total annual average cost of obtaining the loan.  This rate will generally decrease the longer the reverse mortgage is outstanding.  

The money you receive from your reverse mortgage is not considered taxable income. It is not counted as income when determining whether or not your Social Security is taxable.  However, if you are receiving SSI or welfare benefits, you should determine whether or not the reverse mortgage payments could effect your eligibility.   

Interest that accrues on the reverse mortgage is not deductible as mortgage interest until it is paid.

Call 800-245-2691 to find out if a HUD/FHA sponsored reverse mortgage is offered in your community.  For a free booklet on reverse mortgages write to:  Home Made Money, AARP Home Equity Conversion Service, 1909 K. ST. NW., Washington D.C. 20049.   

To find out which financial institutions in your community make Fannie Mae reverse mortgages call Fannie Mae at 800-732-6643.  Request their free booklet "Money From Home".

For information on the internet about reverse mortgages, point you browser to: www.reversemortgage.org/about/reversemortgagecalculator.aspx 

The AARP foundation has printed and audiovisual materials on reverse mortgages.  To order these materials at little or no cost, call Hud User at 202-434-6042.

To locate free or low-cost reverse mortgage counseling from an agency in your area, call the Housing Counseling Clearinghouse at 1-888-466-3487 (9 a.m. to 5 p.m. EDT) 

To order a current list of “preferred counselors” and lenders from the nonprofit National Center for Home Equity Conversion, send $1 in a self-addressed stamped business size envelope to NCHEC, 7373 147th Street West #115, Apple Valley, MN 55124.
























Credit Card Planning 

Obtain up to eight weeks of free credit on your credit cards as a result of buying just after the billing date and paying in full before the due date.

Tom makes occasional large purchases with his Visa credit card. The billing date is the first of each month.  Interest begins to accrue on the due date which may be as long as 28 days after the billing date.  Tom purchases a new stereo system for $1,000 on June 2.  It shows up on his July 1 statement and is not due until July 28.  By making his purchase the day after the billing date and making full payment by the due date, Tom receives a eight-week interest free loan. 

  • If you maintain a balance owed on your card search for a bank that offers a low interest rate but no grace period.  On the other hand, if you generally pay off your card monthly or occasionally have a small balance, go for the lowest rate card with a grace period.
  • If you make a lot of purchases with your credit card consider obtaining a bonus card that pays you a cash bonus based on your level of spending.   The rebate is based on spending levels and not outstanding balance.
  • To minimize fees and interest paid, consider carrying no more that three credit cards as follows:  (1) a no-annual-fee card having a grace period to allow you to make monthly purchases and full payment within the grace period without incurring a finance charge, (2) a low interest rate and no annual fee card for purchases you intend to finance for several months, and (3) a low rate card for business purchases only.  Interest paid on business borrowing is generally fully deductible.  Shop the lowest rates, fees, and length of grace period by referring to Bank Credit Card Interest Rates published the first week of each month in the Wall Street Journal.  You can also order Card Track, a report that lists the lowest interest rate and lowest annual fee cards for the month.  (Ram Research, Box 1700, Frederick, MD 21702)  The cost is $5.  Money Magazine also publishes a monthly column showing the best credit card deals for people who carry balances and for people who pay their card in full every month.

If you already have a card that imposes an annual fee, ask the company to waive it if you have been a good customer, you use the card frequently, and you pay on time.

  • Keep track of credit card purchases by deducting the charges from the balance in your check book register.  Pay the charges off by the due date.


Getting Out Of Debt 

Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt snowball. 

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior.You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction. 

Debt Snowball Plan
The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted. First accumulate $1,000 cash as an emergency fund. Then begin intensely getting rid of all debt (except the house) using my debt snowball plan. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan.

Build Momentum
Redo this each time you pay off a debt, so you can see how close you are getting to freedom. Keep the old papers to wallpaper the bathroom in your new debt-free house. The New Payment is found by adding all the payments on the debts listed above that item to the payment you are working on, so you have compounding payments which will get you out of debt very quickly. Payments Remaining is the number of payments remaining when you get down the snowball to that item. Cumulative Payments is the total payments needed, including the snowball, to pay off that item. In other words, this is your running total for Payments Remaining.

Debt Free!
You attack the smallest debt first, still maintaining minimum payments on everything else. Do what is necessary to focus your attention. Keep stepping up to the next larger bill. 

  • In repaying your debts, prioritize those debts that should be paid off first.  Consider paying off those debts with higher payments and interest rates first.  In making this determination, be sure to consider whether the interest is tax-deductible. Tax-deductible interest lowers the effective rate of interest.
  • If you are overloaded with debt, ask your creditors to renegotiate the terms of the loan by reducing the interest rate, the payment amount, or extending the loan term.




  • Be sure your loans do not have a prepayment penalty for early payoff.
  • Pay off high interest rate debt or replace it with a lower interest rate loan.

Surviving a Financial Crisis 

Excess debt, unanticipated expenses, unemployment, divorce, disability, death of a breadwinner or a legal judgment can create a financial crisis.  When faced with this trial consider the following strategies:

  • If your monthly debt payments are more than you can live with, seek the help of a local Consumer Credit Counseling center.  This nonprofit organization can help you budget your loan payments and negotiate reduced payments to your creditors.  Call the National Foundation for Consumer Credit at (800) 388-2227 to locate a center in your area. The typical charge for the service is $10 a month.
  • Prioritize the assets you can sell.  Get rid of assets that you don't want or don't use frequently.  Sell depreciated investments first and use up to $3,000 of losses a year to offset other sources of income.  Sell appreciated assets next but be prepared to pay tax on the gain to the extent the gains exceed your losses.
  • Employ the drastic money saving strategies in the section Investments: How To Be a Saver.  In addition, consider working a second job and working weekends.
  • Raise cash by borrowing from your company retirement plans and life insurance policies.
  • Turn off automatic payroll contributions to 401(k) plans, savings and stock purchase plans, and charitable organizations.
  • Suspend savings programs for college education and consider invading the funds if necessary.  If college is fast approaching, your reduced income and reduced asset base will enable you to qualify more easily for college financial aid.  If college is far off you'll probably have time to accumulate the funds with a little more effort.
  • Sell your home as a last resort.  The cost of finding a suitable replacement could exceed what you are paying now.  However, if your house is larger than what you need, consider selling it.  
  • If you are having trouble making your monthly house payments, contact the holder of your mortgage immediately and explain your financial problems.  Your lender may agree to partial payments, rewrite the loan to achieve lower payments, or even agree to a period of non-payment.
  • Avoid bankruptcy if possible.  Generally your credit will be shot for ten years which may hamper your ability to get a job or rent an apartment.  IRS obligations and student loans will not be discharged and child support payments will still be required.
  • If you are forced to consider bankruptcy there are four methods that may provide you relief from your creditors: (1) Chapter 7 or straight bankruptcy, (2) Chapter 11: Business reorganization proceedings for individuals and other entities, (3) Chapter 12: Financial reorganization for the family farmer, and (4) Chapter 13: An alternative to Chapter 7 that gives individuals a chance to work with his or her creditors.
  • If you opt for Chapter 7 or 11 be sure to file a tax return for the bankruptcy estate and to elect a taxable year that will minimize your taxes.  Publication 908


Business Restructuring 

Restructuring your business — reorganizing your employees, products and financials

  1. Is in financial or legal distress.
  2. Wants to re-focus its core business holdings.
  3. Needs to adapt to rapid growth and organizational change. 


Action Steps

  • Evaluate your problems - Analyze your situation to determine if your problems have solutions. Are your company's ailments a symptom of its organization, or are they a sign that your business simply isn't viable? Restructuring can save a salvageable business, but it can't help a failed idea succeed.
  • Develop a plan - Create a restructuring plan with which to grow your business and consolidate it. Share the plan with your managers, staff and important third parties, including your creditors and vendors.
  • Realign your team - Restructuring should include reorganization of your employees. Start at the top with an evaluation of your management team and work your way down the company totem pole. Replace weak members of your team and eliminate extraneous positions.
  • Restructure your debts - Use the restructuring process to put your finances in order. Take out new loans, if necessary, to fund restructuring, but work with your accountant to make sure your fiscal plans are sound. 

Tips & Tactics 

  • Lower costs by building intimate relationships with a small number of vendors. Keep them abreast of your company's changes and work with them to maintain affordable service as you move forward with reorganization.
  • Restructuring can be as simple as moving things around; be willing to shift financial and personnel resources from less profitable projects to those that make you the most money.
  • As you restructure, maintain high customer service standards by answering clients' questions promptly and honestly. Instead of hiding changes from your customers, use restructuring as a means for communicating with them.
  • Consider strategic restructuring, whereby you'll partner with another business - via a merger or joint venture, for instance - in order to save yours.
  • A restructured company needs entirely new policies and procedures. Wipe your slate clean and meet with remaining employees often to present company goals and get input on company culture.

The economy today is not stabilized. Even big companies have to confront the ups and downs that come their way. But the only thing that keeps them going is survival. They have to survive in the market and progress swiftly or gradually. One strategy to advancement is that of mergers between companies. There are numerous mergers that take place locally but they do not have a great effect on the market especially the consumers. But the mergers that take place at the national or international level have a profound impact on the economies of the concerned countries. 

There are different reasons behind a merger of two or more companies. But first of all there exist diverse types of mergers. 

a) Horizontal Mergers - two competing companies conjoin to form a single large company. The companies in horizontal mergers are selling the same product in the same market and so are contenders to each other. Such a merger can have a tremendous influence on the market from creating monopoly to escalating prices of the commodity. 

b) Commission - the market and the consumers keep a hawks eye on such mergers and at times detains the companies from merging in the interest of the people. 

  • c) The Vertical Mergers - are the mergers between a supplier and the distributor company of the supplies. This is an anti competitive merger but can be highly beneficial to the company. It is because the distributor will no more have to pay for the manufacturing of the supplies, it gets the product at the base price. So there is good cost saving due to this. Vertical merger also rules out lot of competition from the market. 

d) Market Extension Merger - between the companies selling same product but in different markets. This merger enhances the market for the two companies since they now act as one sole company. 

e) Product Extension Merger is like the one between an eminent company making motor parts and another that makes their own cars. So, the companies involved here sell different but more or less the same product in the same market. This merger promotes the sale of both the companies significantly. 

f) Conglomeration is a merger where the concerned companies have nothing in common to sell. 

There are various reasons behind merger of companies.

a) Synergy factor prompts the merger of most of the companies. The synergy in business pertains to the cost saving and revenue enhancement. The companies after merger decrease the staff keeping only the skilled labor, work with a single managing director, CEO etc. So there is good outlay saving. Moreover the economy of the sale i.e. the purchasing power of the company booms after merger. 

b) To increase the output and rule the market- many mergers are made with the intention to oust the competition and jointly rule the market. This presupposes healthy relations between the competing companies. 

c) Mergers also take place when a company is not able to perform well due to some or the other cause like the lack of required investment in the form of capital, tremendous competition etc. In such a situation this company can merge with one its parent company or any other company that has faith in the prior goodwill of the declining company and in its potential to grow and enhance. So companies also merge in order to overcome their internal inconsistencies. 

d) Many a mergers besides economically are also politically driven. 

e) Acquisitions which imply taking over of one stronger company with the other weaker one are also at times veiled by the name of merger. 

However, the directors who plan to merge their companies should actually contemplate over it, keeping in mind all the possible pros and cons. They must seek advice from neutral financial consultants who do are more inclined towards the welfare of the company and not their own. Their own benefit is also hidden in a merger since the wages of the employees increase with the advancement due to merger. So it is recommended to take advice from all those who are the well wishers of the company before taking any concrete step in this direction. 



Article I, Section 8, of the United States Constitution authorizes Congress to enact "uniform Laws on the subject of Bankruptcies." Under this grant of authority, Congress enacted the "Bankruptcy Code" in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the "Bankruptcy Rules") and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses. 

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk's offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case. 

A debtor's involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a "341 meeting" because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial "fresh start" from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

it gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.

Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. This publication describes the bankruptcy discharge in a question and answer format, discussing the timing of the discharge, the scope of the discharge (what debts are discharged and what debts are not discharged), objections to discharge, and revocation of the discharge. It also describes what a debtor can do if a creditor attempts to collect a discharged debt after the bankruptcy case is concluded. 

Six basic types of bankruptcy cases are provided for under the Bankruptcy Code, each of which is discussed in this publication. The cases are traditionally given the names of the chapters that describe them.

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset cases." A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a "means test" to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor's income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7. 

Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Chapter 12, entitled Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, provides debt relief to family farmers and fishermen with regular income. The process under chapter 12 is very similar to that of chapter 13, under which the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period, not exceeding five years. There is also a trustee in every chapter 12 case whose duties are very similar to those of a chapter 13 trustee. The chapter 12 trustee's disbursement of payments to creditors under a confirmed plan parallels the procedure under chapter 13. Chapter 12 allows a family farmer or fisherman to continue to operate the business while the plan is being carried out. 

Chapter 9, entitled Adjustment of Debts of a Municipality, provides essentially for reorganization, much like a reorganization under chapter 11. Only a "municipality" may file under chapter 9, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.

The purpose of Chapter 15, entitled Ancillary and Other Cross-Border Cases, is to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the applicability of Chapter 15 where a debtor or its property is subject to the laws of the United States and one or more foreign countries.

In addition to the basic types of bankruptcy cases, Bankruptcy Basics provides an overview of the Servicemembers' Civil Relief Act, which, among other things, provides protection to members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors. 

This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act ("SIPA"). Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage firm will find itself involved in a SIPA proceeding. The purpose of SIPA is to return to investors securities and cash left with failed brokerages. Since being established by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that every customer's property is protected, up to $500,000 per customer.

The bankruptcy process is complex and relies on legal concepts like the "automatic stay," "discharge," "exemptions," and "assume." Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman's terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code.


The New Bankruptcy Law: Changes to Chapter 7 and 13

Chapter 7 bankruptcy may be harder to file under the new bankruptcy law passed in 2005.

The changes to bankruptcy law in 2005 may be making it harder for some people to file bankruptcy. A few filers  with higher incomes will no longer be allowed to use Chapter 7 bankruptcy but will instead have to repay at least some of their debts under Chapter 13. In addition, the 2005 law requires all debtors to get credit counseling before they can file a bankruptcy case -  and additional counseling on budgeting and debt management before their debts can be wiped out.

Here are some of the most important changes in the 2005 bankruptcy law.

Restricted  Eligibility for Chapter  7 Bankruptcy

Under the old rules, most filers could choose the type of bankruptcy that seemed best for them -  and most  chose Chapter 7 bankruptcy (liquidation)  over Chapter 13 bankruptcy (repayment). The law passed in 2005  prohibits some filers with higher incomes from using Chapter  7 bankruptcy.

How High  is Your Income?

Under the rules enacted in 2005, the first step in figuring out whether you can file for Chapter 7 bankruptcy is to measure your "current monthly  income"  against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7 bankruptcy. If it is more than the median, however, you must pass "the means test" -- another requirement of the new law -- in order to file for  Chapter 7.

The Means Test

The purpose of the means test is to figure out wheter you have enough disposable income, after subtracting  certain allowed expenses and required  debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that is left over after  these calculations is below a certain  amount, you can file for Chapter 7.

If you are looking for an easy way to determine your eligibility under the means test, please call us so we can provide you the applicable income and expense standards for your state, county, and region.

Counseling Requirements

Before you can file for bankruptcy under either Chapter 7 or Chapter 13, you must complete credit counseling  with an agency approved by the United States Trustee's office.  (To find an approved agency in your area, go to the Trustee's website, www.usdoj.gov/ust,  and click "Credit  Counseling and Debtor Education".) The purpose of this counseling is to give you an idea of whether you really need to file for bankruptcy  or whether  an informal repayment plan would get you back on your economic feet.

Counseling  is required even if it is obvious that a repayment plan isn't feasible or you are facing debts that you  find unfair and don't want to pay.  You are required only to participate, not to go along with any repayment plan  the agency proposes. However, if the agency does come up with a repayment plan, you will have to submit it to the court  along with a certificate showing that you completed the counseling, before you can file for bankruptcy.

Toward the end of your bankruptcy case, you'll have to attend another counseling session, this time to learn  personal financial management. Only after you submit proof to the court that you fulfilled this requirement can you get a bankruptcy discharge wiping out your debts. 

Lawyers May  Be Harder to Find -- and More Expensive

The changes to bankruptcy law enacted in 2005 added some complicated requirements to the field of  bankruptcy. This made it more expensive  -  and time-consuming -  for lawyers to represent clients in bankruptcy cases, which means attorney fees have gone up. The 2005 law also imposed some additional requirements on lawyers, chief among them that the lawyer must personally   vouch for the accuracy of all of the information their clients provide them. This means attorneys hal.e to spend more time on  bankruptcy cases and they charge their clients accordingly.     

Some Chapter  13 Filers Will  Have to Live on Less

Under   the  old  rules,  people  who  filed  under  Chapter   13 bankruptcy  had  to devote  all of their   disposable    income   -   what they  had  left after paying   their  actual  living expenses   -   to their bankruptcy    repayment    plan.  The 2005  law added  a wrinkle  to this equation:   Although   Chapter 13  filers  still have  to hand  over all of their  disposable   income,   they  have to calculate   their   disposable    income   using  allowed  expense amounts    dictated   by the  IRS  -   not their  actual  expenses   -   if their  income   is higher  than  the median   income   in their  state.  These  allowed expense   amounts   must  be subtracted    not from  the  filer's   actual  earnings   each  month,  but  from  the  filer's  average   income   during  the  six months  before   filing.

Other Changes

Other changes were made  in 2005  that  have affected some bankruptcy  filers  negatively,  including how property is valued  (at replacement cost  instead of at auction value,  which means more debtors are at risk of  having  their  property   taken  and  sold  by the trustee)   and  how  long a filer  must  live in a state  to use  that state's  bankruptcy  exemption laws(this can  make  a big  difference in the  amount  of  property   a bankruptcy filer  gets  to hold  on to). These  changes   and  others  are  explained   in  The New Bankruptcy:  Will If Work for You? by  Stephen Elias  (Nolo).





Other Borrowing Strategies 

  • When borrowing from a bank, negotiate a lower interest rate by allowing the bank to deduct monthly payments from your checking or savings account.
  • It is generally wise to decline Credit Life and Disability Insurance in connection with your borrowing.
  • Obtain Automatic Overdraft Protection on your checking accounts to avoid charges for insufficient funds.
  • Consider borrowing the equity built up in your Whole Life and Universal Life Insurance policies.
  • If it is necessary to finance your car, keep the term of the loan to two years or less to minimize interest payments and interest rates.
  • If you need a personal loan and you have a CD at a bank for about the same amount as loan you want to take out, ask your banker to tie the loan interest rate to the rate on your CD.  Most banks will charge you just 1% above the rate you're earning on your CD.


Divorce Planning 


Negotiating The Terms Of The Divorce

  • Be sure your divorce agreement addresses the following tax issues: (1) alimony, (2) deductions for dependents, (3) property settlements, (4) child support, (5) funds in pension plans, and (6) division of taxable income if you reside in a community property state.
  • Consider the use of a professional divorce mediator to help you negotiate the terms of separation or divorce.  Engage a divorce lawyer to review the final settlement.  Many divorce lawyers are not well versed in tax matters, consequently be sure to meet with your CPA before your divorce is finalized.

When Children Are Involved

  • If you are divorced or separated, claim a $ 3,500 dependency exemption for 2008 for your child for whom you were the custodian the greater part of the year.  You must meet one of the following support requirements: (1) you provided over one-half of your child's support, or (2) your ex-spouse provided over one-half the support, or (3) both of you provided over half your child's support.
  • If you are the noncustodial parent, deduct the $3,500exemption for 2001 if your former spouse allows you to claim the child by providing you IRS form 8332.
  • If your divorce decree allows you, as the noncustodial spouse, to claim a dependency deduction for all years until the child ceases to qualify as a dependent, have your ex-spouse sign form 8332 with the following wording: For all future years.  Otherwise, you will have to ask your ex-spouse to sign form 8332 each year you wish to claim the child as your dependent.
  • If both you and your ex-spouse are in the same tax bracket and you have two children, it generally makes sense to allow each of you to claim an exemption for one child.
  • Claim medical expenses you pay for your child if the child can be claimed as a dependent by either you or your ex-spouse.
  • If you have custody of a child under age 17 for a period during the year that is longer than the custody period of your ex-spouse, claim the Child Care Credit. 
  • Consider purchasing additional life insurance if you retain custody of children.
  • Many state divorce courts assume that a financially well-off parent has a legal duty to send children to college even if the child is considered an adult at age 18 under state law. If your child has a Uniform Gift or Uniform Transfer to Minors Account (UGMA or UTMA) where full distribution is not required until age 21, to minimize your responsibility to pay for college costs, the account should accumulate income until your child starts college.  Income and principal can then be paid out of the account semester by semester, in a series of unconditional checks.  Your child should deposit the check in an account and use the funds as needed for schooling.


  • Alimony is deductible by the ex-spouse who pays it and taxable to the ex-spouse who receives it. If the alimony payments that you make decrease by more than $15,000 during the second or third year of your divorce or separation, the excess alimony  you paid in the previous years may have to be included in your current year's income.

This is applicable for divorces or separations occurring after December 31, 1986.  Exceptions to the excess alimony rule are granted in the case of death, remarriage, and fluctuating business income.

  • Your divorce or separation decree should be drafted so that alimony payments are spread more evenly over the first three years of your divorce.  IRC 71(f)


Property Settlements

When structuring a property settlement, take into consideration both the fair market value and the tax cost of the property being transferred.  For example, if one spouse receives cash of $10,000 and the other receives stock valued at $10,000 with a tax cost of $1,000, the spouse receiving stock could end up with considerably less if he or she later sold the stock.  The federal tax on the sale of $10,000 of stock held at least a year with a tax cost of $1,000 could be as high as $1,800, leaving that spouse with only $8,200 after taxes. 

Don't be duped into receiving a burned out tax shelter as a major portion of your property settlement.  Burned out tax shelters generate taxable income but don't distribute even enough cash to pay the tax. They are frequently over-valued.  In many instances the taxable proceeds from the sale of the partnership property is used to pay off partnership debts.  Consequently, you get unwanted taxable income and little or no cash.  The only winner in this situation is your ex-spouse who got the tax benefits while you were married but left you holding the bag.

If you have Series EE or I bonds registered in your name avoid transferring the bonds to your spouse.  Accrued interest up to the date of the transfer will be taxable to you. 

If for some reason you forget to include some property in your property settlement or you restructure the settlement after the divorce is final, you are allowed to sell the property in question to your ex-spouse without triggering income taxes.  The sale must be completed within one year of your divorce.  IRC 1041

Obtain a qualified domestic relations order (QDRO) from the appropriate state court that entitles you to all or a portion of your divorced spouse's nongovernmental pension benefits.  A distribution from your spouse's pension plan pursuant to a QDRO qualifies for a rollover into your IRA.  The rollover must be accomplished within 60 days of the payout.  IRC 414(p)(1)

If your spouse has a governmental pension seek to obtain your share of the account by requesting a property settlement equal to the present value of your share of the future benefits.  If the value of the retirement account is uncertain, or vesting has not occurred, or there are inadequate liquid assets to consummate a property settlement, then you should be guaranteed some percentage split when vesting occurs or when benefits commence.  In this event, you will probably have to return to court to enforce the payout.

If you were married at least one year, obtain a qualified domestic relations order (QDRO) from the appropriate state court that would treat you as the surviving spouse of your divorced spouse's nongovernment pension benefits.  IRC 414(p)(5)(B)  

Other Planning Strategies

In agreeing upon the amount of alimony and child support to be paid and the right to dependency exemptions, both your tax bracket and your ex-spouse's should be considered in order to minimize the overall tax burden.  Alimony is deductible by the payer and taxable to the recipient.  Child support is neither deductible nor taxable.  If the payer is in a high tax bracket and the recipient is in a low tax bracket, consideration should be given to increasing alimony payments and decreasing child support.  In addition, the child dependency deductions may be better utilized by the spouse in the higher bracket. However, see Tax Planning: Deductions for Personal Exemptions.

Ask the IRS to relieve you of liability for amounts owed on a joint tax return where your spouse understated the taxable income, and the income was attributable to your spouse or the deductions were claimed by your spouse without your knowledge.  IRC 6015

If you are planning to sell your home, consider selling your home while you are eligible to file a joint tax return. Provided that you and your spouse meet the ownership and use tests, you will be eligible to exclude up to $500,000 of gain. If you are divorced or you are not eligible to file a joint tax return, the maximum that you will be able to exclude is $250,000.   IRC 121(b)(2)

Contribute up to $2,000 of alimony you receive to your IRA established by your ex-spouse.  IRC 219(f)(1)

Rewrite your will when your divorce is final.

Rewrite your revocable living trust and modify provisions that relate to your ex- spouse.

Revoke any power of attorney that involves your ex-spouse.

Have your parents or other family members consider modifications to their estate plans that involve your ex-spouse.

Upon your legal separation or divorce, consider changing the beneficiary designations on all your IRA's, pension plans, insurance policies, and other documents requiring a beneficiary designation.

Change jointly owned property with rights of survivorship to tenants-in-common.

If your divorced or separated spouse works for a company with 20 or more employees which has employer-provided health insurance, you are also entitled to the coverage for 36 months following your divorce or legal separation.  However, you may have to pay the monthly premiums.  If you have children and you are a custodial parent who doesn't work, your ex-spouse can generally obtain dependent coverage under his or her employer's plan.

Notify insurance companies of the change in your marital status.

Consider purchasing or increasing disability insurance if, as a result of the divorce, you commence employment, or the level of your employment income increases.

Be sure your attorney invoices you separately for any income tax advice relating to the divorce as legal fees for divorce generally are not otherwise deductible. 

Terminate joint credit cards.  


Click here to view Divorce Law Reference Tables by state.

The Divorce Law Reference Tables provided in this area are primarily for researching state specific laws, cases, and statutes that are pertinent to issues related to divorce. Each law and reference table is designed to provide data on a state-by-state basis for easy reference and comparison. 



Business Succession Planning

Transfers Of Assets To Successor(s)  

If you plan to transfer ownership of your business, you will want to ensure the financial security of your retirement. as well as the continued well-being of the business which is the funding vehicle. It is important to have a succession plan for the following reasons: 


  •  you plan to retire but have no immediate successor.   
  • your designated successor needs more training to operate the business effectively   
  • your retirement plans have changed   
  • your designated successor lacks the financial resources required to keep the business running   

Proper planning for business succession will ensure the continuation of operations with minimal disruptions because of our tax, business valuation and business expertise. We are capable of creating an all inclusive plan for successfully passing of your business to the next owner, with minimized tax consequences. 

The Planning Process  

Planning for business succession usually begins with a preliminary evaluation. We gain an understanding of the business and determine whether the succession plan will meet the real objectives of the business & its owner(s). We will research the history & operations of the business. The engagement may consist of client and key personnel interviews, review of financial statements & tax returns. We will also review other relevant documents including trust agreements, wills, shareholder, buy-sell agreements, and partnership agreements. 

Developing A Succession Plan  

There are four basic stages involved in developing a business succession plan. We possess requisite knowledge and experience to create a plan that is both workable & economically feasible: 


  1. Fact Finding 

We collects information through interviews & the review of Company documents to understand the goals of the owner, the owner's family members, key employees, & the business itself. Specifically the following items need to be examined. 


Interviews of appropriate people and review of important materials. 

Financial statements and tax returns  
Industry data and trends  
Company's business plan 


Owner's Information 

Specific ideas about succession  
Opinions on family members  
Strategic plans  
Timetable for succession 


Family Information   

Background and potential successors  
Family agreements  
Job descriptions and compensation agreements 
Key Employee Information 

Feedback on current performance and future potential to business  
Assessment of capabilities of potential successors  


2.  Succession 

Herein, we considers a number of possibilities with regard to the individuals involved & the advantages & disadvantages of each alternative in terms of business growth. 

Some of the most common alternatives: 

A Plan For Family Succession 

The older generation strongly desires that the younger family members continue to control and operate the business. If training is needed, a CEO can be installed temporarily until the designated family member can properly manage the business. 

Sale To Key Employee(s) 

The employee(s) need to have the financial resources to acquire the business as well as the management capabilities. Any potential conflict among employees should be resolved. 

The Establishment Of An Employee Stock Option Plan(ESOP). 

Each year the company contributes a portion of its earnings to the ESOP to enable employees to buy a percentage of the Company's stock. 

The Installation Of A New Ceo. 

To retain ownership, a board of directors is created to select a CEO to run the business. This can be useful if the owner believes the value of the business will significantly increase.   

3.  Communicating Findings & Recommendations 

Thru fact findings we form the basis of recommendations for action or we may help the you reach a decision. 

4.  Implementing The Succession Plan 

We work with the CEO and/or key personnel to develop a detailed succession plan with milestone dates. We monitor the implementation schedule & act as a liaison between your client and other parties, including bankers, attorneys, investors & family members, in the follow-thru and the training per formulated plan. 

Why Choose Our Firm?  

We are CPA's, Financial Planners & our owner is a CVA, ( licensed business valuer). 

Developing a succession plan requires an analysis of various data on your operations, finances & objectives & the management capabilities of family members. Based on our broad background and expertise in multiple financial and business matters, we are particularly qualified to guide you through each stage of succession planning. 

Do to our simultaneous view of your succession needs, by one person, with multiple licenses and business expertise we can help you: 




  • Gather necessary background information on the company and conduct interviews.   
  • Clarify your goals and those of key employees.   
  • Interview and evaluate potential successors.   
  • Analyze alternative succession plans to determine their advantages and disadvantages.   
  • Develop a written succession plan and document the necessary skills to operate the business.   
  • Plan a succession training program in advance of the owner's retirement.   
  • Create a contingent plan for unexpected situations.   

By blending our expertise in business valuation, financial planning, tax & business matters with your company's goals, we can facilitate an orderly transfer of ownership & mgt. of the company, as well as minimize the amount of estate taxes due. Due to our licensed business valuation skills our firm can also help you obtain a reasonable sales price to assist you in maintaining financial independence during your retirement years. Before you make any business decisions contact Sy Schnur CPA's, CVA & Consultants Associated. 


Shield Assets From Creditors & Liability Lawsuits 

Protecting Asset from Legal Traps

Some "high-risk businesses" face additional exposure because they manufacture products that are widely used or provide services that require special expertise. Businesses may be subject to exposure for asbestos contamination, medical malpractice, product liability, or professional malpractice, to name a few. This article discusses suitability of various asset-protection techniques for certain individuals. 

As part of the planning process financial and legal advisers must gauge a client's exposure to legal liability and be familiar with planning techniques appropriate to a particular client's situation. Insurance coverage, legal protection unique to certain assets, the way property is titled, choice of the type of entity for doing business, statutes, and legal planning techniques all can be used to protect assets from creditors. Ideally, a planning technique will also serve a sound business, estate, or family planning objective. Of course, as illustrated in the following example, the best technique for a given client depends upon his or her particular situation. E.g.: Shirley Richards, M.D., age 36, is a prominent neurosurgeon who lives in a major U.S. metropolitan area. She has twoyoung children by his second marriage to Sam, age 35, and one child from a prior marriage to her ex-husband, Anthony. Shirley has a net worth in excess of $11 million. In addition to her pension plan, she has a diversified portfolio of stocks and bonds, and some undeveloped farm land in a prime location. Shirley is also a limited partner in an aggressive tax shelter that is being audited by the Internal Revenue Service. 

The upper limits on Shirley's automobile and umbrella liability insurance policies are $800,000 and 

$2 million, respectively. John's umbrella policy is coupled with his underlying automobile and homeowner's insurance and provides catastrophic liability protection for automobile and personal (non-business) liability in the event the claims limits on his underlying policies are exhausted. Her cost for medical insurance has skyrocketed in the last couple of years. Considering, her substantial net worth and high risk, Shirley should consider implementing more than one of the Asset Protection Plans found in Table A & B below.

Techniques in Table A are mainly Statutory benefits available for ordinary  & high risk business & individuals.

They describe what property (or  extent to which certain types of property) can be seized by a creditor with a legal judgment to satisfy a debt or used by a bankruptcy trustee to pay creditors. These exemptions are basic tools for fighting off creditors. (For purposes of this article, "primary creditors" shall refer to the IRS as collector of federal taxes and family creditors such as ex-spouses and children who are judgment creditors and are entitled to payments for alimony, child support and property settlement agreements. “Secondary Creditors” shall  refer to a1l other creditors. Primary creditors are given much greater legal powers to collect debts than secondary.

In contrast, the sophisticated techniques described in Table B require a substantial amount of advance planning and may involve legal agreements, the creation of new entities, or fractionalization of ownership. High-risk businesses and individuals such as Shirley's should consider which of techniques are best suited to protect her economic interests. 

When two or more individuals own an interest in the same piece of property, fractional ownership results. Fractional ownership is advantageous for a debtor because it makes the collection process more difficult. In some cases, the law protects a non-debtor's fractional interest in property that is owned, in part, by a debtor. Furthermore, a creditor typically will not want a fractional interest in property such as real estate that cannot be sold without the consent of a non- debtor co-owner. Even if debtor and non- debtor interests in the same property can be separated, the additional time and costs required to do so may persuade a creditor to settle for less, thereby discounting the original claim. In effect, fractional ownership creates special difficulties for a creditor and gives a debtor an extra layer of protection from legal claims.  

Certain types of fractional ownership may create same problems for potential debtors as they do for creditors. An owner must give up sole ownership and control over an asset, including  ability to easily sell it for cash. Once a fractional interest completed, it may be difficult or even impossible to unwind  transaction.  How well will the Table B techniques work in Shirley's case? At very least, Shirley may be able to force any secondary creditors to settle for less, thereby discounting their original claims. However, short of 'fleeing the country, it will be difficult (if not impossible) for Shirley to escape her primary creditors.


  • Purchase liability and errors and omission insurance.
  • Depending on the state where you reside, you may be able to shield assets from creditors by repositioning investments into accounts and assets that provide for your retirement and housing such as a pension plan, IRA, tax-deferred annuity or your home.
  • Place your personal assets in trust for your spouse or child. Under this arrangement you will have to divest yourself of control over those assets and income earned by them. This could cause problems in the event of divorce and could result in a gift tax liability if assets are placed in trust for the children.
  • Transfer personal assets to a domestic family limited partnership that is then transferred to a foreign jurisdiction family trust. 
  • Under this arrangement you transfer assets to a limited partnership in exchange for a one percent general partnership interest.  The general partnership interest allows you to control the management of the partnership. The other 99 percent ownership is transferred to a domestic family limited partnership or a foreign jurisdiction family trust.  The laws of many foreign countries are much more favorable in shielding assets from claims of creditors and, in most cases, bar creditors from impounding trust assets.  The cost of establishing these arrangements range from $15,000 to $25,000.  Annual offshore trust fees range from $1,000 to $2,500.  Other costs include tax preparation fees for the partnership and trust tax returns, and state transfer and recording fees.
  • Consider establishing an ancillary retirement plan trust where the foreign trustee can manage your IRA and other retirement plans if necessary.  You may need to amend your plan documents to allow for the ancillary or additional trustee.
  • If you are about to inherit property that you think will be seized by your creditors, consider disclaiming your interest in the property within 9 months of the date of death of the person passing the property to you.  Most states prevent creditors from seizing property that you have disclaimed. Be sure not to receive any income from the property or have any control over it.  IRC 2518


  • Life Insurance process - Link
  • Life Insurance Options - Link
  • Term Insurance - Link
  • Life Insurance Needs Calculator - Link
  • Evaluating the Strength of Insurance Companies - Link
  • Health Insurance - Link
  • Health Reimbursement Accounts - Link
  • Disability Needs Calculator - Link
  • Living Benefit Rider Attachment - Link
  • Simple Annuity Calculator - Link
  • Variable Annuity Calculator - Link
  • Long Term Care Story - Link
  • Family Cost of Long-Term Care Insurance - Link
  • Long-Term Care Linked Benefit - Link
  • Long-Term Care Cost Calculator - Link
  • Long-Term Care Cost by State - Link
  • Home Owners Insurance - Link
  • Automobile Insurance - Link
  • Umbrella Liability Insurance - Link




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Securities offered only through Cetera Financial Specialist, LLC (doing insurance in CA as CFGFS Insurance Agency), member FINRA/SIPC. Cetera is under separate ownership from any other named Entity.

This site is published for residents of the United States only. Registered Representatives of Cetera Financial Specialist, LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all products & services referenced on this site may be available in every state & through every representative listed. For additional information please contact Sy Schnur Financial Advisor the representative listed on this site, Visit Cetera Financial Specialists LLC site at www.ceterafinancialspecialists.com

Sy Schnur is affiliated with Cetera Financial Specialists, LLC and is a Registered Investment Advisor who offers brokerage services and receive transaction-based compensation(commissions) and is also a Investment Adviser Representative who receives fees based on assets under management. 

The income tax brackets for trusts and estates also increase in 2022 to the following: 37 percent for income greater than $13,450; 35 percent for income between $9,850 and $13,450; 24 percent for income between $2,750 and $9,850; and 10 percent income of $2,750 or less Standard Deduction vs Itemized Deductions