Tuesday, March 31, 2009

Professor Frances Miller on Estate Planning

Professor Frances Miller lectures on the basics of probate and circumventing the probate process in this video from Boston University. Please note the lecture was delivered in 2007; therefore, the dollar amounts on the exemptions mentioned may not be current.

From the website:

Boston University School of Law Professor Frances Miller outlines estate-planning procedures and the basics of the probate process. Although probate is necessary in order to collect debts and start the nonclaim statute, Miller says, many people want to avoid the process because it is expensive, time-consuming, and public. To avoid probate with the bulk of assets is the key, she says, explaining that it may be done through joint tenancy. 

View video here.

How Do Nobel Economists Plan For Retirement?

Is it possible that Nobel economists are no better at planning for retirement for the rest of us? View this video from Boston University and judge for yourself.

From the website:

PBS NewsHour correspondent Paul Solman talks about the 2008 financial crisis with Nobel Prize–winning economists Robert C. Merton, Robert Solow, and Paul Samuelson before a packed house at the BU School of Management’s Future of Life-Cycle Saving and Investing conference. The three economists joke about when they will retire, if ever, where they have invested their savings, and what economic hardship will mean for our lives. The Nobel laureates several times digress with teasing banter. Asked when he plans to retire, the ninety-three-year-old Samuelson explains that he would have to grow up before he considers retirement. When Solman questions the experts about the distribution of their own investments, Solow says he had no idea what was in his portfolio. Merton reveals that the bulk of his portfolio is in a Global Index Fund, Treasury Inflation-Protected Securities, and one hedge fund. He says he had been invested in a commercial real estate fund until recently, but dropped that when its value rose too quickly for his comfort.

View video

GAO Reports Declining Interest in Defined Benefit Plans Among Large Employers

As expected a recent GAO report indicates that decline in defined benefit plans is likely to continue. Moreover, the recent turmoil in financial markets will probably exacerbate that trend as plan sponsors find it more difficult to estimate required funding of future benefits.

Defined Benefit Pensions: Survey Results of the Nation's Largest Private Defined Benefit Plan Sponsors, GAO-09-291 March 30, 2009

Excerpt from report:

At the time of the survey, most sponsors reported no plans to revise plan formulas, freeze or terminate plans, or convert to hybrid plans before 2012. When asked about the influence of recent legislation or changes to the rules for pension accounting and reporting, responding firms generally indicated these were not significant factors in their benefit decisions. Finally, a minority of sponsors said they would consider forming a new DB plan. Those sponsors that would consider forming a new plan might do so if there were reduced unpredictability or volatility in DB plan funding requirements and greater scope in accounting for DB plans on corporate balance sheets. The survey results suggest that the long-time stability of larger DB plans is now vulnerable to the broader trends of eroding retirement security. The current market turmoil appears likely to exacerbate this trend.

Saturday, March 28, 2009

BLS Study Finds That Employer 401k Match Does Not Increase Participation Among Low Income Workers

Encouraging Participation in 401(k) Plans: Reconsidering the Employer Match, Keenan Dworak-Fisher, Office 0f Compensation and Working Conditions, U.S. Bureau of Labor Statistics

Excerpt from abstract:

The results of this analysis indicate that the effects of plan provisions vary dramatically between different income groups. The results among workers in the lowest income group comport with a growing consensus in the literature: employer matches have little or no effect on participation, while automatic enrollment has dramatic effects. But among workers in the middle income group, employer matches have substantial effects that may be larger than the effects of automatic enrollment.

Friday, March 27, 2009

2007 Survey of Consumer Finances

Last month the Federal Reserve Board issued the 2007 Survey of Consumer Finances.  The study presents detailed information on assets and liabilities of households.  In the current crisis 2007 seems like ancient history. Given the decline in financial assets much of the data may no longer be relevant.

First $2,400 of Unemployment Benefits Tax Free for 2009

From IRS website

WASHINGTON — All or part of unemployment benefits received in 2009 will be tax free for many unemployed workers, according to the Internal Revenue Service.

Under the American Recovery and Reinvestment Act, enacted last month, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their tax return next year. For a married couple, the exclusion applies to each spouse, separately. Thus, if both spouses receive unemployment benefits during 2009, each may exclude from income the first $2,400 of benefits they receive.

Read more.

IRS Information Related to the American Recovery and Reinvestment Act of 2009

Wednesday, March 25, 2009

Illustrated Maps of Helmet and Automated Safety Laws

From the website:

The Insurance Institute for Highway Safety (IIHS) is enhancing its online presentation of state laws by using interactive maps of the United States. The first such laws to be illustrated are motorcycle and bicycle helmet laws and automated enforcement laws, with additional state law maps becoming available. The maps provide geographic representations of the laws to illustrate the extent to which US states are addressing highway safety concerns.

Tuesday, March 24, 2009

Taxes and Your Ponzi Scheme Losses

The IRS has posted the following guidance on deducting Ponzi scheme losses.
  • The investor is entitled to a theft loss, which is not a capital loss.  In other words, a theft loss from a Ponzi-type investment scheme is not subject to the normal limits on losses from investments, which typically limit the loss deduction to $3,000 per year when it exceeds capital gains from investments.

  • The revenue ruling clarifies that “investment” theft losses are not subject to limitations that are applicable to “personal” casualty and theft losses.  The loss is deductible as an itemized deduction, but is not subject to the 10 percent of AGI reduction or the $100 reduction that applies to many casualty and theft loss deductions.

  • The theft loss is deductible in the year the fraud is discovered, except to the extent there is a claim with a reasonable prospect of recovery.  Determining the year of discovery and applying the “reasonable prospect of recovery” test to any particular theft is highly fact-intensive and can be the source of controversy. The revenue procedure accompanying this revenue ruling provides a safe-harbor approach that the IRS will accept for reporting Ponzi-type theft losses.

  • The amount of the theft loss includes the investor's unrecovered investment – including income as reported in past years. The ruling concludes that the investor generally can claim a theft loss deduction not only for the net amount invested, but also for the so-called “fictitious income” that the promoter of the scheme credited to the investor’s account and on which the investor reported as income on his or her tax returns for years prior to discovery of the theft.
    Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years. The revenue ruling does not address this argument, and the safe-harbor revenue procedure is conditioned on taxpayers not amending prior year returns.

  • A theft loss deduction that creates a net operating loss for the taxpayer can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years.

Read more.

2009 Medicare Primer From the Congressional Research Service

The CRS has just released an updated primer on the Medicare Program. The report reviews the history of the program and provides a brief analysis of the program’s major provisions.

Report here.

TRAC Finds That IRS Audit Rate for Millionaires Plummets

The Transactional Records Access Clearinghouse (TRAC) at Syracuse University reports the following.

IRS figures released to TRAC indicate that agency audits of taxpayers reporting a total positive income of one million dollars or more — involving both face-to-face audits and agency correspondence contacts — fell to only 5.6 per 100 returns filed in FY 2008. This rate would represent a 19 percent drop from the previous year. The full extent of the decline was formally confirmed this past Friday by IRS spokesman Frank Keith.

Read more.

Consumer Don’t Want Automatic Overdraft Coverage on Debt Cards.

You haven’t been keeping track of how much you have in your bank account. You use your debit card to make a $5 purchase and discover on your next statement you overdrew your account and you have been charged an overdraft fee of $34.  Sounds ridiculous, but this happens everyday. You should have known in advance that you had gone over your balance and would be charged this fee.

A survey by the Center for Responsible Lending indicates that most consumers want that choice. Moreover, in this age of electronic communications there is little reason why you could not have been presented with this information. The survey found that

83% of consumers want to choose whether overdraft protection on their debit card purchases and ATM transactions is included with their bank account. The vast majority (80%) of these consumers also want their bank to ask permission before enrolling them in such an overdraft program, rather than do so automatically.

Read more

Saturday, March 21, 2009

Most Employers Continue Matching Contributions to 401k Plans

  • In an open-ended format, approximately three-fifths of respondents stated that the
    financial crisis had not caused any changes to their companies' 401(k) plans.
  • More than 90 percent of participating organizations offer a 401k plan to employees.
  • Despite the widely reported drop in account balances, two-thirds (66 percent) of organizations indicated that at least 70 percent of their eligible employees participated in a 401(k) plan in 2008.

These are key findings in a study, Trends in 401k Plans,  released by the American Benefits Council. The study contains a significant amount of additional information on the current state of 401k plans.

FED Report Finds Community Colleges Provide a Good Return

The Federal Reserve Bank of St. Louis has just issued a report on the state of community colleges. The results indicate that even a year of a community college education can have a significant impact on earnings.

Community colleges play a significant role in U.S. higher education, enrolling 46 percent of current U.S. undergraduates. They offer an opportunity to receive a post-secondary education to many students who would not have attended college otherwise: first-generation college students, students from low-income families and older students who continue to work as they attend classes part time. Attending a community college even without completing a degree resultsin economic payoffs--in particular, annual earnings increase by 5 percent to 8 percent for each year of community college education--and better job opportunities.

Full report here.

Thursday, March 19, 2009


The federal government has created a new website, MakingHomeAffordable.Gov, that is meant to provide help for homeowners who are have trouble staying in their homes.

Free Loan from Social Security

Alicia H. Munnell, Alex Golub-Sass, and Nadia Karamcheva in Strange But True: Free Loan From Social Security from the Center for Retirement Research at Boston College examine the law that allows individuals who are collecting Social Security benefits to change their minds and start over.

For example, an individual can claim Social Security at age 62 and then reclaim at age 70 and receive a higher benefit, provided he pays back the benefits he has received. Because the claimant is only required to return the nominal amount of the collected benefits, he could invest the money that he receives and keep the interest.

The claimant, in effect, receives an interest free loan. They point out that the strategy involves a loss if the recipient dies before reaching average life expectancy. However, this strategy always dominates simply delaying benefits to age 70 because of the interest return on the earlier payments.

Credit Card Industry Facts

CreditCards.com has posted a web page the collects links to all available data on credit card statistics. The web manager asks readers to send in links for credit card statistics they would like to share.

Credit card industry facts, debt statistics 2006-2009

Tuesday, March 17, 2009

FTC Warns Consumers About Economic Stimulus Scams

The FTC is warning consumers that they could get stung by an economic stimulus scam. The scams come in different forms. Right now, on the Web and in e-mail, scammers are telling consumers they can help them qualify for a payment from President Obama's economic stimulus package. All they have to do is provide a little information or a small payment.

E-mail messages may ask for bank account information so that the operators can deposit consumers' share of the stimulus directly into their bank account. Instead, the scammers drain consumers' accounts of money and disappear. Or bogus e-mail may appear to be from government agencies and ask for information to "verify" that you qualify for a payment. The scammers use that information to commit identity theft. Some e-mail scams don't ask for information, but provide links to find out how to qualify for funds. By clicking on the links, consumers have downloaded malicious software or spyware that can be used to make them a victim of identity theft.

"Web sites may advertise that they can help you get money from the stimulus fund. Many use deceptive names or images of President Obama and Vice President Biden to suggest they are legitimate. They're not," says Eileen Harrington, Acting Director of the FTC's Bureau of Consumer Protection. "Don't fall for it. If you do, you'll get scammed."

Some sites suggest that for a small sum of money - as little as $1.99 in some cases - consumers can get a list of economic stimulus grants they can apply for. But two things can happen: the number of the credit card the consumer uses to pay the fee can fall into the hands of scam artists, or the $1.99 can be the down payment on a "negative option" agreement that may cost hundreds or thousands of dollars if the consumer does not cancel.

"Consumers who may already have fallen for these scams should carefully check their credit card bills for unauthorized charges and report the scam to the FTC," Harrington said. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

AnnualCreditReport.com Videos

With these videos the FTC is getting the message out that AnnualCreditReport.com is the only authorized source to get you a free credit report under federal law.

Tuesday, March 10, 2009

CRS Report: The Worker, Retiree, and Employer Recovery Act of 2008: An Overview


In December of 2008, Congress unanimously enacted the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) (P.L. 110-455), which makes several technical corrections to the Pension Protection Act of 2006 (P.L. 109-280) and contains provisions designed to help pension plans and plan participants weather the current economic downturn. This report highlights the provisions of WRERA relating to the economic crisis, such as the temporary waiver of required minimum distributions and provisions that temporarily relax certain pension plan funding requirements. This report also discusses certain technical corrections to the Pension Protection Act made by WRERA, and certain other notable provisions of the Act affecting retirement plans and benefits

Report here

Sunday, March 8, 2009

Thousands lose as Gift Certificate Company Closes Doors

Here is another reason why cash is the preferred alternative to a gift certificate. Read, "Worth of Thousands of Gift Certificates Questioned After Ohio Company Closes," at Law.com.

Tuesday, March 3, 2009

Learn about the Pension Benefit Guaranty Corp.

The PBGC insures qualified defined pension plans. This video produced by the PBGC may not be the most exciting video you have seen lately, but it provides a very good explanation of how the PBGC operates.

PBGC is a federal agency that protects pension benefits in private-sector traditional pension plans known as defined benefit plans. If a PBGC-insured plan ends without enough money to pay all promised pension benefits, PBGC's insurance program will pay the pension benefits up to the limits set by law. Learn more by watching this informative video...

Tenant Rights in Foreclosure

You made all of your monthly payments, but your landlord has not been as responsible as you. The home you live is about to be foreclosed and you are about to be evicted. Do you have an rights? Probably not many. The National Law Center on Homelessness & Poverty and the National Low Income Housing Coalition have issued a report detailing tenants rights in foreclosed home for all 50 states.

The dramatic rise in loss of home ownership through foreclosures is a direct result of the current mortgage crisis. Although the emergency has been well documented in recent months, less attention has been paid to the plight of tenants living in rental properties adversely affected by the systemic nature of this crisis. Many tenants, even those who may be current in their rent payments and in full compliance with their lease terms, face an increased risk of housing loss as a direct consequence of foreclosure proceedings, collateral consequences of such proceedings or through subsequent possessory actions commenced by new owners.

Read more

Monday, March 2, 2009

FTC Releases List of Top Consumer Complaints in 2008

At the top of the list is identity theft followed by debt collection. For the entire top 20 see the FTC News Brief.