Q&A

Q&A: Credit score after bankruptcy

November 28, 2016 By Liz Weston

Dear Liz: This is just to add to your observation that credit scores tend to improve after a bankruptcy. I filed Chapter 13, which required a five-year repayment plan. At that point my score was around 640. The day of the discharge, I was able to get a car loan at 3% interest. Also, the bankruptcy dropped off my credit reports seven years from the filing date, and my scores actually dropped a good bit.

Answer: It’s pretty unusual for scores to go down after a bankruptcy drops off your credit reports. It’s possible you weren’t looking at the same type of score because there are many different formulas in use. It also could be there were other changes that happened simultaneously, such as a high balance on a credit account or an old, paid-off loan that a creditor stopped reporting.

It’s not unusual, though, for someone who completes a Chapter 13 to get a competitive rate on a loan where there’s collateral, such as an auto loan, assuming he has a job, credit score expert John Ulzheimer said.

“Debt free plus employed equals not a bad risk, especially if they put down a decent down payment,” Ulzheimer said.

Q&A: Mixing family and finances

November 21, 2016 By Liz Weston

Dear Liz: I have a relative who is a certified financial planner. He suggested we invest in annuities from which he will make commissions. When I asked him about his commission amount, he said he doesn’t feel the need to disclose that information because the fees don’t come out of my investment, therefore making them irrelevant. He says his fiduciary responsibility makes disclosing his commissions unnecessary. Is this correct?

Answer: Your relative needs to review the CFP ethical requirements. He wasn’t required to disclose dollar amounts or percentages of compensation until you specifically asked for that information. Once you did, he’s obligated to tell you. He (and you) can learn the details on the CFP Board of Standards site (www.cfp.net).

Commissions are far from irrelevant, especially when the product is as expensive and complicated as an annuity. Before you invest in any annuity, you should run the investment past a fee-only certified financial planner. Fee-only planners are compensated only by fees their clients pay and not by commissions that could influence their advice.

Q&A: How to protect an elderly widower from financial predators

November 21, 2016 By Liz Weston

Dear Liz: Our mother recently died after a long illness. Our father is in his 70s and is getting a lot of attention from ladies at his church and the senior center. We’re concerned because of a pattern we’ve seen in other families, where the widower remarries and the new wife convinces him that his kids are only after his money. When he dies, she gets everything. The kids and grandkids are left out in the cold. We love our dad and don’t want him to think we’re gold diggers. We also don’t want someone to take our father from us and take advantage of him. What can we do?

Answer: If your father is willing to consider it, an irrevocable trust could go a long way toward protecting his assets from avaricious future wives and any number of other financial predators, including scam artists and unethical financial advisors. The trust could continue to pay income to him while allowing the underlying assets to be transferred at his death to the heirs he chooses now, when his judgment is presumably not impaired.

This is not a do-it-yourself project. Transferring assets to an irrevocable trust could create a gift tax issue for your dad. An attorney who specializes in trusts will have to carefully craft the language to avoid that, Los Angeles estate planning attorney Burton Mitchell said.

The problem may be convincing your dad that he’s vulnerable to impaired judgment. Although our financial decision-making abilities peak in our 50s and our cognitive abilities decline fairly rapidly after age 70, our confidence in our abilities continues to rise as we get older.

Financial literacy expert Lewis Mandell likens it to driving ability. Other research has shown that older drivers often don’t perceive their driving skills as deteriorating, despite declines in sensory ability that come with aging, said Mandell, author of the book “What to Do When I Get Stupid: A Radically Safe Approach to a Difficult Financial Era.”

But the same research found that when the drivers took an objective test that demonstrated their decrease in skill, they were more willing to alter their driving behavior to reduce the probability of accidents.

It may help to have a third party, such as a fee-only financial planner or an estate planning attorney, talk to your dad about the importance of protecting his assets at this stage in his life.

If that effort fails and he marries the type of woman you fear, try to remain in his life, no matter what. She may try to pick fights with you and then demand he take her side as a way of isolating him. Avoid conflict where possible and maintain contact with regular calls, letters and visits. It will be harder for her to demonize you if you remain a constant, loving presence in his life.

Q&A: How to evaluate consumer options and not get cheated

November 14, 2016 By Liz Weston

Dear Liz: Although I’m able to pay my bills, it’s the decisions regarding cable, telephone, Internet and various insurance options that drive me nuts! I’ve tried to seek out independent groups that discuss such issues, but none exists in my area; and these decisions are not covered by my financial planner, nor do I wish to pay a senior money manager for this advice. As an elder orphan, I’m finding these decisions and others regarding repairs, workmen, etc. very stressful. Friends don’t really want to help and be held “responsible” if their recommendations don’t work out. What do you suggest?

Answer: Sometimes it feels like a full-time job to evaluate your options as a consumer and not get snookered. This isn’t an issue that’s unique to older people. But as we age, our financial decision-making abilities tend to decline, and we become more vulnerable to fraud or bad decisions. So you’re smart to want a trustworthy helper to guide you.

A lot of Internet sites clamor to be that helper, but not all are as objective as they seem to be. They may be steering you toward the companies that pay them the most. Make sure you read a site’s disclosure statements so you understand what its conflicts of interest might be.

One outfit you can trust is Consumer Reports, which has a print magazine as well as an online subscription with objective advice on thousands of products and services. Consumer Reports doesn’t accept advertising and has been helping people make smarter decisions since 1936.

Finding good people to work on your home is trickier. Sites such as Angie’s List and Yelp offer reviews from other consumers and can help lead you to reputable firms. You shouldn’t take the results as gospel, though, because both rely on advertising from the companies being reviewed.

If you don’t feel up to the task of researching and sorting your options, please reconsider your aversion to hiring a daily money manager. You typically can pay such a manager by the hour to help you make these decisions. You’ll also have a chance to “test drive” his or her services since you may well need help with paying bills and other financial tasks down the line.

Q&A: Getting help with credit scores after identity theft

November 14, 2016 By Liz Weston

Dear Liz: Would you please help readers learn how to fix credit scores after identity theft? I have been a victim at least eight times in the past five years. I have filed three police reports regarding these matters and sent them along with other proof to the big three credit report agencies. Only one quickly answered and deleted the false entries.

Answer: You have a friend in the Consumer Financial Protection Bureau.

In the past, complaints about credit bureaus went into a black hole. The Federal Trade Commission collected them but warned consumers that it couldn’t expect any action on their individual cases. The Consumer Financial Protection Bureau, by contrast, forwards consumer complaints directly to the financial company and works to get problems solved. The bureau says 97% of complaints get a timely response.

Before you make your complaints, though, you should check your credit reports again. One bureau may have been faster in responding, but the other two may have since deleted the bogus accounts.