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Subject: persfin-digest V4 #18
Date: Mon, 7 Apr 1997 20:01:27 -0400 (EDT)
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persfin-digest Monday, April 7 1997 Volume 04 : Number 018
IN THIS ISSUE:
ADVERTISEMENT: MCI FAX REPLY SERVICE [Oppenheimer Software <Connect-Sale]
Protecting Real Estate Against Creditors? [dbecnel@nummi.com]
Re: Commission costs before or after stock splits ["Louis J. Schwarz, CFP]
Debt-Income Ratio Calculation [Randy Barnes <rbarnes@atl.mindspring.com>]
Signature Loan ["David J. Churchill" <churchilld@worldnet.att.net>]
Effect of Real-Estate Cash Flow On Income ["David J. Churchill" <churchil]
Re: Title Insurance Considerations [Avrum Lapin <avrum113@cyberg8t.com>]
Unemployment Compensation & Taxes [keagar <keagar@bu.edu>]
Fidelity's Commission Formula - Not Difficult, But Ugly [David Meyers <dm]
Bond Funds - Good Idea? [Scott Mabel <sco@snowhill.com>]
amazon.com IPO Is A Bit Shaky [ldignan@cmp.com]
Re: Protecting Inheritance? Why? [johnel@ix.netcom.com]
Evaluating Title Insurance Policies [BOB FORD <BOB_FORD@compuserve.com>]
Quicken and Spinoffs [Keith Mealy <kmealy@cincom.com>]
Re: Title Insurance [hartwig@gate.net (Bob Hartwig)]
Dental School Loan for International Students? [Jadu <jadu1@lancnews.infi]
Re: Protecting Inheritance Using Trusts [BOB FORD <BOB_FORD@compuserve.c]
Quicken vs. Quickbooks [PHSP11A@prodigy.com ( SKIP WILDER)]
Any comment about WMA? [LIRONG@vms.cis.pitt.edu]
Ken Roberts course - How to Make Money? [Tony_Babb@notes.pw.com]
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Date: Mon, 7 Apr 1997 19:26:23 -0400 (EDT)
From: Oppenheimer Software <Connect-Sales@mcimail.com>
Subject: ADVERTISEMENT: MCI FAX REPLY SERVICE
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------------------------------
Date: Mon, 7 Apr 1997 19:28:09 -0400 (EDT)
From: dbecnel@nummi.com
Subject: Protecting Real Estate Against Creditors?
I need some advice on the following situation.
An elderly widower with a home worth $400K transfers title of the home to
his two daughters before his death. The daughters own it, but he plans to
live there until he dies. One of the daughters proceeds to develop major
financial problems and now has many creditors, most more than a little
upset. The second daughter has a strong financial foundation and she is
worried that the whole farm will be lost if the creditors find out the
first daughter has her name on a piece of property.
Now my questions:
Does the "good" daughter need to worry? Does the father?
In the age of computers, how easy would it be for the creditors to locate
this property and put a lien on it?
If they can put a lien on the property, can they attach it to 100% of the
value or only 50%?
It there a way the title can be restructured so as to better shield it from
creditors?
Could a trust be used in this situation to any advantage?
Thanks,
David
------------------------------
Date: Mon, 7 Apr 1997 19:30:13 -0400 (EDT)
From: "Louis J. Schwarz, CFP, RFC" <sfc@clark.net>
Subject: Re: Commission costs before or after stock splits
(Editor's Comment - Actually, there is no standard way of calculating
stock commission. Some brokers do it on the total dollar value of the
trade, others on number of shares. One I know of (Fidelity) actually
does it 3 ways (these 2 plus one other way) and charges the commission
in the middle! If you want to have some fun, phone up Fidelity and ask
them to explain their commission formula. -IK)
- --
Oh, yes, in the securties industry, the commission is based on three
things: total dollar value, number of shares, and price per share.
If I know any of my clients wants to sell any particular stock with
expected coming stock split, I usually advise them to sell before stock
split in order to save the increase in commision due to increase of
share numbers.
Louis J. Schwarz, CFP, RFC
Silver Spring, Maryland 20910-4500 Mailto:sfc@deafcfp.com
------------------------------
Date: Mon, 7 Apr 1997 19:32:01 -0400 (EDT)
From: Randy Barnes <rbarnes@atl.mindspring.com>
Subject: Debt-Income Ratio Calculation
This is all from a former mortgage lender perspective. (Other type
lenders make their own rules.)
Debt to Income ratios are calculated by dividing your monthly debt
payments by your gross income.
Included in your total debt payments is your housing expense. That's
your present or proposed mortgage(p&i), the prorated property tax and
Home insurance, and if association or condo fees apply add that in too.
(Divide this by gross income for housing expense, or "front ratio".)
Now, take the housing number above and add your payments to installment
and revolving debt. Credit card payments are calculated at the monthly
minimum payment, (there is a figure for this on the credit report that
the lender has). Car loans and other installment loans use your current
payment. Do not include any payments for taxes, insurance, phones
etc..but DO include any alimony or child support payments as well. (When
divided by your gross, this'll give your "back ratio")
Add the payments from all of the above. This must now be divided by your
gross income. You may have some trouble coming up with the same income
as the lender but follow this guide and you'll be very close.
If you are a w-2 employee with an hourly wage; multiply your rate x
hours/wk x 52 and divide the result by 12 to get a monthly figure. Any
overtime must be averaged over a year or two.
Fixed salary simply divided your annual salary by 12. If you get any
bonus or overtime this is going to be averaged over a two year period.
Self employed individuals are going to have to provide tax returns. The
last two years, and current year to date will be averaged to derive a
monthly income.
Total Housing Expense/ Monthly Gross Income = Front Ratio (AKA Top
Ratio)
Total Housing + Debt Pmts/Monthly Gross Income = Back Ratio (AKA
Bottom Ratio)
Mortgage lenders obtain money to lend from the secondary market. This
market ( FHA,FannieMae etc..) sets rules on ratios which is one reason
why the lender is so interested. As a guide your "Front" should not
exceed 28-29%. Your "Back ratio" is harder to generalize, and is more
important. Your ratios will not make or break a deal. They are flexible.
Other factors determine how much.
As you put down large down payments, the lender will ease up on their
limits. If you only put down the minimum expect the tightest
underwriting. Other factors the lender considers is your job and income.
Are you a young doctor with likelihood of rising income? Also
considered will be your "reserves", i.e. how much money you have left
after your down payment. Credit Score is becoming a big issue too. Your
FICO should be over 650, and if it's above 700 your credit is golden.
Here are some guidelines the mortgage lenders use
Front Back
Conventional Loans 26-28 33-38
FHA 29-31 41-43
Jumbo Loans 28-33 36-40
(This is not even considering adjustable loans which gets into another
range of issues.)
Personally I believe that anyone can manage a debt load (back ratio) of
40%. The facts are however that the more you stretch your ratios, the
longer and harder it'll be to accumulate some real wealth. If you are
over 40%, take a year or two to tighten up, or cut back on spending.
Lenders are greedy SOBs and know that higher ratios will only end in
defaults which will cost them money. Don't fight these limits as it's
like gravity and the weather.
------------------------------
Date: Mon, 7 Apr 1997 19:32:51 -0400 (EDT)
From: "David J. Churchill" <churchilld@worldnet.att.net>
Subject: Signature Loan
Try a credit union - ours offers "signature loans", though I'm not sure
they go up to $100K. That's a lot of money, and some collateral does
seem called for.
> From: Kennbu@aol.com
> Subject: Signature Loans For Debt Consolidation?
>
> Where can one obtain a legitmate signature loan for $50-100,000 to
> consolidate debt when the credit history is perfect?
------------------------------
Date: Mon, 7 Apr 1997 19:33:37 -0400 (EDT)
From: "David J. Churchill" <churchilld@worldnet.att.net>
Subject: Effect of Real-Estate Cash Flow On Income
Are you sure that the $6,000 positive cash flow actually increases your
income? The depreciation on the properties, depending on the value of
the properties, would normally be expected to wipe out a big chunk of
the cash flow, for tax purposes.
------------------------------
Date: Mon, 7 Apr 1997 19:34:45 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Title Insurance Considerations
Make sure that the policy you buy is an owners policy as opposed to a
lenders policy. The former protects the owner and the lender, the latter
only protects the lender's equity.
If the insurer is good enough for the lender, it is proably good enough for
you.
Avrum Lapin
Upland., CA
------------------------------
Date: Mon, 7 Apr 1997 19:35:53 -0400 (EDT)
From: keagar <keagar@bu.edu>
Subject: Unemployment Compensation & Taxes
(First time question for the list)
I was unemployed for 6 mos. during 1996 and received unemployment
compensation for that period, which is, of course, untaxed. I now find
myself cash broke due to having been unemployed and facing a tax bill of
$179 (filed already) for the state and $429 for the Feds (calculated by
using the IRS telefile service). I'm single, with only myself as a
dependent, and rent an apartment. I am temping now for an office temp.
agency and will do this until I receive a full-time salaried position in
my field.
My questions are: how can I reduce this amount tax owed? Should I
consult a CPA? How much would a CPA services cost?
Feedback would be greatly appreciated. (If more info. is needed in order
to provide feedback, please let me know.)
Thank you.
------------------------------
Date: Mon, 7 Apr 1997 19:38:47 -0400 (EDT)
From: David Meyers <dmeyers@panix.com>
Subject: Fidelity's Commission Formula - Not Difficult, But Ugly
>(Editor's Comment - Actually, there is no standard way of calculating
>stock commission. Some brokers do it on the total dollar value of the
>trade, others on number of shares. One I know of (Fidelity) actually does
>it 3 ways (these 2 plus one other way) and charges the commission in the
>middle! If you want to have some fun, phone up Fidelity and ask them to
>explain their commission formula. -IK)
Actually, I found their formula to be not all that difficult, but
just unfortunately ugly. They have a schedule based on dollar amount
of the trade in question. You can figure out the scheduled commission
on there pretty easily. Then you have to look at the max and min
numbers below. For example, they have a max commission for 100 shares
or less which, for less expensive stocks, is less than the schedule
dictates.
The real complication from them is the additional discounts and the
fact that they have _two_ entire schedules with maxes and mins - one
for regular folks and one for "spartan" traders (you have to make
something like 3 commission-generating trades/month to qualify).
The discounts apply as 10% for touch-tone trader (phone, no human),
and 25% for web trading.
Spartan folks also get a substantially lower margin-interest rate.
And for what its worth, commisions at places like E*Trade are LOTS
lower than at Fidelity.
In all, unless you have a substantial bit of money, commisions will
eat up a couple of a percent of any trades you make. They have
a decent explanation of their schedules online on their web site.
- --D
(Editor's Question - Is Fidelity going out of style? Magellan has
definitely lost popularity, perhaps because of its lackluster performance.
- -IK)
------------------------------
Date: Mon, 7 Apr 1997 19:42:12 -0400 (EDT)
From: Scott Mabel <sco@snowhill.com>
Subject: Bond Funds - Good Idea?
I need to invest a lot of money VERY soon, and am a little nervous about
the next 6 months in stocks. (Confession; yes, I'm thinking a little about
market timing)
I've never really owned any bonds or bond funds. But with interest rates
creeping up and the stock market potentially cresting, is this a good time
to add a bond fund to the portfolio? If so, what about high yield (junk)
bonds vs corporate grade?
I will have a very good tax situation for 97 (half my pay will be tax-free),
so that's not a factor, just want to increase overall value.
Thanks,
Scott
(Editor's Comment - If you *really* think interest rates are going up,
bonds are *not* the place to be. Bond prices go down as interest rates go
up. The risk is greater for long term bonds than for short term. For the
least risk, go with 1 year Treasuries. The yield curve is pretty flat
nowadays. You get 6% on a 1 year Treasury and 7% on a 30 year. Being
compensated 1% for a 29 year interest rate risk is a poor bet, in my
opinion. -IK)
------------------------------
Date: Mon, 7 Apr 1997 19:44:32 -0400 (EDT)
From: ldignan@cmp.com
Subject: amazon.com IPO Is A Bit Shaky
The Amazon IPO seems a bit shaky because it takes little effort by
Borders and Barnes & Noble et al to get in the act. But Amazon could
become one of those Web brand names like Yahoo!
Our columnist seems to think the future is questionable.
http://www.techweb.com/investor/mavens/netgain/tt0327.html
Larry Dignan
Editor
TechInvestor
http://www.techinvestor.com
(Editor's Question - Wouldn't B&N and Borders be cannabilizing their
retail outlets by offering discounts through the Web? Isn't that the
problem with retailers and the Web in general? -IK)
------------------------------
Date: Mon, 7 Apr 1997 19:47:27 -0400 (EDT)
From: johnel@ix.netcom.com
Subject: Re: Protecting Inheritance? Why?
Jacqueline.D.Richardson@Hitchcock.ORG wrote:
>With all this talk lately of divorce statistics it has brought to mind
something that has been on my mind for some time now so I thought I would bring
it up in this forum and see if anyone had any suggestions.
>My husband and I are working very hard to create a secure (early) retirement
for ourselves. We are well diversified in mutual funds and have bought our
first multi-family house and are looking for more good ones. By the time we
die there should be a tidy collection of property and investments that will go
to our two sons.
My response:
According to Jonathon Pond, the best executed estate planning ends up with no
estate to worry about. If you earned it, you ought to spend it! The only
logistical worry one ought to have is ensuring one's finances don't come to an
end before one's life does.
The best legacy one can leave one's heirs are good memories and thrifty habits.
Working long and hard to provide financial security for one's children may not
be the best thing for them. If you believe in the value of work and
self-sufficiency, you may unintentionally deprive your children of the
opportunity to learn those values themselves.
While none of us would want to see our children go hungry, I also think
we need to be careful in assessing our goals and priorities. If we want
our children to have happy, fulfilling lives, perhaps they would be better
served if we provide for them education and job opportunities, instead of
handouts. Another thing we can do for our children and grandchildren is to
campaign for reducing Social Security and other tax burdens so that they
don't wind up paying twice the taxes we do now.
Just my $.02 worth,
John Leipold
(Editor's Question - Anyone for Henry George, the 19th century economist
(PROGRESS AND POVERTY) who advocated just one tax - a 100% estate tax?
- -IK)
------------------------------
Date: Mon, 7 Apr 1997 19:48:54 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: Evaluating Title Insurance Policies
EDWARD
My experience with title companies has all been in California but I think
the information applies in most states.
There are usually 2 classes of title insurance. One covers more problems
with the title to the property than the other one. Of course the one that
covers more problems is more costly.
The one that covers more problems usually requires some to inspect the
property. The cheap one is usually a search of the public records only.
As you have noted, most title insurance policies that cover the same things
are very close in price.
However unless you request and pay more for a title insurance policy, IT
COVERS THE LENDER ONLY, NOT YOU. It cost just a few more dollars to get
the policy that covers you and I suggest you do so.
Before you, choose a company, ask to see a copy of their policy.
GOOD LUCK
BOB FORD
------------------------------
Date: Mon, 7 Apr 1997 19:49:57 -0400 (EDT)
From: Keith Mealy <kmealy@cincom.com>
Subject: Quicken and Spinoffs
I have a DRIP where the underlying company has spun off
a subsidiary, and now I'm trying to back and compute the
basis for the stock shares that have dribbled in over the last
few years.
I have an old version of Quicken (very old), and it handles
the reinvestments and even the 2-for-1 splits, but does not
seem to handle the spinoffs and subsequent basis adjustments.
I do not normally use it, but would, or would upgrade it it handled
this task.
Does anyone know if a later version of Quicken handles this?
------------------------------
Date: Mon, 7 Apr 1997 19:50:36 -0400 (EDT)
From: hartwig@gate.net (Bob Hartwig)
Subject: Re: Title Insurance
When I bought a home 4 years, I experienced much of the same frustration.
In the end, I determined that all of the policies are basically the same,
including the prices. This is because the line is tightly regulated. The
state (in my case Florida) mandates a **minimum** premium to be charged (per
$1000 of mortgage) and most companies charge this amount or something very
close to it.
------------------------------
Date: Mon, 7 Apr 1997 19:51:55 -0400 (EDT)
From: Jadu <jadu1@lancnews.infi.net>
Subject: Dental School Loan for International Students?
Hello Persfiners:
A relative of mine is planning on attending a dental school in the US.
She will be coming to this country as an international student. The cost
of attending the program is over 26K/Yr. I am exploring possibilities
of finding a loan for her where I can sign as a collateral. I am a US
citizen with stable job etc.
The ideal loan would be something like a Stafford loan where my relative
would pay off the loan after she gets done with the program.
Is anyone out there who knows of any similar loans out there? Does
anyone know any other finacial resources for international students?
Are there any dentists on this list who came to this country as a
foriegn students?
All comments will be genuinely appreciated.
Please acknowledge to my personal e-mail as well.
Regards....
jadu1@lancnews.infi.net
------------------------------
Date: Mon, 7 Apr 1997 19:53:51 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: Re: Protecting Inheritance Using Trusts
JACKIE
I am not an attorney so what follows is not legal adivce. It is my
opinion.
What you want to do to see that your money goes to your children and not
their former spouse is a very common request. I think the best way to do
that is to create a revokable trust. Unless we are talking about a great
deal of money( in the millions), I think an irrevokable trust is a bad
idea. None of us knows what the future may bring and what money we might
need. In an revokable trust, you can always assess all of the assets of
the trust if you need cash. An irrevokable trust is just that,
irrevokable. Your needs and wants can change in the future. Give yourself
some flexiblity.
I agree with you that since you made the money, you and you alone should
dictate how it is spent even after your death.
A trust in concept is very simple. Instead of you owning an asset, the
asset is owned by the trust and managed by the trustee. The trustee can be
you or anyone else you choose or several people. The documents that
created the trust can have almost any provision you like on what the
trust's assets can be used for. A trust can save you probate costs and
possibly some estate taxes. Check your tax advisor on how a trust is
taxed.
Many people make themselves the trustee and their children successor
trustees. They make a provision in the trust that the successor trustees
(in this case, your children after your death) must agree on all actions by
the trust. This prevents the argument that the assets are not distributed
fairly.
I know of a case where the trust documents stated the trust would pay the
credit card bills only where the credit card receipts were signed by the
children, not their spouses. Another case I know about wanted to encourage
their children to excell and make a lot of money. The trust each year gave
the children 1/2 of the income reported to the IRS. In this way the more
money the child made, the more money they got. You can be very creative in
the terms of the trust. Some people provide for their grandchildren in
their trust.
You can also specify how the money is to be invested (stocks, bonds, real
estate, etc) in a trust. You can specify when your children get any assets
and how much of the trust assets is given each year. You could if you
wanted to, specify that only the trust income is distirbuted to your blood
decendents. That way you create an income for your decendents FOREVER.
If you need more information, let me know.
If you think you want a trust, get good legal advice. Do not use one of
the books of fill in the forms for your trust.
BOB FORD
------------------------------
Date: Mon, 7 Apr 1997 19:54:58 -0400 (EDT)
From: PHSP11A@prodigy.com ( SKIP WILDER)
Subject: Quicken vs. Quickbooks
Quicken clearly is designed for cash basis individuals, not businesses.
Quickbooks, on the other hand, is clearly designed for businesses and not
individuals.
In a nutshell, Quickbooks enables accrual basis accounting,
maintenance of accounts receivable and accounts payable, issues invoices
to customers, and allows journal entries. The checking account features
are the same for both programs.
Skip WIlder
phsp11a@prodigy.com
McLean, VA
------------------------------
Date: Mon, 7 Apr 1997 19:56:00 -0400 (EDT)
From: LIRONG@vms.cis.pitt.edu
Subject: Any comment about WMA?
I couldn't remerber if I saw some comments regarding WMA (World Marketing
Alliance) with VUL products discussing before. I'd like to hear any sugestion/
comment about WMA, either positive or negative one.
Thanks!
L. Chen
------------------------------
Date: Mon, 7 Apr 1997 19:56:57 -0400 (EDT)
From: Tony_Babb@notes.pw.com
Subject: Ken Roberts course - How to Make Money?
I received an uunsolicited booklet from Ken Roberts claiming I could make
a ton of money on futures doing it his way. Of course I don't believe it's
as easy as he says but... has anyone tried his course and methods and what
was your experience?
Thanks
------------------------------
End of persfin-digest V4 #18
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