Welcome to the NEWSLETTER of Fisherís Law Office, providing
you with legal information you can use in your everyday life. In this
issue, we discuss ways in which clients can survive tough economic times.
If you have questions about what you read in this newsletter, please
call us today.
1. Basics of FDIC (Federal Deposit
Congress has created the FDIC, an entity that purportedly
insures bank accounts. (See the Federal Deposit Insurance Act, 12 U.S.C.
ß1811(a)). Although it may take years for you to get your money back,
FDIC bank accounts are insured up to $100,000.00. Be aware that the
following accounts are not FDIC insured and do not provide any
guarantee of repayment should your bank or financial institution fail:
- money market accounts
- mutual funds
- brokerage accounts
- mortgage backed securities
- other financial arrangements
Moral to the story? If you absolutely need the money
you are investing at some point in the future, make sure that you put
your money into a bank that has a high rating and is FDIC insured.
2. How can you check the financial
solvency of your bank?
Bankrate.com has a rating service that ranks banks.
In general, you should always put money into banks which have the highest
rating. Be warned that if a depression hits the United States, the banking
system will be under tremendous stress and many, many banks will fail.
If this happens, it may take years for you get your money back even
if it is from an FDIC insured account. Therefore, do not put money into
any bank accounts and banks that have less than the highest rating.
3. How should I handle debt during
times of economic depression and recession?
Unlike the inflationary 1970ís and 1980ís, dollars
that are used to repay debt at this time are worth as much as the money
you borrow. The reason for this is that inflation is
very low or even declining. Some economists even say that the U.S. is
suffering from "deflation" in which prices continually decline.
This phenomenon is a fact of life in Japan today. What this means is
that money in the future is worth more in real terms
than money in the present and money that is borrowed
today will be more difficult to pay back. You should therefore be very
cautious at borrowing money or charging on credit cards.
4. If inflation and high
interest rates afflict the economy, will my ten-year U.S. Treasury Bonds
go down in value?
Yes. As the graph below shows when interest rates go
up, the market value of bonds goes down. Moral? long term government
bonds can be risky investments.
What are some ways I can protect myself against the effect of depression
Here are a few basic tips on protecting yourself against
(a) Review all of your investments very carefully to
make sure that they are in a safe place. For example, bank accounts
are more safe than money market funds and stocks. Try to pay down
as much debt as you can. In this way, you will be more able to weather
the economic storms. Remember that the last depression in the United
States lasted from 1929 until the beginning of World War II. You should
therefore be able to weather an eight to ten year period of economic
(b) Save as much money as you can in case you or your
spouse loses your job.
(c) Develop a "side business" in which you
have a source of income besides your regular earnings that you can
rely on to supplement your income or serve as your primary source
of income if you lose your job.
(d) If there is a teenager in household, explain to
the teenager the situation and see if you can convince your teen to
get a job and begin saving money. The teen can use the money saved
to attend college or trade school or pay for extras.
(e) If you have any real estate other than your house,
you may want to consider selling it now. Real estate has done very
well even as the stock market in the U.S. has declined. However, some
economists believe that the real estate market is in the midst of
a "bubble". When the bubble breaks, the price of housing
and other real estate will collapse or fail to appreciate as much
as in the past.
Moral: Now might be the best time to sell real estate
about my house? Is it a good investment?
Housing has appreciated substantially in the last ten
years in the United States. However, in measuring the net increase in
the value of your home, consider the following:
- Be aware that real estate is very expensive to hold.
There are maintenance costs, insurance, flood insurance, and improvements
that most people need to make to maintain the value of their homes.
- Interest expense and real estate taxes are big expenses
that reduce real estate gains, even after considering the deductibility
of mortgage interest and real estate taxes.
- Most economists believe that you can count on spending
between one and two percent of the value of your home per year to
maintain its value.
- Once these costs (taxes, insurance, interest, maintenance,
etc.) are subtracted from the appreciation, real estate is often not
as good an investment as one might initially think.
On the other hand, if you own a home that has substantially
appreciated in value and you sell it, you probably will not be liable
for income taxes as the first $250,000.00 of gain on a personal residence
is not taxable to a single person and the first $500,000.00 of gain
on the sale of a primary residence is not taxable to a married couple.
This tax benefit has helped underpin the real estate market in the United
about inheritance taxes? Should I worry about money I inherit?
For the vast majority of Americans, the estate tax has
been effectively repealed. In 2002 and 2003, the amount you can inherit
or receive as a gift without paying gift tax or estate tax is $1,000,000.00.
This amount will increase until 2010 when the amount will be an unlimited
amount. In 2011, you can inherit up to $675,000.00 without paying estate
should I do to begin my estate plan?
To plan your own estate, you should make a list of all
of your life insurance, real estate, investments and other assets once
a year to determine whether or not you have an estate tax issue. If
your estate is under $1,000,000.00 in 2002 and 2003, your heirs do not
have to pay estate tax and your estate passes tax free to your loved
ones. The next step is to write a Will. Fisherís Law Office helps clients
write simple Wills for a modest fee.
9. Iím thinking
about refinancing my house. Is this a good idea?
In 2000 through 2001, Americans borrowed four trillion
dollars in equity from their homes. Some of the money ended up being
used in home improvements but most of it was spent on immediate consumption.
The good news is that the economy benefited from all of the spending.
The bad news is that homeowners now must spend the next 15 to 30 years
paying back the money they borrowed over the last two years. Here are
some refinancing tips. If all of the following apply to you, you might
consider refinancing your home mortgage:
- The interest rate on your mortgage will decrease by
greater than one or two percent.
- Your refinancing will not extend the time of the loan
(for example, if you have 15 years left on your mortgage, your new
loan will be paid off in 15 years).
- You are not "cashing out" money. This means
that when you refinance, you are not increasing the debt balance on
your home by borrowing more money. You should not "cash out",
that is take out money from the value of your home when you refinance.
This defeats the entire purpose of refinancing and decreases your
hard earned home equity!
- Your closing costs are small. Warning! If a mortgage
broker proposes to charge you a fee to find loan money, donít do it.
Go to a bank. Always look closely at "closing costs" before
you consider refinancing.
- You plan to stay in your home for a number of years.
- You are able to deduct the interest you pay from your
United States federal income taxes. (Be aware that unless the amount
of interest expense is greater than the "standard deduction",
your tax bill will not decrease as a result of borrowing money on
- You should never refinance and extend your payments
into the future past your point of retirement. Always plan to have
your house paid off before you retire.
Refinancing warning: Be aware that refinancing involves
a new appraisal of your home. If your home has increased in value, your
homeowners insurance will increase, often by a substantial amount.
you thinking about selling your business?
Here are a few helpful hints of things to consider before
you sell a business.
(a) Make sure that the buyer has enough money to pay
for the business. Do not accept a small down payment and expect the
buyer to pay off the debt. You may not get your money.
(b) Tell key suppliers that you are no longer associated
with the business. Also, make sure that no suppliers are billing you
personally for the supplies of your business. These communications
should be with the buyerís consent.
(c) You should disclose everything to a buyer. Do not
put yourself in a situation where a buyer wants to sue you.
(d) Make sure that all debts of the business are paid
off and that all taxes are paid before you sell the business.
(e) Make sure that you inform the United States Internal
Revenue Service, the Florida Department of Revenue and all other governmental
agencies that you are no longer associated with the business.
(f) Have your tax number for the business changed so
that you are no longer associated with the "EIN" (employer
identification number) of the business. In this way, should taxes
for payroll or social security not be paid, you will not be billed
personally as a "responsible person" .
(g) Make sure that if you sell a corporate entity,
you have resigned as a corporate officer in the books and records
of the Department of State in Tallahassee, Florida. In this way, you
put the world on notice that you are no longer associated with the
(f) If at all possible, you may want to consider working
in the business for a few months after you sell it in order to help
the buyer during the transition period. However, donít take on a management
role or create expectations that you will continually help the new
buyer with the business.
(g) Be careful in agreeing to covenants not to compete.
(h) Always see a lawyer to help you write up a contract
for the sale of the business and for the transfer of the business
assets or stock in the business to the buyer. The sale of the business
is a very serious matter and one should not scrimp on attorneyís fees
for such transactions.
you buy a used car in Florida, you should be very cautious.
Here are a few things that you should do to protect yourself
when you buy a used car in Florida.
(a) Make sure that you transfer the car into your name
at the tag agency on the day you give the money. Preferably, the transaction
should take place at the tag agency.
(b) Have the person selling the car sign the title
over to you in the presence of a witness at the tag agency.
(c) There is no requirement to sign titles in the presence
of a notary so you should always get a copy of the driverís license
of the seller and verify that the name of the seller is the same as
the name as it appears on the title. Never purchase
a car from someone who holds an "open title".
(d) Make sure there is no lien against
the car you are buying and if there is, get a
lien satisfaction from the lender. Donít rely
on a lien satisfaction "stamp" on the
title. Contact the lienholder directly and get a written confirmation
that all liens on the car are paid. Make sure
that the lien satisfaction is on file with the State of Florida Motor
(e) Do not assume that going to a car dealership will
save you from any of the hassle associated with buying a car. You
should be just as vigilant if you are dealing with a car dealer as
you would in dealing with an individual.
(f) Be careful about stolen vehicles. You may want
to contact the police and verify that any cars you are buying are
not stolen or have been reported stolen.
(g) Always pay with a personal check and not a cashierís
check or cash so you can stop payment on the check if it turns out
the car is not properly titled into your name or if the seller is
(h) Always have an inspection done on any car you buy
by a reputable mechanic before you buy the car.
(i) Always verify the value of a car online before
you buy it. There are many online services that will value cars and
give an approximate value of cars such as KBB.com.
(j) Never be rushed into buying something that you
are not sure you want to buy.
(k) Purchasing a car is a big decision and you should
never make a decision of this nature quickly. If at all possible,
do not buy a new car as new cars decline in value by over 30% the
moment you drive them off the parking lot.
(l) Never assume that there is a right of rescission
for car purchases. In general, there is no right of rescission (a
waiting period that allows you to cancel the purchase) except for
certain home mortgages and other contracts. Good luck, youíll need
you a new resident in Florida or know someone thatís recently moved
Make sure they do the following when they move to Florida:
(a) Get a Floridaís driverís license. It is against
the law to work or have a child in a Florida school and not have a
Florida driverís license.
(b)Transfer all vehicle registrations to Florida.
(c) Register to vote in Florida.
(d) Register utilities in your name as soon as possible.
(e) Begin paying taxes and filing your tax return
from Florida. Other states have a personal income
tax but Florida does not. It is therefore advantageous
to be a Florida resident and the earlier you
file a tax return with the U.S. federal government
from Florida, the earlier you are excused from
being required to file a tax return in your home state.
(f) Consider filing a sworn statement establishing
your domicile in Florida under Florida Statutes, Section 222.17.