Home

Handling a Dispute with Your Insurance Company

Know your rights
The insurance industry is highly regulated. Your state has laws that dictate what insurance companies can and cannot do when it comes to bill collecting, settling claims, and other matters. The law may be called the Unfair Insurance Practices Act, the Unfair Claims Settlement Practices Act, or something similar. To learn about the laws in your state, call your state insurance department or check its website. Most states have the following regulations in place:

  • An insurance company cannot misrepresent your policy. In other words, the company cannot knowingly tell you that the policy means something that it doesn't actually mean. In addition, the company cannot change the policy without informing you in writing ahead of time.
  • The company cannot withhold payment on a claim against one part of your policy in order to force an issue on a claim against another part of your policy. For example, your insurer cannot withhold payment on a claim against the collision portion of your auto policy to force you to settle on the liability portion.
  • Companies must acknowledge and process claims promptly. In some states, companies have to acknowledge within 15 days that they received notice of a claim. After receiving the claim, they must investigate, process, and settle it quickly.
  • Companies cannot ask you for unnecessary forms in an effort to delay an investigation or payment of a claim.
  • Companies cannot make it a practice to appeal most court awards that favor their policyholders. Companies are allowed to appeal decisions they truly believe are unfair, but they cannot use the appeal process to force their policyholders to settle for less than they are due.
  • A company has to have a good reason to deny or delay a claim and must explain the reason to the policyholder. In most cases, lack of coverage or nonpayment of premiums is the reason for a denied claim. Or, the company could be misinformed about the details or circumstances of the claim.


Use your insurance agent or broker
If you have an insurance agent or broker, he or she can be a valuable resource in resolving disagreements amicably. Your agent or broker has an established relationship with the insurance company and knows where to go for help. An agent or broker can usually resolve the problem over the phone right from his or her office. Give him or her your policy number, copies of disputed bills, canceled checks, any written correspondence, and records of any phone conversations. If you don't have an insurance agent or broker, discuss the problem with a customer service representative from the company.
Write a letter

If you've had no luck resolving the problem through your agent or broker or by calling the company, write a letter to the appropriate manager at the company. For example, address letters regarding disputed bills to the accounting or finance manager. If possible, obtain the manager's name before writing the letter. Your letter should clearly state the problem and what you think would be a fair resolution. Include information about phone conversations you had with customer service representatives, such as dates of the calls and the names of the people you spoke with. Your letter should also include your policy number and your daytime telephone number. Finally, include copies of written correspondence, bills, canceled checks, or bank statements.

Get a third party involved
Complaints rarely come to this point, but if your company still hasn't resolved the problem to your satisfaction, there are a number of options you can pursue. Calling your state's insurance department is one such option--there are state insurance regulators who investigate policyholder complaints. In fact, if the state finds that the company is violating any state laws or regulations, the state could fine or otherwise reprimand the company. You might also consider contacting your state's consumer protection division or the Better Business Bureau. Another option is to seek an out-of-court settlement through arbitration or mediation. There are independent organizations that will provide this service when you have a dispute with your insurer.

Take legal action
As a last resort, you can take the insurance company to court. If the amount in question is below a certain threshold (this amount varies by state), small-claims court may be an option for you. You do not need an attorney in small-claims court.

If the amount is too big for small-claims court, you can hire an attorney. It is in the insurance company's best interest to settle disputes quickly, especially if they involve expensive litigation. Chances are good that once you hire an attorney and he or she contacts the insurance company, the dispute will be settled out of court.

If you educate yourself, have all the information at your fingertips, stay organized, and be persistent, you should be able to resolve your problem quickly.

This article was provided by Forefield and distributed by Lawrence Sprung.

Trust Basics

Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn't hard.

What is a trust?
A trust is a legal entity that holds assets for the benefit of another. Basically, it's like a container that holds money or property for somebody else. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust depend largely on your goals. For example, if you want the trust to generate income, you may want to put income-producing securities, such as bonds, in your trust. Or, if you want your trust to create a pool of cash that may be accessible to pay any estate taxes due at your death or to provide for your family, you might want to fund your trust with a life insurance policy.

When you create and fund a trust, you are known as the grantor (or sometimes, the settlor or trustor). The grantor names people, known as beneficiaries, who will benefit from the trust. Beneficiaries are usually your family and loved ones but can be anyone, even a charity. Beneficiaries may receive income from the trust or may have access to the principal of the trust either during your lifetime or after you die. The trustee is responsible for administering the trust, managing the assets, and distributing income and/or principal according to the terms of the trust. Depending on the purpose of the trust, you can name yourself, another person, or an institution, such as a bank, to be the trustee. You can even name more than one trustee if you like.

Why create a trust?
Since trusts can be used for many purposes, they are popular estate planning tools. Trusts are often used to:

  • Minimize estate taxes
  • Shield assets from potential creditors
  • Avoid the expense and delay of probating your will
  • Preserve assets for your children until they are grown (in case you should die while they are still minors)
  • Create a pool of investments that can be managed by professional money managers
  • Set up a fund for your own support in the event of incapacity
  • Shift part of your income tax burden to beneficiaries in lower tax brackets
  • Provide benefits for charity

The type of trust used, and the mechanics of its creation, will differ depending on what you are trying to accomplish. In fact, you may need more than one type of trust to accomplish all of your goals. And since some of the following disadvantages may affect you, discuss the pros and cons of setting up any trust with your attorney and financial planner before you proceed:

  • A trust can be expensive to set up and maintain--trustee fees, professional fees, and filing fees must be paid
  • Depending on the type of trust you choose, you may give up some control over the assets in the trust
  • Maintaining the trust and complying with recording and notice requirements can take up considerable time
  •  Income generated by trust assets and not distributed to trust beneficiaries may be taxed at a higher income tax rate than your individual rate

The duties of the trustee
The trustee of the trust is a fiduciary, someone who owes a special duty of loyalty to the beneficiaries. The trustee must act in the best interests of the beneficiaries at all times. For example, the trustee must preserve, protect, and invest the trust assets for the benefit of the beneficiaries. The trustee must also keep complete and accurate records, exercise reasonable care and skill when managing the trust, prudently invest the trust assets, and avoid mixing trust assets with any other assets, especially his or her own. A trustee lacking specialized knowledge can hire professionals such as attorneys, accountants, brokers, and bankers if it is wise to do so. However, the trustee can't merely delegate responsibilities to someone else.

Although many of the trustee's duties are established by state law, others are defined by the trust document. If you are the trust grantor, you can help determine some of these duties when you set up the trust.

Living (revocable) trust
A living trust is a special type of trust. It's a legal entity that you create while you're alive to own property such as your house, a boat, or mutual funds. Property that passes through a living trust is not subject to probate--it doesn't get treated like the property in your will. This means that the transfer of property through a living trust is not held up while the probate process is pending (sometimes up to two years or more). Instead, the trustee will transfer the assets to the beneficiaries according to your instructions. The transfer can be immediate, or if you want to delay the transfer, you can direct that the trustee hold the assets until some specific time, such as the marriage of the beneficiary or the attainment of a certain age.

Living trusts are attractive because they are revocable. You maintain control--you can change the trust or even dissolve it for as long as you live. Living trusts are also private. Unlike a will, a living trust is not part of the public record. No one can review details of the trust documents unless you allow it.

Living trusts can also be used to help you protect and manage your assets if you become incapacitated. If you can no longer handle your own affairs, your trustee (or a successor trustee) steps in and manages your property. Your trustee has a duty to administer the trust according to its terms, and must always act with your best interests in mind. In the absence of a trust, a court could appoint a guardian to manage your property.

Despite these benefits, living trusts have some drawbacks. Assets in a living trust are not protected from creditors, and you are subject to income taxes on income earned by the trust. In addition, you cannot avoid estate taxes using a living trust.

Irrevocable trusts
Unlike a living trust, an irrevocable trust can't be changed or dissolved once it has been created. You generally can't remove assets, change beneficiaries, or rewrite any of the terms of the trust. Still, an irrevocable trust is a valuable estate planning tool. First, you transfer assets into the trust--assets you don't mind losing control over. You may have to pay gift taxes on the value of the property transferred at the time of transfer.

Provided that you have given up control of the property, all of the property in the trust, plus all future appreciation on the property, is out of your taxable estate. That means your ultimate estate tax liability may be less, resulting in more passing to your beneficiaries. Property transferred to your beneficiaries through an irrevocable trust will also avoid probate. As a bonus, property in an irrevocable trust may be protected from your creditors.

There are many different kinds of irrevocable trusts. Many have special provisions and are used for special purposes. Some irrevocable trusts hold life insurance policies or personal residences. You can even set up an irrevocable trust to generate income for you.

Testamentary trusts
Trusts can also be established by your will. These trusts don't come into existence until your will is probated. At that point, selected assets passing through your will can "pour over" into the trust. From that point on, these trusts work very much like other trusts. The terms of the trust document control how the assets within the trust are managed and distributed to your heirs. Since you have a say in how the trust terms are written, these types of trusts give you a certain amount of control over how the assets are used, even after your death.

This article was provided by Forefield and distributed by Lawrence Sprung.

Preventing Credit Card Fraud

What is credit card fraud?
Credit card fraud occurs any time your credit card account is used without your knowledge or permission. Credit card fraud costs cardholders and issuers hundreds of millions of dollars every year. Closely related to credit card fraud is "identity theft," which is addressed in our separate topic discussion, Coping with Identity Theft. While it is easy to become the victim of credit card fraud, there are many simple ways to protect yourself against this loss. Some of these are outlined below.

Tip: The Fair and Accurate Credit Transactions Act of 2003 (FACTA) provides consumers with an arsenal of weapons to fight fraud and identity theft. For example, you can ask the credit bureaus to truncate your Social Security number on any disclosures they send to you, including your credit report. Additionally, creditors and businesses must take other steps to protect consumers against fraud and identity theft. For example, merchants can only print the last five digits of your credit card or debit card number on electronically generated receipts.

How can you protect yourself from credit card fraud?

Keep track of your card
The first step in protecting yourself is to know where your credit card is at all times. Try carrying your money in one pocket and your credit cards in another, so a thief won't steal both at once. Keep your eye on your card during transactions, and be sure the clerk returns it at the end of the transaction. Don't loan your card to anyone or reveal your personal identification number (PIN).

Take some low-tech precautions
Retail stores and other businesses that accept credit cards are prohibited by law from asking to see additional identification. This can actually make things easier for anyone fraudulently using your card. Immediately sign the back of a new card, and use permanent ink. A thief may be inhibited by the need to forge your signature. Make the activation call the company requires, because that protects you against liability and may give you additional information. Keep your PIN separate from your card.

Handle your personal identification number (PIN) with care
Your PIN is an important protection for your card. Select one that is easy to remember, but not easy to guess. Don't use your house number, your license plate, your birthday, or part of your Social Security number. Don't write the number on your card or carry it somewhere in your wallet. Don't share your PIN with anyone, including family members.

Consider using a credit card protection service
Having your wallet or purse stolen can be a nightmare. To save yourself the worry of calling every single issuer whose card you carry, you can pay a small fee to a protection service that will notify your credit card companies for you. Some of these protection companies will also pay any liability you incur after you notify them, and they will wire you money if you request it.

Caution: You'll be paying monthly for this protection service, so think about whether you really need it. Also, the service will only be as good as the information you give them. If you change cards, add cards, or lose more cards than you realized, the service won't be worth the money you spend on it.

Tip: Make a list of your cards, their numbers, and the toll-free number to report loss or theft. Keep this list in a safe place--not in your wallet or purse. If you lose your wallet or purse and aren't able to notify your card issuers, you'll be liable for a portion of any illegally made charges.

Protect your card number as carefully as you protect your card
A thief may steal your card itself, but is even more likely to steal your card number. A dishonest clerk or telemarketer, for example, can copy your credit card number. A thief can also find your number on discarded receipts or carbons and use the information to shop by phone, mail, or Internet. Instead of stuffing your receipts in your glove compartment, keep them in a safe place at home so your number is protected. Never write the number on the outside of envelopes or on postcards.

What do card issuers do to prevent fraud?
You may feel that it's you against the pickpocket, but card companies have an incentive to back you up. In most situations, the card issuers bear the responsibility for illegally incurred charges. Many credit cards now have holograms or photos for identity protection. They may also carry "neural networks," which track your spending habits, the geographical area where you usually shop, and what your typical price range is. That's why travel card companies advertise that they call their customers if their credit cards show unusual activity.

How secure is shopping by phone?
Phone and catalogue shopping are very popular, especially during the holiday season. Phone shopping is generally safe and convenient, as long as you've initiated the call. If someone claims to be calling from a catalogue company, get their number and call them back to be sure the call is legitimate.

Cybershopping: The newest arena for fraud
Cybershopping is the ultimate home shopping experience. Click a button and buy a discounted best seller or new CD. If you're going to shop on-line, there are basic ways to protect your credit information.

Unsecured information sent over the Internet can be intercepted. If you decide to buy on-line, your browser should invite you to download a secure program, such as secured hypertext transfer protocol (SHTP) or a Secure Sockets Layer (SSL), for transmitting credit information. Even if the program takes several minutes to download, the inconvenience is far better than taking a chance on having your card number intercepted. Without a Web browser that complies with industry standards for security, your credit information will be available to anyone with the skills to find it.

Here are some other tips:

  • Buy from reputable stores and sellers.
  • Look for third-party seals of approvals, such as Better Business Bureau Online and Trustee.
  • Make sure the site uses encryption. Look for an "s" after "http" in the address. There should also be a tiny closed padlock in the address bar, or lower right-hand corner of the window.
  • Use a browser filter that warns you of suspicious sites.

 

This article was provided by Forefield and distributed by Lawrence Sprung.

Tax Planning for the Self-Employed

Self-employment is the opportunity to be your own boss, to come and go as you please, and oh yes, to establish a lifelong bond with your accountant. If you're self-employed, you'll need to pay your own FICA taxes and take charge of your own retirement plan, among other things. Here are some planning tips.

Understand self-employment tax and how it's calculated
As a starting point, make sure that you understand (and comply with) your federal tax responsibilities. The federal government uses self-employment tax to fund Social Security and Medicare benefits. You must pay this tax if you have more than a minimal amount of self-employment income. If you file a Schedule C as a sole proprietor, independent contractor, or statutory employee, the net profit listed on your Schedule C (or Schedule C-EZ) is self-employment income and must be included on Schedule SE, which is filed with your federal Form 1040. Schedule SE is used both to calculate self-employment tax and to report the amount of tax owed. For more information, see IRS Publication 533.

Make your estimated tax payments on time to avoid penalties
Employees generally have income tax, Social Security tax, and Medicare tax withheld from their paychecks. But if you're self-employed, it's likely that no one is withholding federal and state taxes from your income. As a result, you'll need to make quarterly estimated tax payments on your own (using IRS Form 1040-ES) to cover your federal income tax and self-employment tax liability. You may have to make state estimated tax payments, as well. If you don't make estimated tax payments, you may be subject to penalties, interest, and a big tax bill at the end of the year. For more information about estimated tax, see IRS Publication 505.

If you have employees, you'll have additional periodic tax responsibilities. You'll have to pay federal employment taxes and report certain information. Stay on top of your responsibilities and see IRS Publication 15 for details.

Employ family members to save taxes
Hiring a family member to work for your business can create tax savings for you; in effect, you shift business income to your relative. Your business can take a deduction for reasonable compensation paid to an employee, which in turn reduces the amount of taxable business income that flows through to you. Be aware, though, that the IRS can question compensation paid to a family member if the amount doesn't seem reasonable, considering the services actually performed. Also, when hiring a family member who's a minor, be sure that your business complies with child labor laws.

As a business owner, you're responsible for paying FICA (Social Security and Medicare) taxes on wages paid to your employees. The payment of these taxes will be a deductible business expense for tax purposes. However, if your business is a sole proprietorship and you hire your child who is under age 18, the wages that you pay your child won't be subject to FICA taxes.

As is the case with wages paid to all employees, wages paid to family members are subject to withholding of federal income and employment taxes, as well as certain taxes in some states.

Establish an employer-sponsored retirement plan for tax (and nontax) reasons
Because you're self-employed, you'll need to take care of your own retirement needs. You can do this by establishing an employer-sponsored retirement plan, which can provide you with a number of tax and nontax benefits. With such a plan, your business may be allowed an immediate federal income tax deduction for funding the plan. You can also generally place pretax dollars into a retirement account to grow tax deferred until withdrawal. You may want to use one of the following types of retirement plans:

  • Keogh plan
  • Simplified employee pension (SEP)
  • SIMPLE IRA
  • SIMPLE 401(k)
  • Individual (or "solo") 401(k)


The type of retirement plan that your business should establish depends on your specific circumstances. Explore all of your options and consider the complexity of each plan. And bear in mind that if your business has employees, you may have to provide coverage for them as well. For more information about your retirement plan options, consult a tax professional or see IRS Publication 560.

Take full advantage of all business deductions to lower taxable income
Because deductions lower your taxable income, you should make sure that your business is taking advantage of any business deductions to which it is entitled. You may be able to deduct a variety of business expenses, including rent or home office expenses, and the costs of office equipment, furniture, supplies, and utilities. To be deductible, business expenses must be both ordinary (common and accepted in your trade or business) and necessary (appropriate and helpful for your trade or business). If your expenses are incurred partly for business purposes and partly for personal purposes, you can deduct only the business-related portion.

If you're concerned about lowering your taxable income this year, consider the following possibilities:

  • Deduct the business expenses associated with your motor vehicle, using either the standard mileage allowance or your actual business-related vehicle expenses to calculate your deduction
  • Buy supplies for your business late this year that you would normally order early next year
  • Purchase depreciable business equipment, furnishings, and vehicles this year
  • Deduct the appropriate portion of business meals, travel, and entertainment expenses
  • Write off any bad business debts

Self-employed taxpayers who use the cash method of accounting have the most flexibility to maneuver at year-end. See a tax specialist for more information.

Deduct health-care related expenses
If you qualify, you may be able to benefit from the self-employed health insurance deduction, which would enable you to deduct up to 100 percent of the cost of health insurance that you provide for yourself, your spouse, and your dependents. This deduction is taken on the front of your federal Form 1040 (i.e., "above-the-line") when computing your adjusted gross income, so it's available whether you itemize or not.

Contributions you make to a health savings account (HSA) are also deductible "above-the-line." An HSA is a tax-exempt trust or custodial account you can establish in conjunction with a high-deductible health plan to set aside tax-free funds for health-care expenses.

This article was provided by Forefield and distributed by Lawrence Sprung.

Health-Care Reform: How Does It Affect Businesses?

In March of 2010, President Obama signed two pieces of legislation into law, implementing the most pervasive health-care reform since Medicare. Many of the reforms that relate to business and employers don't take effect until 2014. Here are some of the important highlights of health-care reform from the perspective of employers and businesses.

Health insurance not required but encouraged
Contrary to popular belief, health-care reform does not actually require all employers to offer health insurance to their employees. Instead, the new reforms use financial penalties to encourage employers to offer affordable health insurance coverage. Specifically, beginning in 2014, employers who have at least 50 full-time employees, and do not offer health insurance, may be assessed a fee of $2,000 for each full-time employee (excluding the first 30 employees) if at least 1 employee is receiving a premium credit. (A premium credit can be used by eligible individuals and families who purchase health insurance through state-based exchanges to reduce the premium cost.)

Even employers who do offer coverage may face a fee if at least 1 full-time employee is receiving a premium credit. The fee is either $3,000 per employee receiving the credit or $2,000 for each full-time employee, whichever total is less. Employers with fewer than 50 full-time employees are exempt from these fees. But, employers with 200 or more employees must automatically enroll employees in health insurance plans offered by the employer. The employee may voluntarily opt out of the employer's plan.

In addition, employers that offer employee health insurance must offer a free choice voucher to employees who elect to enroll in a state-based American Health Benefit Exchange plan. The value of the voucher is equal to the amount the employer would have paid to cover the employee under the employer's plan. Employees may enroll in an Exchange plan if the employee's income is less than 400% of the Federal Poverty Level (FPL) and the employee's cost to participate in the employer's plan is between 8% and 9.8% of the employee's income. The voucher can be used to offset the employee's cost to participate in the Exchange plan.

Employer incentives
As an incentive for small businesses to offer employee health insurance, from 2010 to 2013, employers with 25 or fewer full-time employees with average annual wages less than $50,000 may be eligible for a tax credit of up to 35% of the employer's total premium cost. Beginning in 2014, small businesses that buy insurance through state Exchanges for their employees may receive a credit of up to 50%. In either case, the credit decreases as the number of employees and average annual wage increases.

By 2014, in an effort to promote wellness and decrease health insurance costs, employers will be able to offer employees rewards, such as premium discounts and added benefits, for participating in wellness programs and meeting certain health-related standards. The value of the rewards can equal as much as 30% of the cost of coverage and may even reach 50% in some cases.

Employers who provide insurance for retired employees who are over age 55, but not yet eligible for Medicare, may receive reimbursement for 80% of retiree claims between $15,000 and $90,000. This temporary reinsurance program begins in 2010 and is available until 2014. On the other hand, employers who currently receive a tax deduction for Medicare Part D drug subsidy payments will see that deduction eliminated in 2013.

Small businesses with up to 100 employees may be able to purchase health insurance through state-based Small Business Health Options Program (SHOP) Exchanges by 2014. The Exchanges will offer at least four benefit categories of plans based on covering an increasing percentage of benefit costs.

This article was provided by Forefield and distributed by Lawrence Sprung.

More Articles ...

@MitlinFinancial