I DON’T GET IT!

February 18th, 2009

I spent about a year writing a lesson book designed to teach young people money skills. After completing the book, I managed to get it approved as a text book by the Newport-Mesa School District here in Orange County, CA.

Then reality hit. They don’t teach personal finance classes anywhere in the district. Why one might ask? To this probing question, as with so many questions, there are good answers and real answers.

First, the good answers. We’re teaching Math and Science – they are a national priority. Young people are getting all the financial lessons they need at home – studies indicate that 90% of money skills are learned at home. Blah, blah, blah.

Now, the real answers. We don’t have the money to teach money skills – they are paid to teach Math and Science. We don’t have the time to teach money skills – the unions are dictating how much teaching time is available in any one day and again Math and Science are priorities. Blah, blah blah.

Now here’s what I don’t get and perhaps you may understand and can inform me. I keep hearing all about Math and Science. Hey, they are a national priority. We’re falling behind the world in Math and Science. China is burying us in Math and Science. This all sounds so important and so immediate and so critical to the future of the universe.

Now let’s confuse the situation with logic and clear thinking. A very dangerous thing in most cases.

Question: For every one thousand high school students how many will be working in fields related to Math and Science 20 years form now?

Follow-up Question: How many will be handling money, balancing check books and working with personal and family budgets?

See what I mean? Thinking too much can make you crazy.

Another Question: Based upon what you see today, are money skills being learned at home?

Get this – only three states require high schools to teach money skills. What ever will the rest of us do?

Easy answer – buy my book.

Enough said.

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Financial Advice ,

Joint Ownership of Property

February 9th, 2009

Putting various types of property into Joint Tenancy is an easy planning tool since with the passing of one owner the other takes ownership immediately. However, great care must be taken in this area because the creation of joint tenancy, in many cases, creates a gift which often can be a “taxable gift”.
With bank and brokerage accounts switching the ownership to joint tenancy is not usually considered a gift unless the new owner starts withdrawing from the account. However, in the case of a business or real property, transferring the ownership to joint tenancy usually creates an immediate gift of half the value of the asset.
If you do choose to transfer an interest in a business or real property (including personal residences) be sure to obtain a reliable appraisal. And be sure to file a gift tax return. Also, be sure your state allows joint ownership.
Obviously estate and gift tax issues arise anytime property is transferred. As always, seek professional help. There is just too much money at stake when one’s total assets approach a current fair market value of around $1 million.
For personal net worth’s of less than $1 million, things can be much simpler. Putting financial assets into joint tenancy with a trusted child and creating of simple living trust, may be an easy way to have your assets transfer to the next generation with little or no hassles. Do-it-yourself books and software are readily available and really do make it simple. A good rule of thumb is to try and find a book written with your state’s laws in mind. If this is not possible, ask around for recommendations.
In my own mother’s case, we created a straight forward living trust and she transferred all her financial accounts into joint tenancy with my sister. With this small amount of estate planning, the most difficult part of transferring her assets was deciding who would get the oak dinning table and chairs. No problem there either, I got them.

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Retirement Advice

Locking Your Credit in California

February 3rd, 2009

My latest client letter subject is a set of instructions for individuals to protect themselves from identity theft. California is one of a few states that allow individuals to “freeze” their credit information. The freeze is accomplished by writing to each of the three credit bureaus, paying a $10 fee and requesting them to completely stop all checks of your credit and stop the issuance of any credit to you or anyone who pretends to be you.

If you want to apply for a loan or credit card, all you need to do is go on-line, use the password issued by the credit bureau and allow that specific credit check.

Complete instructions are included in the California Office of Privacy Protection. The following link will get you there:

http://www.privacy.ca.gov/

Once there find – Consumer Information Sheet 10 for a complete set of instructions on how to freeze your credit.

Sincerely,

Richard J. Harris
Certified Public Accountant

The following are sample letters for each of the three credit bureaus. Note that each bureau’s requirements are slightly different.

February 3, 2009

Equifax Security Freeze
PO Box 105788
Atlanta GA 30348

Dear Eqifax:

I would like to place a security freeze on my credit file. My name is .

My current address is:

I have been at this address for over 10 years and do not have a former address.

My Social Security number is .

My date of birth is .

Enclosed is my check for $10 for placing the freeze by .

Sincerely yours,

February 3, 2009

Experian Security Freeze
PO Box 9554
Allen TX 75013

Dear Experian:

I would like to place a security freeze on my credit file. My name is .

My current address is:

My Social Security number is .

My date of birth is .

As proof of my address, I am enclosing the following two items:
*
*

Enclosed is my check for $10 for placing the freeze by .

Sincerely yours,

February 3, 2009

Trans Union Security Freeze
PO Box 6790
Fullerton CA 92834-6790

Dear Trans Union:

I would like to place a security freeze on my credit file. My name is .

My current address is:

My Social Security number is .

My date of birth is .

Enclosed is my check for $10 for placing the freeze by credit card.

Name of Credit Card:
Account number:
Expiration date:

Sincerely yours,

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Financial Advice ,

Residency Requirements for State Income Taxes

January 31st, 2009

A few of my more astute California clients have noticed that other states have lower or no personal income taxes. A few of my better off clients have homes in several states and foreign countries. If you have or are planning to change your legal domicile, be sure you do it right. And oh-by-the-way, even if you do everything right, the State of California will aggressively pursue taxation of some intangible asset income – such as pension benefits.

If you are involved with a residency audit you will be asked to fill out an extensive questionnaire. Warning! Do not fill out the questionnaire without professional help.

Here’s a check list for establishing a new legal domicile. The list is not complete and not all items need be present to establish residency. Again beware, fulfilling all of the following items will still not guarantee your residency status.

* Sell old residence and buy or lease one in your new state
* Obtain a homestead exemption in your new state
* Move physical assets to new state
* Sever business relationships in old state
* Sell real property and real property investments in your old state
* Close bank and brokerage accounts and open new ones
* Rent a safe deposit box in your new state
* Have an attorney redraft trusts and wills indicating your new residency
* File an affidavit of domicile in new state with the county clerk’s office
* Register to vote in new domicile
* File all tax returns as a resident of the new state
* Register all automobiles in new state
* Cancel your old drivers licenses and get a new ones
* Change the billing address on all bills
* Terminate all church or temple affiliations and establish new ones
* Terminate club memberships and establish new ones
* Join the local library
* Purchase a cemetery plot in new state
* Keep a log of time spent in your new state, in your old state and on vacations
* Try not to use credit cards when in your old sate
* Talk and dress like the locals. If you are moving to Idaho, buy at least two automatic
weapons. If moving to certain areas of Arizona, buy and carry a six shooter.

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Income Tax Advice ,

Social Security Benefits

January 29th, 2009

People are living longer than ever. What this means for a healthy, active person is whether they think they can outlive the average life expectancy for their age group. If you are willing to gamble that you will do just that, postponing your Social Security benefits until age 70 may return substantial benefits.

Say you were born in 1950. If you take SS benefits at age 62 you will receive about $1,600 per month. Waiting until age 66 gets you $2,200 and at age 70 you get $3,000. After doing all the fancy calculations and estimations, it looks to me that around age 82 those who postponed their benefits until age 70 will have already won on the bet. Living longer than age 82 (not unusual as far as I can see) will garner you substantially more money that if you had taken the money at age 62 and ran to the bank.

The bottom line – if you feel good and feel lucky, wait to draw your Social Security.

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Retirement Advice

Welcome to rjharriscpa.com

January 24th, 2009

Thank you for visiting rjharriscpa.com, the website of Richard J. Harris, CPA. This site will provide my clients with quick answers to common tax related questions and issues as well as keep you up to date on all news related to your personal and business income tax needs.

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