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Finance | Financial advice | Immigration | Banking | Accounting | Business

Francis Vayalumkal

Are you wondering what to do with your home equity line of credit? Is it worth keeping even though the rate has almost doubled in the last 21 months? Should you refinance into a fixed? To get an answer, you will have to make a judgment call and probably do some math.

Two years ago, a home equity line of credit looked like a great deal. Credit lines gave homeowners access to money at rates that were lower than those on fixed-rate home equity loans or first-lien mortgages. Cheap credit lines allowed borrowers to use their homes as bank accounts and ATMs to pay for home improvements, college tuition, cars and vacations.

But credit lines are indexed to the prime rate, and that means that borrowers' minimum monthly payments go up whenever the Federal Reserve raises short-term rates. The Fed has done so 15 consecutive times since the middle of 2004, raising the prime rate from 4 percent to 7.75 percent. It is expected that the Fed will hike it at least once more.

The continued increases have hit the homeowners� check books hard. Take the hypothetical example of someone who borrowed $50,000 against a home equity credit line when the rate was 4 percent. Two years later, the same borrower still owes $50,000 because he/she has made only the minimum payments, which cover interest and not principal. Now that the rate is 7.75 percent, the minimum monthly payment has risen from $167 to $323.

The average rate on a credit line is now higher than the average fixed-rate home equity loan. And 30-year, fixed-rate mortgages are even lower. With these rates, credit lines are no longer the great deals they once were.

Borrowers have three options. Keep the credit line, pay it off and replace it with a fixed-rate home equity loan or do a cash-out refinance on the first-lien mortgage and pay off the credit line with the proceeds.


A credit line has two advantages: it grants you flexibility, and you pay interest on the amount owed and nothing more. If those qualities are important, you might want to keep the credit line.

A credit line would work well for a business owner who needs to have a good amount of money available in reserve to use when there is a need. It also is for people who need to borrow money periodically, using their house like a credit card -- homeowners who renovate their homes in stages, for example, or parents who pay tuition. For these people, the flexibility of a credit line outweighs the rising interest rate.

Ideally, these borrowers draw from their credit lines and then pay some or all of the balance before drawing against the credit line again. Using a credit line this way is cheaper than using a credit card and the interest is tax-deductible.


If you can stand the higher payments, it might make sense to refinance the credit line into a fixed-rate home equity loan. At present, rates on home equity loans are roughly the same as those on home equity lines of credit. But home equity loans sport higher payments because the minimum payment includes interest and principal, and not just interest.

Take that hypothetical homeowner who still owes $50,000 on a line of credit and pays $323 a month just for interest. If she converts it into a home equity loan at 7.75 percent -- one that pays off the loan balance in 15 years -- the monthly payment rises to $470.63. The payment is higher, but the loan eventually will get paid off.

That borrower could simply keep the line of credit and pay the higher amount every month, but there are two problems with that. First, he/she might not have the self-discipline to keep doing it. Second, the credit line's interest rate is likely to rise even more (and later, to fall). The home equity loan, in contrast, has a fixed rate, so the monthly payments remain the same for the life of the loan.


The other way to handle a line of credit is to pay it off with a cash-out refinance. That's when you refinance your first-lien mortgage for more than you currently owe, take the difference in cash and use that money to pay off the home equity line of credit.

For some time, the adjustable mortgages were so popular and it was a normal to have an adjustable rate first mortgage and a home equity line as the second mortgage. For many borrowers, it is time to get out of both loans and get into a fixed rate loan.

On the other hand, there are a so many who has acquired a fixed-rate first mortgage when the rates were near the 40-year low and a second loan as home equity line of credit. At present, rates are so much higher now that it doesn't make sense for these people to go for a cash-out refinance.

The best step to take is to do some calculations to see what will work best for you and call your mortgage consultant to ask about your options.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 971-7555 or via e-mail at [email protected]

Finance | Financial advice | Immigration | Banking | Accounting | Business

Nitesh Patel

Life is full of surprises � both positive and negative. When couples pledge to be married to one another, particularly at a young age, the thought of being widowed is the last thing on their minds.While the loss of a spouse is one of life's most devastating experiences, striving to live through it, especially financially, can be challenging and overwhelming. That�s why proactive planning can make a world of difference when a spouse is faced with the death of his or her partner.

Women, in particular, would be wise to plan ahead financially. Consider the following statistics:

Women typically outlive men by an average of 5.3 years. (1)

One third of women between the ages of 65 and 74 are classified as widows. (2)

The percentage of women classified as widows over age 75 nearly doubles to 61 percent. (3)

What�s more is that women are more at risk to be at a financial disadvantage on several fronts when their spouses die. Statistically, they earn 76 cents on the dollar compared to men and the gap widens with age. (5) Plus, women are more likely to work part-time, have shorter work tenure due to raising children or caring for aging parents. The result is smaller Social Security payouts and pension accumulation. (6)

Planning ahead

Early preparation can help a couple � and the entire family � have greater peace of mind now and down the road. Here are strategies to jumpstart the process:

Start the conversation - The first step is to begin a dialogue with one�sspouse and family � as difficult as that conversation may be. It may help to schedule a consultation with a financial professional, a family or estate attorney. Their expertise can help you ask the right questions, identify your needs, define goals and make key decisions.

Focus the discussion - The following are some questions to ask yourself and your partner: Does your financial outlook consider the possibility of the death of a spouse? Is there a will? How are your financial documents, wills and/or trusts organized?Where are key forms, policies and legal paperwork located? Is there a living will? What are the short- and long-term wishes of each spouse?

Develop a will � Putting together a will can help couples think through and solidify financial and personal matters. Certainly, this can be a daunting task when all is well and life is good, which is perhaps why 55 percent of Americans don�t have a will. (8) Again, consider working with both a financial professional and an attorney to help the process.

Know what you have � Familiarize yourself with all of your � and your spouse�s � assets, even if your spouse is the �financial decision maker� in the family. Learn about all bank accounts, retirement accounts, tax returns, insurance coverage, life insurance policies, etc.

Keep an orderly and easy-to-access system - Store important documents and paperwork in a safe deposit box, locked file cabinet or other secure place that is easy to access.Be sure you and your spouse regularly update these materials.

Moving forward

Whether or not a couple has planned for a spouse�s death, some practical strategies to help a widowed spouse gradually work through finances should be considered. In most cases, widows will face three transition periods:

Attending to immediate practical concerns � will take one to two weeks;

Handling financial and legal concerns � may take from one week to several months;

Settling tax concerns � which can take one to two years to resolve. (9)

The following are some considerations for navigating these phases:

Take care of immediate needs - During this period, a widow should try to focus on gathering, organizing and making an inventory of all assets and liabilities. Now is the time to take control of the household bills, funeral bills, medical bills, etc. Also organize your spouse�s financial and personal effects, such as bank accounts, vehicle titles, life insurance, Social Security benefits, credit cards, retirement accounts, etc. (10)

Meet with your team of legal and financial professionals - These individuals can assist you with immediate liquidity needs, make additional professional referrals, and help you with details that either must be attended to immediately or should be addressed promptly (bill paying and debt service, tax and estate returns, beneficiary designations on your insurance policies and retirement accounts). It�s a good idea to involve children and other family members in this process so you have a team of close individuals who can help the process. Also, don�t hesitate to ask questions.

Notify institutions. Transfer such things as credit cards, licenses, titles, bank and retirement accounts into your name. This is also a good time to update (or develop) your will and life insurance beneficiaries. (11)

Re-evaluate your financial goals. Talk with financial professionals about your financial needs and continue the conversation as life changes.

In general, it�s wise for couples to manage pre-and post-retirement finances carefully, with short- and long- term goals and resources in mind. Adjusting to a spouse�s death is never easy. However, early planning and working with experienced financial professionals can help a widow move a little easier through such an extraordinary transition.

(1) Centers for Disease Control, Feb. 28, 2005
(2) U.S. Census Bureau Report, 2000
(4) U.S. Census Bureau Report, 2000
(5) U.S. Census Bureau, Income in the United States 2003 (Washington, D.C. 2004)
(6) Women�s Institute for a Secure Retirement (WISER), September 2005
(8) Money, �Do It Now,� January 2006
(9), Money Tips for Widows and Widowers, January 2006
(10), Money Tips for Widows and Widowers, January 2006
(11), Money Tips for Widows and Widowers, January 2006
Centers for Disease Control, February 28,2005
2 US Census Bureau Report, 2000

3 Centers for Disease Control, February 28,2005
4 US Census Bureau Report, 2000
5 U.S. Census Bureau, Income in the United States 2003 (Washington, DC 2004)
6 Women�s Institute for a Secure Retirement (WISER), September 2005
7 2001 US National Center for Health Statistics, Vital Statistics of the United States

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail [email protected].

Finance | Financial advice | Immigration | Banking | Accounting | Business


Families with special needs children or other family members should be aware of a federal law that any special needs child/adult that has more than $2,000 in his/her name loses much-needed government support programs eligibility under Supplemental Security Income (SSI), Medicaid and Medicare. One of the most common mistakes by families is putting funds for a child with special needs into a UGMA/UTMA account (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act).

To make matters worse, even if the assets in a UGMA/UTMA account are liquidated, the funds will still be in the name of the special needs child and counted as income. If a UGMA/UTMA account has already been created for a minor with special needs, it is advised that the client contact a local attorney specializing in elder/disability law and discuss how these funds can be spent down appropriately or possibly transferred legally to a different account such as a Special Needs Trust before eligibility requirements can be applied.

Please take note that using UGMA/UTMA assets to fund a Section 529 plan will not be effective in removing the assets from the minor's name because the participant of the Section 529 account will still be the custodian of the UGMA/UTMA. Parents and guardians for special needs children have to pay close attention to the rules. Parents should talk to grandparents and family members who may possibly want to leave funds to the special needs child in their wills and estate that the monies are placed in a special needs trust. This way, the funds are outside the child�s estate and ownership. Careful planning and consideration will prevent much stress at a later time.


To avoid triggering disqualification from government agencies long before special needs children reaches the age of majority (usually 18 or 21 in most states), any educational monetary gifts for the special needs child being made should go to either a Section 529 plan or a Special Needs Trust. (Note: a Section 529 plan can be opened under parents/grandparents' names and Special Needs Trust can be opened under the name of the trustee (parent, guardian, nonprofit or individual professional trustee). In addition, families need to check for other beneficiary (ies) distribution(s) in 401(k), IRAs and insurance policies where a direct, automatic distribution to the special needs child can cause immediate disqualification from government programs. Should you have any concerns or questions speak to an attorney who specializes in this area.

Dr. Ram P. Ramcharran can be reached at [email protected]

Finance | Financial advice | Immigration | Banking | Accounting | Business

Kamlesh Patel
CRUNCHING �EM NUMBERS: Check your withholding and estimated tax payments for 2006

If you expect a large tax refund this year, or if you�ve already received one, chances are you�re happy. But why give the government an interest-free loan? Why not keep more of your money and invest it throughout the year for your own benefit? Whether you pay your taxes through withholding or you make quarterly estimated tax payments, you can take steps now to ensure that you don�t receive a large refund on your 2006 taxes � and that you won�t owe a lot of money either.

Your tax bill in 2006 could vary from last year�s tax for many reasons. If you or your spouse get a new job or leave a job this year, your income may change. Perhaps, your eligibility for the various tax credits, exemptions and deductions that are available will change this year. If your income decreases or if you can take advantage of any of the tax breaks to reduce your taxes, you may be able to lower your tax withholding or quarterly payments and put more money in your pocket now. The opposite is true if your income rises or you lose eligibility for a deduction, exemption or credit. In that case, you may have to increase your withholding or quarterly tax payments.

To adjust your withholding for 2006, ask your employer for a new Form W-4, and take the time to complete it carefully.

If you make quarterly tax payments, you should be aware of the safe harbor rules that will let you make the lowest required payments without subjecting yourself to possible penalty changes. The rule that fits most taxpayers is the one that calculates your 2006 quarterly estimated payments based on your 2005 tax liability.

Classify workers correctly

If you have people working for your business, you may face the issue of whether to classify them as employees or as independent contractors.

Classifying your workers as independent contractors generally saves you money. That�s because you avoid paying employment taxes and benefits on their behalf.

In most instances, however, few of your workers actually qualify as independent contractors. If the IRS determines that you misclassified your employees as contractors, you could end up paying all of the employment taxes and benefits that should have been paid over the years. Depending on the size of your work force, the cost to you could be substantial.

How can you ensure that you properly classify your workers? Start with the factors listed by the IRS to determine a worker�s classification. If you maintain control over your workers through hiring, training, supervision, scheduling the work to be done, and by providing them with tools and materials, your workers are most likely your employees. The same holds true if you pay your workers a set salary or an hourly wage and have the right to let them go at any time.

As a general rule, if you only have the right to control or direct the result of the work and not the means and methods of accomplishing the result, the individual may qualify as an independent contractor.

If your business employs independent contractors, take steps to protect yourself and your business. Be consistent with how you classify your workers, and follow how other businesses in your industry classify their workers.

Get an early start on cutting 2006 taxes

Once you�ve filed your 2005 tax return, you may be tempted to file away your records and relax a little. However, you could be missing a perfect opportunity to save on your 2006 taxes. With your completed 2005 return in one hand and a recent paycheck stub in the other, you�re ready to get an early start on 2006.

First, review your current paycheck deductions. Are your federal, state and local tax withholdings on target? Significant life changes in 2006 could result in tax underpayment penalties unless you adjust your withholdings.

Are you taking full advantage of your employer�s retirement plan match? If not, you�re leaving money on the table. Contribution limits on 401(k), SIMPLE, and IRA plans have gone up as well, so consider telling your employer to increase your retirement withholding. And while on the subject, ask your employer if the company offers the new Roth 401(k). It might fit nicely in your overall retirement plan.

Maximum use of your flexible spending account also is a tax-smart move. A review of your 2005 medical deductions may shed light on how much you�ll use in 2006. Remember that IRS rules now let you buy over-the-counter medications out of your flexible spending account, so factor that into your calculations.

You might actually save taxes in 2006 by spending money. How? By investing in qualified, energy-efficient equipment, such as hybrid vehicles and home improvements. Such purchases may be eligible for tax credits in 2006. So what�s good for the environment also could be good for your wallet.

The 2006 tax year may be far from your thoughts, but not from ours. If you�re ready to talk taxes, we�re ready to listen. Give us a call for an early start on your 2006 tax planning.

Kamlesh H. Patel, CPA, can be reached at (813) 289-5512 or (813) 846-5687 or e-mail [email protected] or [email protected].

Finance | Financial advice | Immigration | Banking | Accounting | Business

Brian Stephens

The undeniable worldwide success of franchises is due to the enormous advantages it offers, consisting of a stable model to expand a business and penetrate markets.

It also is considered by many to be the safest and least risky way for an entrepreneur to own a business, making him or her the beneficiary of the synergies that franchising offers - that is, to be part of a regional, national or worldwide network.

The safety of a franchise is especially strong for someone who wants to enter a field in which he or she has not gained complete expertise. So many people we see start up a new concept because they have had some exposure to the industry, but have not have the chance to see how much upfront planning, research and unforeseen preparation is required in planning.

What is a franchise?

It is a strategy that allows for the penetration and domination of markets. An effective franchise permits the owner of a trademark to reproduce the elaboration of goods and / or services that he has developed successfully. Through the implementation of administrative and operative procedures, a third party that invests work and capital, can effectively reproduce that franchises goods and / or services in other markets with the same quality.

It is an individual or company that contractually acquires the right to market a product or service within an exclusive market, utilizing the benefits that he gets by using a certain trademark, and the support he receives in the training and management of the business.

What is a franchisor?

It is an individual or company that possesses a certain trademark and marketing technology (know-how) of a product or service, who contractually cedes the rights and transfers the use of these, as well as committing himself to provide support and assistance in the organizational, managerial, administrative and marketing areas to the business of the franchisees.

Advantages for the franchisee (that is you)

Reduction in the risk and uncertainty factors by investing in a proven business format;
Permanent innovation in the methodological and technological aspects of the business; Continuous support on the part of the franchisor;
Documented training based on the Operative Manuals;
Access to administrative control systems and evaluation of the performance of his point of sale;
Training in the productive processes of products and services;
Sense of belonging to a consolidated network of franchises;
Access to promotion and advertising programs;
Increase in an investors (franchisee�s) personal prestige by getting involved in a successful business concept.

Just like any business investment, do your research. Talk to other owners, look at the company�s growth and support structure, and check out what competitors are out there too.

Lastly, after you have done your research, use your God-given talent of imagination, and visualize how you will enjoy doing this business year after year. We often find that people try a new concept because it initially impresses them, but well into first year, they realize that don�t enjoy the day-to-day task. I believe that everyone buying a business should find pleasure and satisfaction in what they do. Make sure the business is right for you.

Brian Stephens of Empire Business Brokers in Tampa can be reached at 813 571-7700 or via e-mail at [email protected].

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