Questions answered on air for April 26-27
On this week's Marketplace Money, Chris and Tess answer questions about rising property values, dealing with a collection agency, transferring savings bonds and switching life insurance.
TEXT OF GETTING PERSONAL (FIRST SEGMENT)
Tess Vigeland: It's time once again for Getting Personal and that's when we answer your money questions. With me once again is our economics editor Chris Farrell. Hey Chris.
Chris Farrell: Hi Tess. What you got for me?
Vigeland: Well, we've got Lisa on the line and she's calling from Washington, D.C., our nation's capital. Hi Lisa.
Vigeland: So what do you do there in DC?
Lisa: Well, I do a couple of things. I'm a teacher and I'm a massage therapist.
Vigeland: Oh, I could use a massage right now.
Lisa: Well come on over.
Vigeland: I'll be right there. So, what's your question for Chris today?
Lisa: Well, I got a letter in the mail from the government of the District of Columbia saying that my real property, meaning my condominium, has been assessed for real property taxation purposes. "An analysis of local real estate market conditions" -- I'm quoting from them -- "has resulted in the above proposed assessed value" and they've of course raised the assessed value.
Vigeland: They raised the assessed value...
Vigeland: ...in the middle of a housing bust?
Lisa: Right, exactly, which, of course, means my taxes will go up and they want me to present them with a market value.
Vigeland: To compare to what they valued it at?
Lisa: I guess so.
Vigeland: Chris, obviously when home prices are rising, this is something that people deal with all the time. Are you surprised at all that they're looking to raise her property taxes in the middle of a housing bust?
Farrell: Not really and for two reasons. One is I think a number of cities are desperate, but there's also often a lag effect and don't hold me to this figure, but less than or around 2 percent of property taxes are appealed, but people who do appeal them, about three-quarters of them succeed.
Vigeland: Oh, so how does Lisa go about doing this? How do you prove the value of your home? Does she have to hire an appraiser?
Farrell: Well, that's one way to do it and I have one other suggestion and this is both for Lisa and for other people. The Home Builders Association of America, if you go to their web site they have what's called the -- I love this name -- Property Tax Reduction Kit and it's a do-it-yourself step-by-step guide to reducing your real estate taxes, but probably the easiest thing to do would be to get an appraisal assuming that that's going to save you more than the cost of the appraisal.
Lisa: Uh-huh. OK, thank you.
Vigeland: All right, good luck Lisa. Thanks for the call.
Lisa: Thanks. Bye bye.
Vigeland: All right, Chris, we got an email from Jane in El Paso, Texas and I have to say this is one familiar question. This happened to me.
Farrell: Oh, well you can answer this question then maybe.
Vigeland: Well, I want to hear from you what you recommend and see if I dealt with it correctly. She recently reviewed her credit report and found out that three collections had been opened in 2004 for a hospital bill that she was not aware of. She was a little surprised that the hospital didn't bother to contact her after all this time. It went straight to this collection agency. She's decided to pay the bill, but she's getting some other suggestions that she not do that. She's heard that she should not call them from her home phone or mail a check from her home address because the collection agency will harass her. So here's the question: how can she best go about paying this four-year-old bill so the people leave her alone?
Farrell: OK, well you can probably give us a real-life experience, Tess.
Vigeland: Well, I'll tell you exactly what I did: I paid the bill. I called the collection agency. The hospital was not able to track me down after I moved. I don't know why that was so hard, but I paid it off with interest -- everything -- because I just wanted to be rid of it and I've never had a collection call since then and I believe it has now been removed from my credit report.
Farrell: And that's exactly what I would do because Jane wants to pay off the bill. So call the agency and just get rid of it. The reason why she's getting that contradictory advice or that slightly paranoid advice; there's some good reason for it. Unfortunately, the debt collection business has become rough and there are horror stories out there and so my standard advice in many cases is to say look, when you're dealing with this type of situation, you really should do everything in writing because of the poor reputation of this industry, but lots of people handle it the way you did, Tess and they don't have any follow-on problems.
Vigeland: Yeah, I mean, if you're paying off the bill, why would they harass you?
Farrell: Exactly. I mean, where you get the harassment stories is when you can only pay off part of the bill.
Vigeland: Ah OK. So if you're paying off the entire bill, just do it and get it over with.
Farrell: Exactly, or you know the other situation happens. Let's say it was a bill from seven, nine years ago and you have no clue whether you really owe this money -- did you pay it, I mean -- and then you're sort of like, well, I want to pay off my bills, but I have no clue whether I really do owe this money and again, that's where you do everything in writing. The situation you described; bravo.
Vigeland: Yeah, well... and frankly I paid it off because it should have been paid by my insurance but by the time I found out it was on my credit report and had gone to a collection agency, I had switched insurance companies. So at that point, trying to get it dealt with by insurance was just going to be a big pain, so I just swallowed it and paid it off.
Farrell: Right. You'd have to hire a lawyer who has expertise in this area and you have other things to do with your life.
TEXT OF GETTING PERSONAL (SECOND SEGMENT)
Tess Vigeland: We're back again with Getting Personal. As always, I'm joined by Chris Farrell, our personal finance expert and Chris, we got an email from Candace and she's in Lansing, Michigan. Fifteen years ago, she bought a series of EE Bonds to help fund the kids' education and both her name and her kids' names are on the bonds.
Chris Farrell: Ouch.
Vigeland: Uh-oh, OK, we're already in trouble. She says that she went to the IRS web site and found that she does not have to pay tax on the interest if the bond is just owned by her and not her children, so what happens now that both of the names are on these bonds?
Farrell: You're paying the tax. That's the deal. Now, there is a maneuver that I believe she can make which is that these are probably paper Series EE Savings Bonds and she can go to treasurydirect.gov and she can open up an account directly with the Treasury and then they'll give her all the things you need to do to turn in her paper bonds and make them electronic and then she can change the co-owner.
Vigeland: Hmm. Essentially, you're rolling over your paper bonds into an electronic bond and while you're doing that you can change who's on the bond?
Farrell: And it's only because there is a difference. There are slightly different rules between the way paper bonds are treated and the way the electronic form of the bond is treated. Now, do I understand this? No, I do not. However, let's just take advantage of it. The other thing and just for other people who have saved with savings bonds for their children's college education, I would really recommend going to the web site www.treasurydirect.gov and you can get all the savings bond information there because there's like eight criterion in order to cash in your savings bonds to pay for your child's college education without forking over a bunch of money to Uncle Sam.
Vigeland: All right, let's hit the phones again. Bill is with us from St. Paul, Minnesota. Hi Bill.
Bill: Hi Tess. How you doing?
Vigeland: We're doing all right and Chris is on the line.
Bill: Hi Chris.
Vigeland: So, tell us a little bit about yourself. What do you do there?
Bill: Well I'm 61, married, both children are grown up and married and each has a child. My title is Staff Engineer which really doesn't mean anything. What I do is I support a web site that manages the inventory and services of all of our customers in our 15 datacenters.
Vigeland: So you're one of those very, very important IT people in the company?
Bill: Yeah, except it's not an IT title.
Vigeland: Okay, well, tell us what your question is for Chris today.
Bill: Well, I have this insurance policy which is part whole-life and part term-insurance for $178,000. The policy terminates at age 65 -- that means I stop paying premiums. I can leave the cash value in there. It currently has a cash value of about $59,000 and I've been advised to transfer this cash value, using what I think is called a 1531 Transfer where I don't touch the cash, to another insurance company where I can get a higher insurance coverage -- somewhere between $236,000 and $240,000 -- and the reason given for doing this is that it will maximize the death benefit while minimizing the out-of-pocket expense.
Vigeland: Well, Chris is that valid? Is that what it will do?
Farrell: Well, I have a couple questions and I can't say, you know, do this, don't do that. I have concerns or warning bells going off. There has been a real problem in the life insurance industry with people having a good life insurance plan and then you're convinced to transfer it into another life insurance plan and what that ends up doing is generating a lot of commissions.
Farrell: And if you look at the early years of a whole-life policy, you know a lot of the premium really is going towards commissions and so I'd be skeptical. I do have... rather than just rely on the Chris Farrell Skept-o-Meter...
Vigeland: Although it does work quite well I have to say.
Farrell: It does. One thing you can do: the Consumer Federation of America has this service www.evaluatelifeinsurance.org and if I remember the figure right, I think it costs you like $70 and they'll evaluate your current policy versus this other policy and see which one does make more sense and frankly I have a feeling that in the end you probably should stay where you are.
Vigeland: So, is that something where if the policy is terminating in four years when he's 65, can he just basically re-up?
Bill: Well, the way the policy is written, you leave the cash value in there and you continue with the coverage until the cash value actually starts increasing the value of the insurance.
Vigeland: So that would be the other option?
Farrell: Yeah and it's a good policy. He's paid it all these years. The commissions are way back in the past, so my suspicion is that this is the policy to hold onto and there's no reason to make any transfer. I'm worried about commission costs and there's been a lot of churning going on in the life insurance. I'd really want to get a second opinion before I would make any move.
Bill: OK. That sounds like good advice.
Vigeland: All right. Thanks so much for the call, Bill.
Bill: Thank you very much.