Suttons Bay Law

Creditors use employer garnishment errors to collect entire debt from employers
Employee wage garnishments appear to be informal and somewhat routine proceedings from the perspective of the employer. Employers are routinely sent writs of garnishment on printed forms, and employers can simply respond to writs of garnishment without using an attorney. Employers, however, face a huge risk relative to its employees’ garnishment proceedings because in the State of Michigan, employers can be held liable for the entire debt of the employee that is subject of the garnishment, including court costs and attorney’s fees, if the employer fails to comply with certain requirements. Some creditors are paying attention to the small details that the employer may overlook, because the creditor wants to be repaid and rather than wait around to be paid from the debtor, creditors are using employer garnishment errors to collect the entire debt from the employer. Employers are commonly not represented by counsel in this process and creditors are represented by counsel, providing the creditor a significant advantage.

Failure by employers to respond within 14 days could cause courts to take action against the employer
If an employer is named as the garnishee in a writ of garnishment, the employer must provide information as to the debtor-employee’s money that the employer controls on the Garnishee Disclosure Form, including a calculation of the amount that is available for garnishment from the employee’s paycheck. The properly completed form must be mailed to the court and the parties within 14 days after the employer receives the writ of garnishment. If the employer fails to disclose within the 14 days, the court can take action against the employer and can order the employer to pay the full amount owed on the judgment as stated in the writ of garnishment. A friendly letter to the creditor stating that the employee is no longer in the employer’s records or other information is unavailable is insufficient. The creditor can go to court and obtain a default judgment for the entire amount of the debt because the employer did not properly respond to the writ.

Employers are responsible for managing the priorities and amounts
Additionally, if an employee has multiple creditor problems and those creditors have all obtained a writ of garnishment, employers are responsible for managing the priorities and amounts of the various writs. This can be challenging for an employer to correctly manage. For a one time, $6.00 fee, employers must calculate, deduct, and remit payments, in addition to accommodating other obligations the employee-debtor may have.

How to lessen your risk of direct employer liability
To lessen the risk of being responsible for an employee’s debt, employers should establish a detailed process of addressing writs of garnishment that begins when the writ arrives in the mail, carries through the calculation process and the final step of properly serving the disclosure. In Michigan, an employer is not required to retain counsel to respond to a writ of garnishment but this creates an interesting scenario where the creditor is represented by counsel and the employer that is at risk for the entire debt of the employee is not necessarily represented by counsel. Retaining an attorney to advise and evaluate your garnishment process is recommended to lessen your risk of direct employer liability.

Additional information:

Garnishee Disclosure Form and Instructions

A Guide to Garnishment and Periodic Payments

Dan A. Penning

Tags: Asset Protection, Employment Law, Know it Now by Dan Penning
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Going, Going, Gone!

U.S. taxpayers are experiencing a “perfect storm” of opportunity to make tax-free transfers (gifts) of assets such as family businesses, real estate and other wealth from one generation to the next. The gift tax was first enacted in 1932 by the federal government. Over the coming months, we all have what may be the best opportunity since 1932 to gift family assets without a gift tax now and to avoid significant estate taxes later.

Two notable exceptions to the gift tax
Some people are not aware that giving away assets to their children or other individuals may create a taxable event. The “gift tax” referenced above applies to anything of value transferred by one individual to another. There are two notable exceptions to the gift tax. One is an “annual exclusion” which is an exception that allows individuals to gift up to $13,000.00 per year per person without any gift tax consequences. A second exception is an overall gift tax exemption which historically has been limited to $1M during an individual’s lifetime.

The above-referenced “perfect storm” of opportunity is almost certainly short-term in nature. Several key elements have transpired to create this opportunity as follows:

• At the conclusion of 2010, Congress changed the estate tax exemption which allows for transfers of gifts up to $5M per individual ($10M per married couple) of assets with no federal gift tax.
• Asset values, particularly for real estate, are still significantly depressed resulting in a greater opportunity to gift value from one generation to the other. In the State of Michigan, a recent Supreme Court decision also provides a unique opportunity for parents to gift ownership of real estate to their children in such a way that a transfer can avoid a significant increase in future real estate taxes.
• Certain widely accepted techniques used by experienced estate planning attorneys may also result in individuals transferring 10 to 20 times the $5M or $10M gift tax exemption limit without incurring gift taxes based on certain “leveraging techniques”. Although these techniques can be complex, they are well established and have withstood attacks in the past by the IRS.
• Most transfers that are made to take advantage of the gift tax exemption also provide significant asset protection for the assets.
• Many of our Cottage Law clients with family cottages will be able to enjoy long-term tax savings as a result of taking advantage of this opportunity to make tax-free transfers (gifts) of these legacy assets. Visit our Cottage-Law website at www.Cottage-Law.com for additional information.

An appropriate gifting strategy can save significant taxes
Why act now? Unless Congress and President Obama take further action to create a new law, the 2010 Tax Act will automatically expire at the end of 2012 (approximately 13 months from now). The current lifetime gift tax exclusion of $5M per person will drop to $1M. The window of opportunity for gifting significant assets from one generation to the next to avoid potential future estate tax is narrowing. Gifting assets removes the asset’s value in the transferors estate for estate tax purposes. As a result, an appropriate gifting strategy can save significant taxes.

Reducing future tax burdens
It is a widely accepted belief among financial advisors and other financial experts that taxpayers should transfer assets that are depressed in value that may be subject to future estate tax liability as soon as possible. As these assets begin to recover and grow in value in the future, so do an individual’s current and future tax burdens.

The possible benefits
Whether you perceive yourself as wealthy or not, given the possible benefits of making gifts of assets and the unique opportunity that currently exists to do so, everyone should at least evaluate their potential future estate tax liability and how current gifts of assets may reduce that liability.

Please contact me if you would like to evaluate your own situation to determine whether gifting assets at this time is right for you.

Dan A. Penning

Tags: Asset Protection, Business Succession, Cottage Law, Estate Planning, Know it Now by Dan Penning
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Have you ever stood at an automobile rental counter while traveling staring at a rental contract trying to figure out what the insurance options mean? “Should I buy additional coverage through the rental car company or am I paying for coverage I already have based on my insurance coverage for my own vehicle?”

Consider the following information the next time you rent a car while traveling or need a replacement while your vehicle is being repaired.

Your Primary Insurance Coverage

As a general rule, your automobile insurance coverage on the vehicle you own or lease will cover you on the same terms with respect to repairing physical damage (less applicable deductibles) to a vehicle in an accident and liability coverage concerning potential injuries to third parties.

As a result, depending on your insurance coverage and the various deductibles and limits in the policy you carry on a vehicle you own or lease, many of the “supplemental” coverages offered by the rental agencies are unnecessary and probably a waste of money. However, there is on exception.

Auto Rental Collision Damage Waiver

One exception to the general rule that your primary insurance is adequate to cover your risks of loss in automobile rental situations is a program offered by all automobile rental companies known as “Auto Collision Damage Waiver” or sometimes referred to as “Optional Damage Waiver”. This program is not insurance but rather a contractual provision where a rental company, in exchange for a fee usually in the form of a daily charge, agrees to assume all of the risk for any physical damage to a vehicle while in your control as well as waiving or covering payment of other fees usually buried in the rental contract fine print such as administrative fees, loss of use fees and surcharges imposed by a rental company when a vehicle is damaged.

In Summary

Purchasing a damage waiver from the rental company essentially takes away any chance your own insurance company would have to pay any claim for physical vehicle damage and the program insures that you will not have to pay any deductibles, administrative fees, loss of use charges and other surcharges that your own insurance would not cover. The “damage waiver” provision does not apply to liability issues with respect to injuries to third parties but, rather, only the physical damage to the vehicle.

Let’s Consider An Example

If you rent a vehicle on vacation or for business and you are involved in an accident resulting in $5,000.00 damage to the vehicle, your financial responsibility would be as follows:

• Without Physical Damage Waiver – if you opted out of purchasing the “physical damage waiver” program, then your insurance company would receive a claim from the rental company to repair the vehicle. You would then have to pay whatever deductible you have under the terms of your primary insurance policy and you would be responsible to pay administrative fees, loss of use charges and any other contractual charge included in the rental contract which, on average, can total over $1,000.00. In addition, don’t forget that because an accident claim is submitted to your insurance carrier, that the accident will be on your record with the insurance company for a period of three years often resulting in increased premiums of $300.00 – $400.00 per year for three years. All total, the accident could cost you over $3,000.00 out-of-pocket based on your deductible, the contract fees to the rental company and the future increased insurance premiums. Your insurance carrier would pay for the $5,000.00 in damage to your vehicle less your deductible.
• With Physical Damage Waiver – given the same example with $5,000.00 of damage to the vehicle, if you purchased the “physical damage waiver” (usually costing $15.00 per day), you simply return the vehicle to the rental company and walk away. There is no claim filed with your primary insurance carrier and all other contractual costs and deductibles are waived. Based on the fact no claim was filed with your insurance company, there are no increased premiums. Assuming a five (5) day rental period, your out-of-pocket costs given the same accident example would be $75.00 (5 x $15.00/day). Your insurance company would pay $0 for repair to the damage to the vehicle, you would pay $0 in out-of-pocket costs and the rental car company would assume and pay for all costs to repair the rented vehicle.

Check Your Credit Card

If you pay for your car rental with a credit card, many credit card companies offer the physical damage waiver as a benefit of your card membership. This would allow you to decline purchasing the program from the auto rental company while still enjoying the protection from your credit card company.

Dan A. Penning

Tags: Asset Protection, Know it Now by Dan Penning
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Many of us know someone or will possibly be responsible for someone that is affected by mental illness. Yet, many patients have not executed patient advocate designations for psychiatric care. Psychiatric illness may come on quite suddenly and can be traced to metabolic imbalances, drug interactions, and other situations that, initially, may not appear to pose a threat to someone’s mental health. There are numerous stories of patients being erroneously diagnosed and treated for an extended time for a condition that did not exist. This can result in severe depression and anxiety disorders. When treatments fail, the patient can sometimes be persuaded to undergo therapies that may provide relief but have severe side affects. For example, I recently read about a woman who agreed to undertake electric shock therapy after her course of treatment failed to successfully combat a supposed infection. Electric shock therapy is known for wiping out years of memories which can force the patient into losing their career and being unemployable. If the patient is depressed, maybe to the point of suicidal tendencies, can they be competent to consent to treatment and therapy? On the other hand, individuals with severe psychiatric illnesses such as bipolar disorder, post-traumatic stress disorder, and schizophrenia can have time periods where they are stable, lucid, and handle a high-level career.

Everyone should have input, at some point, into the treatment of their medical and psychiatric issues in the event of an emergency. Individuals can make these decisions while they are still competent, and generally, these decisions are addressed in a Patient Advocate document (a power of attorney designation for health care and mental health). We encourage our clients to appoint a trusted surrogate (a “patient advocate”) with a power of attorney to authorize psychiatric care on behalf of the client in the event of mental illness. An individual may prefer to combine the appointment of a patient advocate with an expressed declaration of his or her preferences when the patient advocate encounters certain situations and choices that affect the patient.

There will continue to be legal, moral, and ethical issues related to decisions for the treatment of mental illness. The person you choose to stand in your place to make mental health care and treatment decisions on your behalf should be willing to take the time to understand mental illness, advocate for care that is in your best interest, and persuade mental health providers to undertake the best course of action for you. We have assisted many clients with the designation of a patient advocate in a written and signed document, that can be placed on file with relevant health care providers. We can help you do the same to better protect yourself, or a family member, in the event of an unexpected (or expected) onset of mental illness.

Dan A. Penning

Tags: Asset Protection, Know it Now, Personal Management by Dan Penning
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Every day my in box fills with information from many sources. Some is from mainstream media, trade journals, special reports and various reviews and findings from the legal and wealth advisory community. Often, while reading an article or report, many people come to mind that I think might also share an interest in the information.

For example, earlier this year I read through a Special Survey Report published by WealthCounsel and Trusts & Estates magazine. I read it again this week. Even though the survey was directed to estate planning attorneys about emerging industry trends within our profession, there were some items that were of interest to me because they addressed those of us who are moving in 2011 from the “Baby Boomer” and “Generation Jones” generations to being “Golden Boomers”.

Yes, the truth of the matter is, we are maturing into “Golden Boomers” and as “we” begin to approach and enter into retirement age our spending habits and where and how we spend – or not spend – our money will have an affect on the economy.

Planning as “Golden Boomers”
Another key finding from the survey dealt with the concern that most Americans don’t have an estate plan or even a basic will. It’s believed that most people fail to plan because they aren’t aware of the benefits of creating an estate plan nor are they aware of the negative consequences of not having an estate plan.

Estate planning is not just for the wealthy
Another assumption revealed from the survey is that many people think estate planning is only for the wealthy, and because of that they fail to realize the legal limitations of joint tenancy and beneficiary designations.

Why you should plan
It doesn’t matter how old you are, whether you’re a “Baby Boomer,” “Golden Boomer,” or even a member of “Generation X,” without a trust-oriented estate plan your heirs will undoubtedly find themselves walking through the doors of a probate court system. Even though it’s easy to understand the need to plan, the urgency to plan often gets overlooked.

Life doesn’t wait
Many think they can do their estate planning next quarter, or even next year, but reality has proven many times that life doesn’t wait for your estate plan. There are many benefits to having an estate plan, and many consequences to not having one. If you want to minimize estate taxes, prevent family disharmony after death and avoid having your estate tied up in probate, plan to begin planning now.

Control is prime motivator for planning
With planning you can preserve and manage your wealth effectively and you can make sure your assets are distributed as you direct.

If you have questions about creating your estate plan give me a call so we can begin planning now to care for your financial well being and personal legal health.

Dan A. Penning

Tags: Asset Protection, Estate Planning, Know it Now, Personal Management by Dan Penning
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As we counsel clients during the preparation of their estate plans, one concern is usually very evident – parents are worried that their children will squander the funds and assets that they worked very hard to accumulate. This concern can be addressed in many ways, but usually, parents request specific provisions in their estate planning documents that control an heir’s access to distributions based upon age, accomplishments, and certain life choices. Therefore, the assets are distributed largely because a specific milestone has been reached. The thoughtful nature of the distribution planning, however, leaves a primary problem unaddressed – preparing the heirs for wealth transition from one generation to the next.

Studies conducted by various institutes demonstrate that many estate plans that have been completed and then updated carefully and competently throughout the years, successfully address the issues relevant to the parents’ wishes. The attention to detail, however, cannot necessarily fill the gap of the heirs’ lack of direction and instruction that results in chaotic estate administration, family disharmony, and relationships that remain broken forever.

The “soft” skills that are necessary to develop the maturity and wisdom for the successful transition of family wealth should be given more attention by parents and grandparents. Most of the care and thought given to such considerations as tax-planning, beneficiary designations, and other details are very important to the preservation of family wealth, yet no matter how well those matters are addressed in the estate plan, if the heirs have not been prepared to accept and manage the responsibility that comes with an inheritance, the investment that was made in the estate plan may not provide the return the client was hoping for (after his or her death).

Ask business owners what the most important asset of their business is, and they usually respond with “our employees.” Their answer does not consider the banking account balance of the business. A family’s most important assets are the people- the parents, children, grandchildren, uncles, aunts, grandparents, cousins, etc.- the understanding and knowledge that these individuals have learned and will, ideally, integrate into the family.

During the summer months when families can spend more time together, such as on vacation, the opportunity is provided to work on communicating family values and stories that impart learning experiences, reading excellent books that promote stories of character, and deliberately using intelligence and common sense to tackle problems. Parents can encourage their children to develop the ability to work through problems while dealing with difficult personalities and people, to consider other options to solve seemingly incompatible ideas that siblings may have amongst themselves, and to place the most value on the people that are a part of the family organization rather than on the financial assets that will eventually become theirs.

Parents can begin by encouraging shared values and the enhancement of the individuals and the family as a whole. A family can preserve itself through many, many generations if the proper estate plan is in place and if the attitude toward the family’s assets is that of the assets serving the harmony, growth, and human capital of the family.

Dan A. Penning

Tags: Asset Protection, Business Succession, cottage succession planning, Estate Planning, Know it Now, Personal Management by Dan Penning
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The Practical Effect of Michigan Supreme Court’s Decision in the case of Klooster v City of Charlevoix

The Supreme Court’s decision in the Klooster case provides that certain types of joint ownership of real estate in Michigan can prevent property taxes increasing at the time of a joint owner’s death. While the decision is generally favorable to the taxpayer, there are various rules and contingencies that must be satisfied in order to achieve property tax savings.

Historical Perspective on Michigan’s Property Tax System

In 1994, voters passed a law (Proposal A) amending a portion of the Michigan Constitution to limit the annual increase in property tax assessments. The purpose of the law was to limit taxes on property as long as it remained owned by the same party, even though the actual market value of the property may have risen at a greater rate. The Michigan Legislature was then instructed to determine the specific rules needed to implement the effect of the law on Michigan property taxes.

The Legislature passed law that fixed the cap on assessment increases at the lesser amount of either 5% of the assessed value of the property for the previous year or the increase in the rate of inflation from the previous year (usually less than 2%). However, after certain transfers of ownership occur, property becomes uncapped and thus subject to reassessment based on actual property value. In the event of a “transfer of ownership” of property after new law took effect in 1995, the property’s taxable value for each calendar year following the year of the transfer is the property’s state equalized valuation for the calendar year following the transfer.

From the definition of “transfer of ownership” set forth by the Legislature in the law, there were 17 specific transfers and conveyances that were exemptions (exceptions), including the creation and termination of certain joint tenancies (transfers creating a joint ownership of property or the death of a joint owner). In the event an exemption applies, the property does not become uncapped and is not then subject to reassessment based on actual property value.

The Joint Tenancy Exemption

In order to avoid an uncapping of property taxes at the death of a joint owner, the first element that must be satisfied is that when the joint ownership was established, at least one of the joint owners was an “original owner”. An “original owner” to satisfy this provision of the joint tenancy exception would be a person who owned the property at the time that the last “uncapping occurrence” occurred. For example, if a husband and wife, or the survivor of them, purchased property in 1998 resulting in the uncapping of the property at the time of their purchase, then either of them would be an “original owner” and satisfy this element of the joint tenancy exception.

The next element that must be satisfied in order for the joint tenancy exception to apply is the form of joint ownership must be “joint ownership with rights of survivorship.” This type of joint ownership means that all of the joint owners have a current ownership interest in the property; however, at the time of one of their deaths, the deceased individual’s interest then, by operation of law, transfers to the remaining joint owner(s). A type of joint ownership that does not satisfy the test is joint owners as “tenants in common”. This type of joint ownership indicates that a joint owner and undivided fractional share of the property and in the event of a joint owner as a tenant in common’s death, the deceased individual’s share is then part of his or her estate and can transfer to their heirs.

As a result, a parent who is an “original owner” pursuant to the aforementioned definition can now transfer real estate to his or her children as joint tenants with rights of survivorship. In the event the parent predeceases the children, there would be no uncapping of the property for property tax purposes at the time of the parent’s death. Neither the initial transfer by the parent to the children or the subsequent death of the parent would constitute a “transfer of ownership” and result in an uncapping of the property for property tax purposes. This scenario can be attractive to certain real estate owners who wish to transfer their property to their children without a significant increase in the property taxes resulting at the parent’s death.

Potential Problem

The potential problem with creating joint tenancies to avoid an increase in property taxes is that the time of the death of an original owner, the surviving owner must maintain joint ownership of the property as “joint tenants with rights of survivorship”. A requirement of continuing to own the property as joint tenants with rights of survivorship means that if ownership is maintained that way, then at the death of one child, the remaining children would receive that deceased child’s ownership share. That result is not usually keeping with parent’s goal that children often times be treated equally with respect to the assets in the parents’ estate. The solution, in order to achieve the parents’ intended goal would be to change the ownership of the property after the parents’ death from joint tenants with rights of survivorship to joint tenants as tenants in common. However, that change of ownership would be deemed to be a transfer of ownership and the property would uncap for property tax purposes at that time.

As a result, the joint ownership exception for purposes of avoiding an uncapping of the property at one joint owner’s death is most attractive where a parent(s) intends to leave ownership of real estate to a single child. That being said, there is an advantage to transferring property jointly to more than one child in that the children can always own the property for an indefinite period of time before changing ownership to “joint ownership as tenants in common” which would uncap the property but, in the mean time, children as joint owners would enjoy the tax savings.

Conclusion

While the Supreme Court’s decision presents a benefit to Michigan taxpayers who are real estate owners, everyone should keep in mind that the Legislature could amend the current law to remove the joint ownership exception which has been recognized by the Supreme Court in the Klooster case. Whether or not legislative action in the future would be retroactively applied to those joint ownership situations that existed prior to any legislative action taking place is unclear. If you are considering a transfer of real estate to possibly take advantage of the joint tenancy exemption, please contact us to discuss the specific facts of your situation and your goals to make sure your proposed action is best for you and your family.

Dan A. Penning

Tags: Asset Protection, Cottage Law, Estate Planning, Know it Now by Dan Penning
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We are pleased to announce that for the second consecutive year, Dan A. Penning was named a FIVE STAR wealth advisor for 2011 by HOUR Detroit Magazine. The magazine contracted an independent market research company to administer a research process to identify a select group of wealth managers who were exceptional in both their ability and commitment to overall client satisfaction.

More than 102,500 high net worth individuals and 4,200 financial services professionals were asked to evaluate wealth managers including financial planners, investment advisors, estate attorneys and accountants in the Detroit community. The final list was reviewed by a blue ribbon panel of financial services industry professionals. Less than 7% of the wealth managers in the Detroit area, including attorneys, accountants, and financial advisors, were selected.

Tags: Asset Protection, Business Management/Law, Estate Planning by Dan Penning
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Dan A. Penning has been invited as a featured speaker to present on the topic of estate and gift tax issues concerning cottage succession planning at the ICLE 51st Annual Probate & Estate Planning Conference for Michigan attorneys. Penning will join two other speakers addressing cottage law succession planning issues during the three-day conference featuring a variety of topics for Michigan attorneys seeking continuing legal education. The conference will be held at the Grand Traverse Resort, in Acme, Michigan on May 19-21, 2011 and a second presentation will be held at The Inn at St. John’s in Plymouth, Michigan on June 17-18, 2011.

Tags: Asset Protection, Business Succession, Cottage Law, cottage succession planning, Estate Planning by Dan Penning
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Many services available at no cost

Data breaches and loss of personal identifying information have spawned products and services to help consumers prevent or minimize the risk of identity theft. Some rights and protections you have under federal or state laws can help you protect your identity and recover from identity theft at no cost, but some people either prefer to pay a third party to perform these services or they are not aware that many of the services are available at no cost.

Free Fraud Alerts
A fraud alert is a signal placed in your credit report or credit file to warn potential creditors that they must use what the law calls “reasonable policies and procedures” to verify your identity before they issue credit in your name. Fraud alerts may be effective at stopping someone from opening new credit accounts in your name, but they may not prevent the misuse of your existing accounts. Under the federal Fair Credit Reporting Act (FCRA), you may be entitled to two kinds of free fraud alerts: initial and extended.

Initial Alert:
You may ask a consumer reporting company to place an initial fraud alert on your credit report if you suspect you have been, or are about to be, a victim of identity theft. This may be appropriate after your wallet or another source of personal information is lost or stolen. An initial fraud alert is good for 90 days, and can be renewed when appropriate. To place an initial fraud alert, call the toll-free fraud number of any one of the three national consumer reporting companies. The company you call is required to contact the other two; they, in turn, will place an alert on their versions of your report. Expect to receive a confirmation from each of the companies.

Equifax: 1-800-525-6285

Experian: 1-888-EXPERIAN (397-3742)

TransUnion: 1-800-680-7289

When you place an initial fraud alert on your credit report, you’re entitled to order one free credit report from each of the consumer reporting companies; if you ask, only the last four digits of your Social Security number will appear on your reports.

Extended Alert:
If you have been a victim of identity theft, you may ask for an extended alert, which stays on your credit report for seven years. To get an extended fraud alert placed on your report, you will need to contact one of the credit bureaus, and provide an Identity Theft Report, such as a police report or other report to a law enforcement agency, including a report to the FTC. If your credit report has an extended alert, potential creditors must contact you in person, or by phone or some other method you have provided before they can issue credit in your name. When you place an extended alert on your credit report, you’re entitled to two free credit reports from each of the consumer reporting companies within 12 months. In addition, the consumer reporting companies must remove your name from marketing lists for pre-screened offers of credit for five years.

Credit Freezes
If you place a freeze on your report, potential creditors and certain other people or businesses can’t get access to it unless you lift the freeze temporarily or permanently. Limiting access to your credit report makes it more difficult for identity thieves to open new accounts in your name. Most creditors will need to view a credit file before opening a new account; if they can’t see the file, they may not extend the credit.

A credit freeze is different from a fraud alert in a number of ways. A freeze generally stops all access to your credit report, while a fraud alert permits creditors to get your report as long as they take steps to verify your identity. The availability of a credit freeze depends on state law or a consumer reporting company’s policies; fraud alerts are federal rights intended for consumers who believe they may have been, or actually have been, victims of identity theft. Some states charge a fee for placing or removing a freeze, although it is free to place or remove a fraud alert.

The cost and lead times to lift or remove a freeze vary, so it’s wise to check with your state authorities or with a consumer reporting company in advance if possible.

Free Credit Reports
Federal law gives every consumer the right to one free credit report from each nationwide consumer reporting company every 12 months. Requesting a report from a different company every few months can help you monitor activity on your credit reports. For more information, or to request your free credit reports, visit www.annualcreditreport.com.

Identity Theft Protection Products and Services for Sale
Identity theft protection companies offer a range of products and services for sale. Often, the companies advertising these services simply are offering to place a fraud alert or credit freeze on your report as described above. Under the law, initial fraud alerts and renewals are available for free if you have reason to believe you have been or are about to be a victim of identity theft.

Some companies, including consumer reporting companies, offer subscriptions to credit monitoring services. These services track your credit report, and generally send you an email alert reflecting recent activity, such as an inquiry or new account. Some companies offer services to help you rebuild your identity in the event of identity theft. Typically, these services operate by obtaining a limited power of attorney from you, which enables the company to act on your behalf when dealing with consumer reporting companies, creditors, or other information sources.

Additional services include removing your name from mailing lists or pre-screened offers of credit or insurance, representing your legal interests, “guaranteeing” reimbursement in the event you experience a loss due to identity theft, or helping you track down whether your personal information has been exposed online. Before you agree to pay for any of these services, read the fine print. Some of these services are available at no cost: for example, pre-screened offers of credit and insurance can be stopped for five years or permanently by calling toll-free 1-888-5-OPTOUT (1-888-567-8688) or visiting www.optoutprescreen.com

Tags: Asset Protection, Know it Now by Dan Penning
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