21st Century Student FinLit -Getting Personal SW

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11. T 12. F 13. T 14. Yes, the collision coverage should pay to repair the damage to the car. He will be responsible for paying the deductible. 15. Collision coverage is for damage caused by collision only. Coverage for something else, like theft or vandalism requires comprehensive coverage, so he is probably out of luck here. 16. These indicate policy limits. The 100 = $100,000 in bodily injury to another person; 300 = $300,000 bodily injury per accident; 50 = $50,000 in damage to the other party’s vehicle. None of these numbers explain how much coverage there is for damage to her car. That is under collision or comprehensive coverage. 17. Disability coverage provides income when an insured is unable to work due to illness or injury. It does not apply here. They need Term Life, which is temporary and makes up for the lost income over the earning years of the insured. 18. Probably – at least any amount over the $5,000. Her policy could be canceled and she might be in trouble for insurance fraud. 19. A 20. Generally, PPO plan members can self-direct to a specialist within their plan’s preferred provider network. Will and Fred’s Not So Excellent Co-Ownership Adventure 1. Joint tenancy or tenancy-in-common 2. When one joint tenant dies their ownership interest automatically passes to the other joint tenant(s) A JT has a right of survivorship. A TIC does not. A JT cannot sell or encumber their property without permission of the other joint tenants. A TIC may sell or dispose of their share. They own house as Joint Tenants. Generally, joint tenants can’t sell or encumber an asset without the other joint tenant’s agreement. In the absence of direction, co-ownership is assumed to be joint tenants. They should have discussed how they want to own it and directed the title company to make them tenants-in-common. 3. 4. 5.

6. Yes — very! A co-borrower is liable for an entire debt regardless of what their agreement is with their co-owner(s) about sharing ownership of the asset or responsibility for paying the debt. He’s wrong. The bank will foreclose against the entire property, not just Will’s “share”. As joint tenants they own equal and undivided interest in the property. Fred will lose his interest in the house. Not easily. Once a person is added to title as a joint tenant, it’s hard to remove them. As a cosigner, the loan missed payments and default show up on his credit report. Fred is fully responsible for repayment. 10. Any joint tenant has access to and the right to withdraw all of the money. Joint tenants have an equal and undivided interest in an asset. If you share a bank account know very well and deeply trust anyone who has access to it. 11. If either owner of Joint Tenancy property fails to pay income taxes, the IRS can place a tax lien on the property. The IRS can foreclose to satisfy a tax judgment against any one of the joint tenants. 12. The girlfriend by right of survivorship, since she is still a joint tenant. 13. In a co-signing situation, the item purchased is not for the benefit of the co-signer. The car does not belong to the sister, yet she will have to continue making payments on it if she values her credit score. 15. risks; obligations; attorney; accountant 16. F 17. F 18. T 19. T 20. F 7. 8. 9. marriage are separate property/obligations.

2. Yes, if they are joint tenants they own equal and undivided shares, which makes the entire property at risk for the debts of one JT. Students should indicate that Clark and Tessa would be best suited to being tenants in common, because they both want to be able to independently sell their ownership interest when they are ready. A Acceptable answers for benefits include: making purchases more affordable by spreading the cost, joint ownership to ensure the asset passes to the joint owner, more incomes make it easier to qualify for a mortgage or other loan. Answers for disadvantages include: unintended inheritance outcomes, possibility of losing the asset due to the other owner’s negligence or debt, inability to freely sell, transfer and manage the asset. Marriage will not re-characterize these from separate to joint debt or property. Pre-marriage debt remains a separate responsibility after marriage; pre-marriage assets remain separate property. Bad idea. Joint bank accounts should only be shared with whom you have a close, long-standing and very trusting relationship. 10. F 11. C 12. D 13. T 14. D 15. As co-signors, Mary and Mindy are both equally responsible. 16. Yes. Mary is a borrower and responsible for payment of all the charges. As a co- borrower, Mary also co-owns the furniture. 17. Rosie can sell her interest to someone who wants to be a part owner of an apartment building or sell her share to Posy. 18. No. It was her separate property when they got married. It stays her separate property after they are married. 19. F 20. Yes, a co-debtor is liable for repayment of the full loan in spite of what the agreement might be among the borrowers, and this shows on a credit report. 3. 4. 5. 6. 7. D B

14. No. Assets and debt acquired before PRODUCT PREVIEW 8. 9.

Couple’s Financial Compatibility Survey

Student’s discretion.

Are You Financially Literate? Chapter 16 Quiz

1.

D

385 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY

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