You need monetary advice from a human 3 times


You can now manage most aspects of your money without ever consulting another person. You can budget, borrow, save, invest, get insurance, prepare your tax return, and make a will – among many other tasks – using apps, websites, and software.

But technology still has limits, especially when you are faced with a money situation that is complex or requires judgment. Consider consulting a human expert in the following situations:

1. You will be deducted from your home insurance

Insurers typically can’t cancel a policy after 60 days unless you don’t pay premiums, commit fraud, or make serious misrepresentation in your application, according to the Insurance Information Institute, a trading group. However, insurers can choose not to renew your policy when it expires.

With car insurance, you often have many options after such a “non-renewal”. Even if you’ve had an accident or multiple damages, you can usually find insurance coverage from companies that specialize in higher-risk drivers.

However, if you get terminated from home insurance, you may struggle to find coverage, says consumer advocate Amy Bach. This is especially true if you’ve been dropped because you made too many claims, or if your area is deemed high risk due to forest fires, extreme weather conditions, or crime, for example.

How would other companies find out? Insurers share such information in databases, and application forms usually ask if you have been “not renewed” by another insurer, says Bach.

Bach’s nonprofit United Policyholders recommends consulting an independent agent or broker who has relationships with multiple insurance companies. The broker or broker should know which insurers may be more open to your application and have a good word for you, says Bach. Although most insurance decisions are made by computers, there are still opportunities for people to override the algorithms.

“It’ll make a difference, though [the agent or broker] can call an underwriter they know and vouch for you, ”says Bach.

If your area is classified as high risk, ask your neighbors for recommendations on agents or brokers who have helped them find cover. Otherwise, you can ask an accountant, lawyer, or financial planner if they have any recommendations. Friends and family can also provide pointers.

2. You are face to face before a tax audit

Most IRS audits are done through the mail and are relatively routine. The IRS will send a letter requesting additional documentation to support a deduction or other tax break that you have taken advantage of. If you send back enough evidence, your case will be closed with no taxes. Otherwise the IRS will send you an invoice.

However, if the IRS wants to meet with you, the stakes get much higher. In fiscal 2020, the average amount of additional taxes recommended on personal reviews was nearly ten times the average on a correspondence review: $ 72,210 versus $ 7,658, according to IRS statistics.

Even tax professionals hire someone to stand in for them on personal reviews, says Leonard Wright, a San Diego certified public accountant and financial planner. Wright has a lot of experience: he was the chief financial officer of an audited company and his personal tax returns were audited four times. In either case, he hired another CPA to represent him.

It’s all too easy to say something that shouldn’t be said when you look closely, says Wright. You could volunteer information that may not be helpful to your case, or become defensive or confrontational.

“You don’t want it to get personal and you don’t want to ruffle the auditor’s feathers,” says Wright.

If you have hired a tax advisor, you can be sure that this person can represent you in a tax audit, but this is not always the case. Typically, CPAs, attorneys, and enrolled agents can represent clients on IRS exams, but other tax professionals typically cannot. Your tax advisor may be able to refer you to someone to represent you, or you may receive referrals from friends, family, or financial advisors.

3. You create an estate plan

Will creation software and estate planning websites can help you produce critical legal documents when money is tight. Otherwise, you should probably consult an attorney, says Betsy Hannibal, senior legal editor for self-help law firm Nolo.

“Why not get individual advice that is tailored to your situation if you can?” Says Hannibal.

It is particularly important to get help if you have to or want to do something complicated with your estate, such as placing conditions on a legacy, caring for someone with special needs or setting up a foundation, she says. You will also need an attorney’s help if you have a lot of debt as there may be ways to protect your assets from creditors. Finally, if you think someone may be challenging your will, see an attorney. A lawyer can take extra safeguards and act as a professional witness that you knew what you were doing, Bach says.

“If someone thinks you were out of your mind, an attorney can help ensure that (a legal challenge) cannot proceed,” she says.

This article is intended to provide background information and should not be viewed as legal guidance.

This article was written by NerdWallet and originally published by the Associated Press.


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