If you are an investor in Australia, it’s likely you have come across the term “franked dividends.” But what exactly are franked dividends, and why are they important to understand? This article will provide a comprehensive guide to franked dividends, including what they are, how they work, and why they can be a valuable addition to your investment portfolio.
What is a Franked Dividend?
You may be wondering, “what is a franked dividend?”A franked dividend is a type of dividend payment made by an Australian company that has already paid corporate tax on its profits. The term “franking” refers to the process of crediting the tax already paid to the shareholder who receives the dividend.
The Australian tax system allows companies to pass on the benefit of the tax they have already paid to shareholders through franked dividends. This means that shareholders receive the full value of the dividend, as well as a tax credit for the amount of corporate tax paid by the company. The tax credit can be used to offset the shareholder’s own tax liability, reducing their overall tax bill.
How Franked Dividends Work
To understand how franked dividends work, it’s important to understand the basic structure of the Australian tax system. Companies in Australia pay corporate tax on their profits at the rate of 30%. When a company declares a franked dividend, it passes on some of these profits to shareholders, along with a tax credit.
The tax credit is calculated as the amount of corporate tax paid by the company, divided by the number of shares outstanding. For example, if a company pays $100 in corporate tax and has 1 million shares outstanding, each shareholder would receive a tax credit of $0.10 per share.
Shareholders can then use the tax credit to offset their own tax liability. If the shareholder’s marginal tax rate is less than 30%, they will receive a cash refund for the difference. For example, if the shareholder’s marginal tax rate is 20%, they would receive a cash refund of $0.10 for every $0.50 of franked dividends received.
Why Franked Dividends are Important
Franked dividends can provide several benefits to investors, including:
Increased income: Franked dividends provide shareholders with a higher level of income compared to unfranked dividends, as the tax credit increases the overall value of the dividend.
Tax benefits: As mentioned, shareholders can use the tax credit from franked dividends to offset their own tax liability, reducing their overall tax bill.
Lower risk: Companies that pay franked dividends are typically well established, with a proven track record of profitability. This makes them a lower-risk investment compared to companies that do not pay dividends.
Diversification: Adding franked dividend-paying stocks to your investment portfolio can provide diversification, as these stocks tend to come from different sectors and industries compared to other types of investments.
Long-term growth: Companies that pay franked dividends are often focused on long-term growth, which can benefit investors in the form of capital appreciation and future dividend payments.
Conclusion
Franked dividends are a valuable component of the Australian tax system, providing investors with increased income, tax benefits, and diversification opportunities. By understanding how franked dividends work, you can make informed decisions about your investment portfolio and take advantage of the benefits they offer. Whether you are a seasoned investor or just starting out, franked dividends can be a valuable addition to your portfolio.
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2.4 million funerals take place in the U.S. every year. If you're not in the funeral business, this is a sobering thought.
When a parent dies, the grief and pain you are dealing with can often be compounded by financial pressures if you are named as their executor.
In a way, it is flattering to be named a parent's executor. It means they trusted your intelligence, patience, and fairness enough to appoint you the overseer of their property after they are gone.
In other ways, it is overwhelming to consider the number of debts, unknown assets, and contentious relatives you will need to keep a record of.
If you are unsure what to do when a parent dies and you are the executor, take a deep breath, pick up a pen, and begin to approach your responsibilities in an organized, measured way.
What to Do When A Parent Dies and You Are the Executor:
Right after someone dies, there is usually a period of chaos. During this time, the estate needs to be opened, and the executor is appointed to avoid surprises by debt collectors or the IRS. You may have already been appointed the executor in a will.
No one should begin to take or distribute assets yet.
As the executor, it is your job to decide whether or not the will should go into probate, which is the official "proving" of the will in court. If the estate is larger, or if there is some disagreement about the will, probate may be necessary before you can begin carrying out your duties as the executor.
When you go through probate, you will have to file papers with the local probate court, prove that the will is valid, and present the court with a list of debts and assets. You should also explain how they should be distributed. The probate process could take anywhere from a few months to a year.
If your parent set up a living trust, you won't have to go through probate. The person named as the trust's successor will be able to distribute assets according to the will without having to go through the courts.
Your overall responsibility as the executor is to make sure that all debts and creditors of the deceased are paid off. Then the rest of their assets can be distributed according to their expressed wishes.
An executor is different from a power of attorney, who makes decisions about life-sustaining medical treatments while a loved one is still alive. Once they have passed, the power of attorney is no longer valid.
If there are any dependent children or pets, you will need to be certain that guardians are appointed in accordance with the decedent's wishes. These are often complicated things to handle, you might want to enlist the services if an expert right away. Thomas Church, Florida Will Contest Attorney is one of the best Estate Litigation experts in USA.
Get the Right Paperwork:
Your first duty as the executor is to find your parent's will. It could be filed away with important paperwork or in the hands of their attorney. It is usually necessary to file with a probate court, even if it is determined that probate is not necessary.
If there is a will in place, you will receive letters testamentary, which is a legal document authorizing you as the executor to take control over the decedent's estate. If there is no will, you will receive letters of administration. You can then begin your work as an executor.
You should also be certain that a pronouncement of death has been filed. This is a letter filled out by a medical professional stating where and when the decedent died.
A death certificate should become available after the funeral. You can obtain it from your funeral home, county registrar, or health department. About 10-15 copies should be sufficient to cover your administration needs.
You will need the certificate to prove the situation to insurance, credit card, and mortgage companies. If you find you need more copies, they can be obtained from the Department of Vital Records.
It is important to begin keeping a list of assets and liabilities before liquidating assets, paying off debts, and distributing funds among beneficiaries.
Acquiring credit card statements, mortgage statements, vehicle registrations, a social security card, and copies of insurance policies will also make the process smoother.
You should be sure to punch a hole in the decedent's driver's license and passport to help prevent fraud.
Giles & Robinson, P.A. explains that an ancillary administration can take six to nine months to finalize.
Hire Some Help:
An estate attorney, like Verhaeghe Law, can help you avoid mistakes that could cost you money in the long run. A financial consultant can help with asset transfers. An insurance agent can assist with claims forms to help make sure beneficiaries are paid.
The costs of the funeral, as well as getting the decedent's affairs in order, are taken from the estate. Don't be afraid to ask for help to make sure the process goes smoothly and does not end up making you liable for problems that may arise.
Stop Payments:
The decedent's estate is responsible for any debts that arise after death. Heirs and beneficiaries are not responsible, although some feel a sense of moral responsibility to pay them off.
You should notify all credit card companies, government agencies, utility companies, and mortgage banks of the death. This will help you to avoid late charges, and accounts will be transferred to decedent status. Doctors and other health professionals who may be owed fees should also be notified.
Check the decedent's credit card statements and be certain to cancel any payments with "auto-renewal," such as those for magazine subscriptions, AARP, AAA, and clubs. You may want to wait a month or two before closing the decedent's primary credit card so that you can view the companies that need to be notified.
Be certain to contact the three main credit reporting agencies: Equifax, Experian, and Transunion, immediately. They can flag the decedent's account so no one will try to steal their identity. It is also a good idea to check back two months later to be certain no fraud has occurred.
You should be sure to notify Social Security so they will stop payments and you will not be responsible to pay back posthumous checks.
If your parent was employed at the time of their death, you will need to call their employer. You can find out about any payments due to them, death benefits, life insurance policies, and beneficiary benefits.
Pay Off Debts:
Keep a list of how much your parent owed to mortgage companies, credit card companies, car payments, etc. You may need to liquidate assets, such as selling houses or cars, to pay off these debts.
Check with a CPA to see if your decedent's taxes have been paid. Money from the estate can be used to pay any money owed to the IRS.
You will also need to file taxes for your parent from the day of the year they passed until the date of death. If the estate is large, there may also be state or federal estate taxes to pay.
Consolidate Assets:
The executor should open a separate bank account for ongoing bills, as well as incoming checks. Keep valuables safe in a safety deposit box.
You should hire an assessor to see how much their property is worth. It is your duty as the executor to maintain the decedent's property until it is sold or bequeathed to the proper beneficiary.
Distribute Assets and Maintain Healthy Communication:
After all known debts are paid, you can begin distributing remaining funds to the family as specified in the will. It is important to get and keep a signed receipt from each beneficiary after they are paid.
Many arguments and breakdowns during the asset distribution process happen because folks feel that they are being overlooked or marginalized. It is important to let them know what the timeline is so that they will know exactly what is being done with the funds and when they can expect to receive funds that are due them.
It is a good idea to take some time before making investments with estate funds, as grieving can be an emotionally overwhelming time for most.
Close the Estate:
You may be required to file a petition in court before distributing assets and closing the estate. As the executor, your duty is complete.
Take Care of Yourself:
Losing a parent can be one of the most confusing, disheartening times in an individual's life. If you are overwhelmed by the complications of what to do when a parent dies and you are the executor, be sure to enlist the help of qualified professionals.
By keeping detailed records, liquidating assets, paying off debts, and distributing assets, you can be assured that your parent's affairs have been handled properly and you can begin taking steps toward the next chapter in your life.
For more lifestyle advice, read our blog today.
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Debt consolidation has become a very common practice in the modern world. Financial advisers encourage people to take this approach especially if you want to become debt-free. Always go for a credit card loan during emergencies and look for means and ways of clearing it fast. Credit cards loans only assist you because you get them very fast. However, they come with more disadvantages the benefits to the borrower. At this point, consolidating all your credit card loans into one big but cheaper loan becomes a necessity.
Importance of Debt Consolidation:
Debt consolidation loan refers to taking out a personal loan that is equivalent to the sum you owe on your high-interest credit cards. After you use the loan to pay off the credit card, you must now pay back the lender that extend the loan to you. If you can find a personal loan with a low-interest rate, you will be saving money in repaying your credit card debt. Lower interest rate means that you can pay off your credit card debt and become debt-free faster.
How Debt Consolidation Works:
Many online personal loan lenders offer a loan amount of up to $35,000 to more than $100,000. The loan amount that you get approved will depend on whether you have the income to pay back. Once you are approved of the loan, they may send you a check or direct deposit the amount into your bank. You can then use the funds to pay back the credit card debt yourself. Some lenders can help you to submit the payment to your preferred credit card companies. In this case, you have to tell them what lenders to submit the payment and the amount to submit for each lender.
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Other benefits of Debt Consolidation:
Now that you can afford to pay back the loan, you must be diligent in making the repayment every month. In this way, your credit score will be build-up by the time you finish repaying the loan. You should check your credit report prior to applying for a personal loan use for the purpose of debt consolidation.
The debt consolidation loan could also help to extend your loan term and reduce the monthly payment. Making a minimum payment on the loan means that you are only paying the interest rate. The actual amount you owe will remain the same in this case. This option is ideal for people who have limited income and need help in repaying the loan.
The lender will review your credit profile and financial documents when deciding whether to approve the loan. It is easy to get a low-interest debt consolidation loan when you have a good/excellent credit score. In addition, you also must have a low outstanding debt to qualify for a low-interest rate. The length of repayment will also affect the interest rate. Longer repayment term causes you to pay a higher interest rate.
A debt consolidation loan can consolidate your credit card debts into a single monthly payment. Before that, you have to remember different due dates from different credit cards to make sure you promptly submit the payment to the credit card company. It is easy to miss a payment when you have multiple due dates to remember. Now, you just have one repayment date to remember. This ensures that you will always remember to make the repayment on time.
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Conclusion:
It’s a nice move to consolidate all your credit cards debts into a single but less expensive loan. You will have a peace of mind from the single installment and reduced interest rates. You will also rebuild your credit history as you continue repaying the loan as long as you make timely monthly installments.
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Most people understand that bankruptcy can help you discharge the debt if you're in a bad financial situation.
They also understand that bankruptcy can hurt your credit score. But can bankruptcy ruin your credit entirely?
The Importance of Talking With an Expert
First, if you’re considering filing for bankruptcy protection, make sure you talk to a bankruptcy lawyer. A bankruptcy lawyer will have the knowledge and expertise necessary to help you determine whether filing is appropriate for you and which type of bankruptcy you should pursue.
They'll also help you understand the core process of filing for bankruptcy and setting your expectations for timelines, costs, and consequences. Lawyers are an indispensable resource here, so don't neglect to hire one.
Different Types of Bankruptcy
You should also understand that there are different types of bankruptcy. Different types of bankruptcy manage debts in different fashions and have a different impact on your credit score.
For example, Chapter 7 bankruptcies tend to stay on your credit report longer than Chapter 13 bankruptcies, due to the fact that Chapter 13 bankruptcies frequently allow consumers to pay back a portion of their debts.
A chapter 13 case could benefit a person for numerous reasons. Typically, a person would file a chapter 13 case to save a house from a mortgage foreclosure action and a car from repossession, due to payment arrears.
A person may also file for chapter 13 protection to pay back only a portion of unsecured debt because they do not meet the chapter 7 criteria. Chapter 13 requires a person to make monthly trustee payments for 36 to 60 months. A chapter 13 case is completed after all monthly plan payments have been paid in full.
Chapter 7 bankruptcies allow an individual to eliminate all unsecured debt, such as credit card debt and personal loans. Therefore, a person who is only interested in eliminating unsecured debt would file a chapter 7 case, if one meets the criteria.
The chapter 7 case takes about four months to complete after the filing. No payments are required in a chapter 7 case.
The Impact of Bankruptcy on Your Credit
A chapter 13 bankruptcy filing stays on a credit report for 7 years from the date of the filing. A chapter 7 bankruptcy case, stays on a credit report for 10 years from the bankruptcy case filing date.
Typically, filing for bankruptcy has a negative impact on a credit score, although the filing may increase a person’s credit score, based on their financial circumstances.
The most important criteria impacting the credit score are as follows:
The shorter the credit history the less advantageous it;
Missing payments reflect a derogatory mark;
The amount of one’s revolving credit limit compared to the amount of the debt incurred.
The optimum debt to credit limit ratio is a debt balance of 30% of someone’s credit limit. The additional debt incurred over 30%, the more the credit score is negatively affected. For example, a person that used $3k of their total $10k credit limit has used 30% of their total credit limit. However, if the same person charges a total of $6k of the $10k credit limit, the ratio is increased to 60%, which reduces the credit score.
A person’s credit report lists their creditors and other facts regarding each creditor. This includes the status of payments; type of loan; length of the loan, and the loan balance. Typically, a credit report also reflects a bankruptcy filing, foreclosure action, repossessions, charge-offs, and debt settlements. The credit report also reflects a total score, indicating the general state of a person’s credit.
A prospective lender must analyze a person’s financial circumstances to determine: if they will issue the loan; what type of loan will be issued; the loan amount; the loan interest rate; and, the length of the loan.
Based on each creditor’s internal lending requirements, the determination of extending credit is based on a balancing act between the loan applicant’s credit report, income, expenses, the debt amount, debt payments, assets, and other information.
Typically, a person considering filing for bankruptcy protection is experiencing difficulty paying their monthly credit card payments and/or mortgage or auto finance payments. Consequently, such a person usually has a low credit score. The lower the credit score at the time of the bankruptcy filing, the less the impact the bankruptcy filing has on a credit score. Conversely, a bankruptcy filing will have a substantial impact on a person with a high credit score.
In general, a high credit score does not always guarantee that a person will obtain the loan they want with the best terms. A prospective debtor with an excellent credit score and substantial monthly credit card payments may experience difficulties, without filing for bankruptcy. What if a person with an excellent credit score has a very low income?
Let’s assume that a person with a high credit score, with substantial monthly debt payments, eliminates all credit card debt, in addition to other types of debt in a chapter 7 case. Initially, the person’s credit score will sustain a substantial hit, resulting in difficulty obtaining any loan.
However, within a reasonable time period, together with the proper credit repair, the person’s credit score will substantially increase. In the future, the person will apply for credit without their enormous monthly debt payment load.
Now, let’s assume that a person with a low credit score and substantial monthly debt payments eliminates all credit card debt, in addition to other types of debt in a chapter 7 case. Initially, the person’s credit score may sustain a minimal hit.
However, most likely this same person was experiencing great difficulty obtaining credit prior to the filing. If this person implements the proper credit restoration process, the person’s credit score will substantially increase, as well. Ultimately, within a short period, the bankruptcy filing will likely increase this person’s ability to obtain credit
Typically a bankruptcy mark on a credit report has a negative impact on prospective creditors to review. Generally, within one year after the completion of a chapter 7 case, the debtor (the person that filed) will experience great difficulty obtaining a loan.
Although obtaining a loan depends on the totality of the person’s financial circumstances, the rule of thumb for receiving automobile financing with a reasonable to low-interest rate is about one year after the completion of a chapter 7 case. The rule of thumb regarding the receipt of a reasonable to low mortgage rate is about two years after the completion of chapter 7.
Based on a debtor’s financial circumstances, she may be able to obtain automobile financing and/or a mortgage during the chapter 13 case. Otherwise, the same rule of thumb applies to a chapter 13 debtor as a chapter 7 debtor regarding obtaining a reasonable and low-interest rate after the case is complete.
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