Personal Wealth Law News

Until very recently, few people gave much thought to the insurance of bank deposits provided by the Federal Deposit Insurance Corporation. And, it’s likely that few of us will ever have to be involved with recovering deposits from failed banks. Still… it’s a good idea to know some of the basics of FDIC coverage.

If you went into a bank in September, you saw a notice that deposits were insured up to $100,000. Based upon recent legislation, the insurance amount has been increased to $250,000, through December 31, 2009. And news reports this evening (Sunday, October 12, 2008) suggest the possibility that bank deposits might be insured without limit, again at least for a while. Wait and see.

The basic coverage is subject to expansion, providing additonal protection. One basic expansion is that the $100,000 (temporarily $250,000) limit is for each bank in which you hold accounts. Of course, the way banks are merging, there might be only one bank left soon. But, until then, having accounts at different banks is a way to get increased coverage.

You can get additional coverage by titling accounts differently. Amounts held in joint accounts, custodial accounts for minors, certain revocable accounts, irrevocable accounts and most retirement plan accounts have limits that can increase substantially the level of protection afforded by FDIC coverage. The FDIC has, on its very helpful website, a calculator you can use to determine the level of coverage for various types of accounts. Go to www.fdic.gov/edie to meet EDIE the Estimator, who can help you to determine your coverage. Or you can call the FDIC at 1-877-275-3342, although you probably won’t be the only one calling them.

Comments Off

Many people are now thinking that they will have to postpone their retirement, based on the dramatic downturn in the stock market in recent weeks. It has been a shock, although there are already signs that savvy (and brave) investors are about to start buying at bargain prices. But one effect of the uncertainty, coming on top of the long term decline in real estate prices, is that people have to think more carefully about their current spending. That’s why I think this (I hope) brief downturn can provide a useful lesson. The lesson is, how much or how little we need to live on currently. If we strip away expenditures that we really didn’t need to make, we’ll understand how much it costs us to live where we are now, and that can be a good guide to what we’ll have to spend in retirement. As I’ve written before, the number is not some percentage of what we’re spending now, like 70%. It’s whatever it costs, in utilities, insurance, clothing, food, etc. By knowing what we need to spend now, we can learn what we’ll need to spend later. If our retirement savings cover those expenditures, it could tell us what more we can do in retirement, in the form of trips, second homes, etc. Some clients have asked for assistance in determining what their expenditures are, and I have prepared a template that I use myself and suggest to others as a way of gathering information on their expenses. If you would like a copy (gratis), e-mail me at rlouis@saul.com.

Comments Off

It’s certainly a task to find anything positive in the startling drop in stock market levels. As of this writing, it’s unclear whether the drop has ended. Past history suggests that it will end, and possibly soon, and that the recovery could be swift. So, is there anything positive about the recent events? Perhaps this: with values depressed, maybe far more than they should be, this is a good time to make gifts to family members. Gifts are valued at their current fair market values and, under our federal gift tax system, any individual may make gifts of up to $12,000 per year to any number of people without using up any of the gift tax lifetime exemption or generating gift tax. That means that $12,000 worth of gifts right now is more shares of stock, or whatever else is given, than will be the case when values recover. Of course, the downturn isn’t a reason by itself to make gifts, but for those who have been thinking about gifts or who have begun a gift-giving program, this could be a good time to take action. Remember, too, that it now seems clear that we will continue to have a federal estate tax, and that a gift made now can reduce taxable estates by the amount of the gift as well as its future appreciation. There are many ways of making gifts, so please contact us to discuss the best method in your situation.

Comments Off

On October 3, 2008, the House of Representatives passed the so-called “bailout bill”, designed to avoid a further deepening of the economic crisis, and President Bush has already signed the bill. To make the proposals more acceptable to some members of Congress, some provisions were added that affect the tax liability of individuals. Here is a brief summary of a few of those changes.

1. The provision permitting individuals age 70 1/2 or older to make direct transfers from individual retirement accounts to charities, in amounts up to $100,000 per year, has been extended to the end of 2009.

2. The ability to deduct state and local sales taxes in lieu of state and local income taxes has been extended to the 2009 tax year.

3. The deduction for qualified tuition and related expenses, within certain income limits, has been extended through tax year 2009.

4. The deduction for certain expenses of elementary and secondary school teachers has been extended through tax year 2009.

5. The exemption from the alternative minimum tax has been extended and increased. For joint filers and surviving spouses, the exemption is $69,950 for 2008, up from $66,250 for 2007. For others, the exemption for 2008 is $46,200 for 2008, up from $44,350 in 2007. Without this extension and increase, millions of additional taxpayers would become subject to the AMT.

Comments Off