The Estate Tax Roller Coaster

Back when Congress passed estate tax reform a few years ago, after weeks of often bitter debate, 2011 seemed a long way away. However, unless Congress takes some action, the estate tax exemption, which is scheduled to ratchet up to $3.5 million next year, will revert to its old level of $675,000 in less than 3 years. The estate tax is actually supposed to disappear in 2010, only to resurrect itself in 2011, when the tax rates will also go back to pre-reform levels.

With the possibility that a Democrat president will have the backing of a Democrat majority in both houses of Congress when 2011 comes around, many estate tax professionals predict that there’s a good chance that the estate tax will be allowed to return to the old levels. And although 3 years may sound like a long time, there’s no reason not to be prepared for the worst.

That’s why many experts suggest that you check your will, or have a will prepared, if you don’t have one. You should also have your will examined by an attorney who is familiar with estate tax issues. The will should be flexible enough to accommodate the changing exemption levels and should also allow for the possibility of a return to the pre-estate-tax-reform provisions of the law.

The Facts about FDIC Insurance Despite the lackluster interest rates that bank savings accounts and CDs are paying, many investors seeking safety are attracted to them because these accounts are insured by the federal government. While safety is a legitimate goal, however, you need to make sure that your accounts are truly insured by keeping them within the FDIC limits.

Despite recent attempts to up the deposit insurance limits, they remain where they have been for several year—basically $100,000 of insurance per bank per account. There are a few ways to have more than $100,000 of your assets come under the insurance umbrella, however. One is to open accounts in different banks. Each account would be insured up to the $100,000 limit and there is no cap on how many accounts you can open. Although this method would take some time and effort, you could theoretically use it to shelter quite a bit of cash.

Another way to get around the $100,000 limit is by opening different types of accounts, such as an individual account and a joint account. Each would be insured for the $100,000 limit. Also, the FDIC changed the rules applying to joint accounts several years ago so that each person’s share of the account is insured up to $100,000. If you and your spouse have a $200,000 joint account, for example, you both are covered up to $100,000. For more information, visit the FDIC website at www.fdic.gov.