From time to time as development occur in the field of tax planning,
asset protection and other related areas; we would like to bring these
items to your attention.
1) Social Security Benefit Increase -
On Thursday October 16, 2008, the Social Security Administration announced
monthly Social Security and Supplemental Security Income benefits for Americans
would increase by 5.8% in 2009. This is reportedly the largest increase since
1982. This Cost-of-Living adjustment will begin in January 2009 for Social
Security beneficiaries and on December 31, 2009 for Supplemental Security
Income beneficiaries.
2)Internal Revenue Service Inflation Adjustment –
The annual gift exclusion increases to $13,000 per donee per recipient per
year in 2009. Therefore, in 2009, a married couple could now gift up to $26,000
per recipient, and be under the threshold, not required to file a gift tax
return.
3) Federal Deposit Insurance Corporation (FDIC) Increase –
The FDIC protects depositors against the loss of theirs insured
deposits in an FDIC-insured bank or savings association if that
entity fails. The accounts of a depositor at one FDIC-insured bank
or savings association which total $250,000 or less (up from $100,000
or less) are insured. It is also possible for a depositor to have
more than $250,000 at one insured bank or savings association and
still be fully insured, provided certain requirements are met by
the depositor.
This change is effective October 3, 2008 through December 31, 2013.
On January 1, 2014, FDIC deposit insurance for all deposit accounts,
except certain retirement accounts, will return to al least $100,000
per depositor. Insurance coverage for certain retirement accounts,
which include all IRA deposit accounts, will remain at $250,000 per
depositor.
Effective October 14, 2008, all non-interest bearing checking transaction
deposit accounts at an FDIC-insured institution, including all personal
and business checking deposit accounts that do not earn interest are
fully insured for the entire amount in the deposit account. This unlimited
insurance coverage is temporary and will remain in effect for participating
institutions until December 31, 2013.
To check whether a bank or savings institution is insured by the
FDIC, call toll-free at 1-877-275-3342.
FDIC insurance covers all types of deposits at an insured bank,
including deposits in checking and savings accounts, money market
deposit accounts and certificates of deposit (CD’s). FDIC does
not insure money invested in stocks, bonds, mutual funds, life insurance
policies, annuities or municipal securities, even if these were purchased
at a bank. In addition, US Treasury bills, bonds or notes are backed
by the full faith and credit of the United States government, not
the FDIC.
Deposits in different branches of the same bank are aggregated
and considered together in terms of the FDIC insurance limit. Deposits
made in different categories of legal ownership at the same bank can
be separately insured. In this way, it is possible to have more than
$250,000 of deposits at one bank, and still be fully insured. There
are eight (8) different categories of legal ownership recognized by
the FDIC regulations:
a) Single Accounts;
b) Certain Retirement Accounts;
c) Joint Accounts;
d) Revocable Trust Accounts;
e) Irrevocable Trust Accounts;
f) Employee Benefit Plan Accounts;
g)Corporation/Partnership/Unincorporated Association Accounts;
and
h) Government Accounts
The most common ownership categories are single accounts, certain
retirement accounts, joint accounts and revocable trust accounts.
Single accounts are those owned, as the name implies, by one person.
They include accounts created for one person by an agent, nominee,
guardian, custodian or conservator, including Unified Transfers to
Minors Act accounts, escrow accounts and brokered deposit accounts.
Single accounts also include accounts held in the name of a sole proprietorship,
accounts established for an estate, and any account that fails to
qualify for coverage under another ownership category.
Single accounts
also include convenience accounts or those where another signer
is authorized to withdraw under a Power of Attorney. All single accounts
owned by the same person at the same insured bank are added together
and the total is insured up to $250,000, (up from $100,000).
Certain retirement accounts covered include deposit accounts
owned by one person and titled in that person’s retirement account
only. For example, Individual Retirement Accounts (IRA’s), Section
457 deferred compensation plan accounts, self-directed defined contribution
plan accounts, and self-directed Keogh plan accounts. All deposits
an individual has in any type of the retirement plans listed above
up to $250,000 in total are FDIC insured. Naming additional beneficiaries
for retirement accounts does not increase FDIC insurance. The account
value is the dispositive item.
Joint accounts are deposit accounts owned by two or more persons.
These deposit accounts are the same as single accounts: checking,
savings, certificate of deposits (CD’s). Both owners have equal
rights of withdrawal. In joint accounts, each co-owner contributes
up to $250,000 insured deposits. This results in $500,000 of FDIC
insurance coverage in total joint accounts between a husband and wife.
Revocable Trust accounts are deposits held in either living trusts
or payable-on-death (POD) accounts. POD accounts, also known as
totten trusts, are the most common
type of revocable trust account. These are informal trust accounts created
when the account owner signs an agreement, often the bank signature card,
stating the deposits will pass to another stated person upon the
owner’s death.
Living trusts, also known as family trusts, are formal trusts created during
a depositor’s lifetime that may be changed, and are usually created for
estate planning reasons.
The owner of the trust controls the deposits during
their lifetime. Effective September 26, 2008 (rules released September 30,
2008), the FDIC eliminates the rules of qualifying beneficiaries. Previously,
deposit insurance for revocable trust accounts is based on each owner’s
relationship with the beneficiaries of the trust.
The FDIC insures the interests
of each beneficiary up to $250,000 (increased from $100,000) for each owner
if all the following requirements are met: a) the beneficiary is a person,
charity or other non-profit organization (as the Internal Revenue Service
recognizes); b) the account title indicates a trust relationship exists
by including language
such as payable on death, or in trust for, trust, living trust, family trust
or an acronym such as POD or ITF; c) for POD accounts, each beneficiary must
be identified by name in the bank’s account records. The new interim
rules now state that a trust account with up to five different beneficiaries
named in all her/her revocable trust accounts at one FDIC-insured institution
will be insured up to $100,000 per beneficiary.
Revocable trust account owners
with more than $500,000 and more than 5 beneficiaries named in the trust(s)
will be insured for the greater of either: $500,000 or the aggregate
amount of all the beneficiaries’ interests in the trust(s),
limited to $100,000 per beneficiary.
In these times when laws seem to be changing each week, we will continue
to update you as significant and relevant developments occur in these are
other
important subjects.
