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Posted by abby on July 16, 2008, 5:02 am
Hi,
My father-in-law has $260K in his bank account. What is the best
way of breaking it up into chunks less than the FDIC $100K insurance
limit? The sum is distributed among savings, checking, certificates.
I
don't know in what proportion.
The bank suggested we have the accounts re-titled with my
father-in-law, my wife, and her brother as co-owners. Would this be
considered a gift and subject to a gift tax? What are the
implications for
probate?
Are there safe alternatives with a better yield that someone who grew
up during the depression might accept?
Thanks,
Gary
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Posted by on July 16, 2008, 8:30 am
> My father-in-law has $260K in his bank account. What is the best
...
> The bank suggested we have the accounts re-titled with my
> father-in-law, my wife, and her brother as co-owners. Would this be
> considered a gift and subject to a gift tax?
For most things, if you retitle them from one person to being
joint tenancy with another person (other than a spouse), there
are gift tax implications. If you retitle a house, for example.
There is a specific exception, however, for bank accounts and
US Savings Bonds. In those cases, the gift is not considered
to have been made unless and until the added person (who did
not fund the account) extracts the money.
Upon the original depositor's death, the account automatically
and fully belongs to the added person, but it *is* still part
of the estate and counts towards estate taxes.
> What are the implications for probate?
It takes that account out of probate and out from under the
control of the will. Effectively it disinherits anyone else
from that asset. If your entire estate was, say, a $99,000
checking account and your will says to split your estate
amongst your three kids, but you made the account a joint
account with one of them, you've just disinherited the
other two. And if, after your death, the joint owning
child decides to do the right thing and split the $99,000
with his two siblings by giving each of them $33,000 -
he now owes gift taxes on the $21,000 each above the annual
limit. (naturally, he could make the gifts to his sibs
over three years, but that's not the point).
It also may cause a bit of trouble if, by some horrible
chance, both joint tenants die at the same time. Wills
often have language which manages that cleanly.
> Are there safe alternatives with a better yield that someone who
> grew up during the depression might accept?
Depend on what you mean by "safe". I think of FDIC-insured
bank accounts as "safe" only in the sense of that the money
is safe for very very short periods of time. Over longer
periods of time, it gets ravaged by inflation and income taxes -
ie. it's *not* safe for long-term retirement money.
Of course, you almost certainly mean "safe" in the sense
of "no credit risk". The only thing with as little credit
risk as an FDIC-insured deposit is a US Treasury Bond, and
yields on them right now stink. Moreover, any such Treasury
with a maturity longer than a very very short time is subject
to interest-rate risk -- if held to maturity, you will
definitely get your money back, but if, say, you buy a 10-yr
Treasury and need the cash in, say, two years - when you
sell it, you may get a lot less than you paid for it if
rates have gone up in that time.
At this point, Treasuries with maturities shorter than
7 years are paying yields which are less than you can
get on regular savings deposits at some banks - especially
if you don't mind online banking. If you Father-in-law
has a regular checking account at his local bank, you
can help him link it to one of the online banks where he
can get pretty decent bank interest and very very easy
transfers right back to his checking whenever he wants.
ETradeBank is currently paying 3.3%, INGDirect 3.0%
and HSBCdirect 3.5%. I've used ETrade and ING and have
been very happy with both. They all also have CDs with
various maturities out to 5 years, most of which are
paying between 3 and 4% as well, all FDIC insured.
Anyway, if your father-in-law likes his existing bank
and he's getting a decent rate there, their suggestion
to split and retitle is prefectly reasonable - if and
only if it doesn't screw up estate planning and he
trusts his kids completely. In fact, it may be to
his advantage to have his kids able to write checks
from his accounts on his behalf anyway (ie. to pay bills).
One last thing to note - if any of that money is in
an IRA, the IRA is already considered a separate title
from his non-IRA money, and IRAs have a $250,000 limit
for FDIC, rather than the $100,000 limit for non-IRA
money.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
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Posted by kastnna on July 16, 2008, 12:35 pm
Does anyone happen to know (or know where to look for) what percentage
of banks fail in a given time period?
The large number of posts regarding FDIC insurance over the past few
days is no doubt in the wake of IndyMac. I get the feeling, but have
no statistical proof, that many people are sweating bullets over an
outcome that is highly unlikely to happen. I think it's unwise to take
on numerous and significant risks just to mitigate the unlikely "risk
de jour".
Of course, if all of your holdings are all ready in "safe"
investments, then inflation is probably decimating your account anyway
and I guess there is no cost in adding in another layer of protection
(except time and paperwork).
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Posted by on July 16, 2008, 2:50 pm
> Does anyone happen to know (or know where to look for) what percentage
> of banks fail in a given time period?
Um, very very few.
http://www.fdic.gov/bank/historical/bank/index.html
And most are quite small. In Jan, 1 with $58million in assets.
IndyMac got a lot of attention because it's large - $32billion.
Only three in '07 - with total assets of less then $3billion.
None in '06 or '05
Four in '04 with total assets of about $125million.
etc. etc.
The total sum of assets of all the banks which have failed
and gone to FDIC in all the years from '94 through now -
excluding IndyMac - adds up to something like $10billion.
IndyMac alone dwarfs 14 years worth.
For perspective on size and how that compares to bank
assets out there - Bank of America *alone* has total
assets of $1.3 *trillion*. Yes, trillion with a T.
> The large number of posts regarding FDIC insurance over the past few
> days is no doubt in the wake of IndyMac. I get the feeling, but have
> no statistical proof, that many people are sweating bullets over an
> outcome that is highly unlikely to happen.
Pretty much.
But it does happen, and there's no reason, in general,
to have more than the FDIC limits in savings accounts.
Not, at least, for average consumers and savers.
Note, too, that bank failures don't mean that all the
bank's assets disappear. Generally it means there was
a liquidity crisis and perhaps *some* losses. But just
because IndyMac failed doesn't mean that the Feds had
to come up with $32billion. I'm sure the actual costs
have not yet been figured out, but it's a lot less
than that.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
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to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
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Posted by Don on July 21, 2008, 7:21 pm
On 2008-07-16 11:50:25 -0700, BreadWithSpam@fractious.net said:
>
>> Does anyone happen to know (or know where to look for) what percentage
>> of banks fail in a given time period?
>
> Um, very very few.
In the early 80's, if someone had asked the same question about savings
and loan associations, the answer would also have been "very very few."
The trick is to plan for unusual and unexpected events that have never
happened before.
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
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Newsgroup.
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