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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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"abby" <a...@c...net> writes:
> 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.
--
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Transfer to accounts in several different banks.
Note, qualified retirement accounts are insured to $250K.
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On Jul 16, 2:02 am, "abby" <a...@c...net> wrote:
> 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
>
Moving his money into different banks, no more than $100,000 each.
This option was conveniently not given to you by your banker,
strangely enough.
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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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B...@f...net wrote:
> "abby" <a...@c...net> writes:
>
>> My father-in-law has $260K in his bank account. What is the best
[...]
> 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.
By "very very short periods of time" you mean on the order of 5-10 years
or less, right?
The father-in-law (anyone old enough to *be* a FIL) is most likely no
younger than his late forties, possibly much older, and may well be 10
years or less from retirement, or already in retirement. Oh wait, OP
stated the FIL "grew up during the depression", I guess that puts him in
his eighties. Are you and Kastnaa seriously suggesting that bank
accounts are a bad, risky, unsafe place for him to keep his money?
-Mark Bole
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Mark Bole <m...@p...net> writes:
> B...@f...net wrote:
> > "abby" <a...@c...net> writes:
> >
> >> My father-in-law has $260K in his bank account. What is the best
> [...]
> > 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.
>
> By "very very short periods of time" you mean on the order of 5-10
> years or less, right?
Well, maybe "under 5 years". It depends on a variety of
things - the investor's risk tolerance and goals especially.
All we know about this particular father-in-law is that
he's wants "safe" (as I said, presumably credit safety),
and grew up in the Depression. That says that he's quite
old and probably doesn't need to plan on a 30 year time
horizon.
> in his eighties. Are you and Kastnaa seriously suggesting that bank
> accounts are a bad, risky, unsafe place for him to keep his money?
I certainly suggested no such thing. In fact, I suggested
other banks and ways to keep that money in his bank. My
point about long-term risk was for general readership (and
to bring up the point that there are other forms of risk
besides just credit risk).
Sorry if there was any confusion.
--
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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kastnna <k...@a...org> writes:
> 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?
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On Jul 16, 1:05 pm, Mark Bole <m...@p...net> wrote:
> The father-in-law (anyone old enough to *be* a FIL) is most likely no
> younger than his late forties, possibly much older, and may well be 10
> years or less from retirement, or already in retirement. Oh wait, OP
> stated the FIL "grew up during the depression", I guess that puts him in
> his eighties. Are you and Kastnaa seriously suggesting that bank
> accounts are a bad, risky, unsafe place for him to keep his money?
In a word, yes.
Even if he's fully in retirement, I wouldn't likely advocate 100% in
fixed income and even if I did I wouldn't advocate it be at a bank. A
quick search of my posts will undoubtedly expose you to my opinion of
banks.
That aside, I clearly referenced the "large number of posts regarding
FDIC insurance over the past few days". I was making a general comment
that it is not smart to mitigate an insignificant risk at the threat
of increasing one's exposure to significant risk. IOW, never take on
big risk to eliminate small risk. I also clearly stated that my
concern was for anyone thinking about jumping into bank products, not
those all ready caught in their web.
I speculate that it is much more likely that fixed income products
will have a negative real return than it is likely that a given bank
will go belly-up. I could be wrong (that's why my post opened with a
question).
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On Jul 16, 1:05 pm, Mark Bole <m...@p...net> wrote:
> B...@f...net wrote:
> Are you and Kastnaa seriously suggesting that bank
> accounts are a bad, risky, unsafe place for him to keep his money?
For an answer specific to this client...
Many brokerage companies now offer checking, debit cards, and
automatic money market sweep on all cash balances in a brokerage
account for little or no cost. On that same brokerage account, you can
also buy brokered CDs from banks around the country (including Puerto
Rico). By spreading around which banks you buy the CDs from, the
client could potentially have MILLIONS invested in CDs, yet have ALL
the money FDIC insured AND receive one statement AND have the money in
one account. The only risk is that the custodian itself, go bankrupt,
in which case SIPC kicks in (which has higher limits than the FDIC).
So again, yeah, I'm seriously suggesting that the OP oust the bank.
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