I didn’t know the individual, but I work out and play basketball at the same gym. Makes you realize how fragile life is. A 19 year old passed away while playing basketball at Lifetime Gym in Commerce, MI. He had a rare heart disease.

You can read the link to the article in the Detroit News here.

McCain & Obama Debate | Federal Estate Taxes

With the looming McCain Obama debate tonight. I thought it would be helpful to recap what each campaign is proposing for the federal estate tax. Luckily, the Wall Street Journal had an interesting article on this very topic today. You can read the WSJ article here.

The way the current law works is that in 2008, the Federal Exemption is up to $2million. Meaning there is no Federal Estate Tax for any estates under $2million. In 2009, the number jumps up to $3.5million. In 2010, there is an unlimited exemption. Then 2011 and beyond, the exemption is at $1million.

Each canidate has discussed his views on where they would like the tax to go. Here is an important quote from the WSJ article linked above.

Sen. McCain proposes raising the exemption “as soon as possible” to $5 million and cutting the top tax rate to only 15%, says Douglas Holtz-Eakin, senior policy adviser. Sen. Obama wants to keep the exemption at $3.5 million and the top rate at 45%.Portability. Both candidates agree the exemption amount should be easily portable. “Families should not be required to undertake complex and unnecessary financial planning or be penalized for failing to take advantage of sophisticated financial strategies,” says Jason Furman, economic policy director for the Obama campaign. The Democrats’ nominee “believes we should eliminate the estate tax for 99.7% of families — and this is part of his plan to accomplish that goal,” says Mr. Furman.

Sen. McCain also favors portability. The Republican nominee “opposes situations where taxpayers may have unfavorable tax consequences” simply because they couldn’t afford — or didn’t know — “to seek sophisticated tax planning advice,” says Mr. Holtz-Eakin. “All of the costs and effort involved in such planning would be unnecessary or greatly reduced if there was portability of the estate-tax exemption. Such a proposal also meets another of John McCain’s goals of simplifying our complex tax code whenever we can.”

Under current law this year, a married couple could leave a total of $4 million to their children without federal estate tax. “But because the exemptions aren’t portable, quite a bit of planning is necessary to achieve this result,” says John M. Olivieri, a tax partner at the law firm of White & Case LLP in New York City.

Suppose a husband and wife each has $2 million. The husband dies and leaves everything to his wife. Although there’s no federal estate tax because of the marital exemption, the wife now has a $4 million estate but only a $2 million exemption, Mr. Olivieri says. Consequently, if she dies this year and leaves her $4 million to her children, “her estate will be hit with a federal estate tax of about $900,000,” based on this year’s rate structure, Mr. Olivieri says. “A similar problem arises if the entire $4 million is owned by the husband and the wife dies first.”

To avoid the problem, “many married couples expend considerable time, effort, and money to avoid wasting their combined federal exemptions,” says Mr. Olivieri. “But if the exemptions were portable, none of this would be necessary.” However, even if the exemption does become portable for federal estate-tax purposes, Mr. Olivieri points out that many people may need to take special estate-planning steps anyway because of state-tax issues.

Although many tax advisers do expect major estate-tax changes next year, no matter who wins the presidency, don’t count on them just yet. Even though the two candidates agree on portability, nobody knows how quickly such a change might happen, what the effective date might be and how the fine print of legislative language would read.

But “my sense is that portability would have bipartisan congressional support,” says Blanche Lark Christerson, managing director at Deutsche Bank Private Wealth Management in New York. “It also could simplify people’s planning and be a good thing.”

However, many people still might benefit from setting up trusts and taking other steps anyway, Ms. Christerson says. That includes many people who live in states that have “decoupled,” or separated, from the federal estate-tax system. “Also, bear in mind that even if there were no potential tax consequences and apparent need for a trust, you still might want one” for other reasons, such as protecting assets from creditors or other factors.

Valuations. This is a key issue when calculating capital-gains taxes on the sale of inherited assets. Here’s an example: Suppose your cousin dies and leaves you stock he originally purchased decades ago for $100,000 and the value of that stock has grown to $500,000 as of the date of his death. Your tax basis typically would be $500,000 — or, under certain circumstances, the value six months after the date of death. That means you don’t have to figure out what your cousin originally paid for that stock. This system is scheduled to continue through next year and undergo major changes in 2010. Critics say those changes would create additional complexity and impose unfair recordkeeping burdens on taxpayers. Advisers to both candidates have said the candidates want to retain the current system.

EDIE the Estimator

The FDIC has came out with a webpage that hels you calculate your FDIC coverage for you deposit accounts. In this turbulent time, this type of information is key. In addition to consulting EDIE, it is probably a good time to contact you financial adivsor, financial professional to make sure you have a plan to weather this storm that is sending investment portfolios south.

To use EDIE, go here.