It’s Time to Diversify Your Banking!
5 Reasons Not to Keep All of Your Money in One Place
You’ve probably heard the expression, “Don’t put all of your eggs in one basket.” But what about “Don’t put all of your dollars in one bank”? Banking at a single institution is the default for most people, but just because something is the typical strategy doesn’t mean it’s the best one for you! Here are five reasons to consider taking the road less traveled. 1. Different banks have different perks. Credit unions are member-run nonprofits and often don’t have minimum balance requirements. Traditional banks have cutting-edge financial technology and more loan options. Some banks offer high-yield checking accounts while others don’t, and online banks can have interest rates on savings accounts up to 15 times higher than brick-and-mortars. By banking with more than one institution, you can get the best of both (or three!) worlds. 2. You’ll have a backup if one bank fails. According to Bankrate, 511 U.S. banks failed between 2009 and 2020. That’s not nothing! If your bank isn’t insured by the Federal Deposit Insurance Corp (FDIC) and it fails, you could lose your entire balance, so diversifying your accounts (or choosing only FDIC-insured banks) is a good backup measure.
high-value accounts, depositing with multiple banks can ensure all of your money is covered.
4. The more accounts you have, the more withdrawals you can make penalty-free. Many money market and savings accounts have limits on how many times you can pull money out each month. If you bank with several institutions, you can make a few withdrawals from each of them, stay under the limits, and avoid fees. 5. You’ll have access to more banks and ATMs. Do you travel across your city, state, or the country regularly? If you do, it can be beneficial to bank with several institutions so you’re always close to an ATM or bank branch. For example, you may want to use a local credit union at home for the member benefits but bank with a national bank for out-of-state emergencies.
3. You can make sure ALL of your money is insured. The FDIC only covers up to $250,000 per depositor, per bank. So, if you have
The Capital Gains Tax Dilemma
How to Protect Your Heirs from Inheriting a Massive Tax Burden
The Biden administration has proposed an enormous increase in the capital gains rate (as high as 56.7% in California and no lower than 43.4% in a few states when state income tax is factored into the calculation) along with the elimination of the step up in basis. That means your heirs will owe an immediate capital gains tax on the value of your assets in excess of $1 million. Suppose your business is worth $10 million at your death before accounting for $5 million of debt. The capital gains tax would be due at your death and based upon the $10 million in value and not the net value of $5 million. So, even if your heirs did not sell your business at your death, they still owe the capital gains tax. That’s why the proposed capital gains rate and the elimination of the step up in basis should get your immediate attention. So, what can you do? There are two schools of thought. The first is that you could sell an appreciated asset (such as your business) with the 2021 lower capital gains rate in place and help your heirs avoid inheriting your business and owing a huge capital gains tax. While the Biden administration’s plan for capital gains tax increases could end up being retroactive, there is no support for a retroactive tax increase among Republicans, and some moderate Democrats are against it, making this action less likely.
The second school of thought is to wait it out until there is a change in administrations so that the current capital gains rates are reinstated and step up in basis is once again part of the tax code. This second school of thought is fraught with too many “ifs” and too many uncertainties to make this school of thought the preferred choice If you’re a business owner, and you’re concerned about how the capital gains tax increases will affect your plans for your business, I would recommend getting in touch with Phil and Andy Kaiser at The Kaiser Law Firm in St. Louis. They’re experts in helping you protect your assets, and they would be pleased to share their in-depth thoughts with you. Contact them today at Phil@KaiserLawFirm.com or Andy@KaiserLawFirm.com. You can also contact them through their website at KaiserLawFirm.com.
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