What You Need to Know about Estate Taxes

Call Sterling Van Dyke Credit Union at 586.264.1212 for an appointment to discuss ways we can help you with your estate planning needs.

If you are handling the disposition of an estate, you are probably already aware that there was an unexpected reprieve from taxes on the estates of those who died in 2010. But if you’re involved in future estate planning for a loved one or yourself, it’s important to know that high estate tax rates have come back in force this year and beyond. The Michigan Association of CPAs offers a rundown on some of the complexities of estate tax issues.

A One-Year Hiatus

Congress allowed the federal estate tax law to expire for 2010, meaning no taxes were due on the estates of anyone who died in 2010. That was good news for the families of numerous famous people—including New York Yankees owner George Steinbrenner—but it also meant many families at the more modest end of the income scale did not have to deal with estate taxes. In addition, the executors of estates of those who died last year did not have to file a tax return for the decedent’s estate with the Internal Revenue Service.

Are You Aware of all the Assets that Are Part of Your Estate?
Many individuals do not understand what kinds of assets make up their estates. Many people have a misconception that their estate consists solely of cash in their account. They may be in for an unpleasant surprise, however, if they don’t consider the current value of all the assets in their estate. A parent who did not have a lot of cash on hand may have owned a home that has increased substantially in value over the years, especially if it’s located in an area with high or rising property values. Add in the value of a retirement account savings or other assets and the total may quickly jump to more than $5 million. That may also be the case with a small business that family members built from scratch into a thriving enterprise, especially if the company owns valuable property or equipment.

In addition, while an estate may not be subject to a Federal estate tax, the estate’s executor may still have to pay an estate tax at the state level, depending upon the appropriate state’s laws. Your CPA can help you in the accounting and valuation of your estate to determine whether your situation calls for undertaking some tax-savvy estate planning for both Federal and state purposes.

The Tax Burden Returns
On December 17, 2010, President Obama signed into law the “Tax Relief Act of 2010.” In this bill, Congress reinstated the estate tax for decedents dying after December 31, 2009. The new rules are only temporary and will sunset on December 31, 2012. Executors of deceased taxpayers must pay taxes on an estate over $5 million (there are considerations for surviving spouses, which should be discussed with your CPA). The estate tax will be based on the new 35 percent top rate.

In light of the rules that were in effect prior to the “Tax Relief Act of 2010,” Congress afforded executors of decedents dying after December 31, 2009 and before January 1, 2011—such as the Steinbrenner Estate—the option to elect to not come under this newly revived estate tax. In this case, the estate would pay no estate tax as originally described above, but beneficiaries would be subject to the modified carryover basis rules.

A CPA Can Help
Estate taxes are complicated, so it’s wise to consult with a CPA about long-term estate plans. Turn to your CPA with all your questions about estate tax planning or any other financial concern.
You seek the expertise of CPAs at tax and audit time, of course. But CPAs also promote personal and professional financial security year round. Visit the CPA Referral Service on the MACPA Web site to search for a CPA in your geographical area or specific area of expertise.

This article was submitted by the Michigan Association of CPAs

Considering a CD

Call Sterling Van Dyke Credit Union at 586.264.1212 for an appointment to discuss ways we can help you with your investment options.

Shopping at your credit union for a CD (certificate of deposit) isn't quite as easy as going to the local music store for a CD (compact disc). But it’s a lot easier to choose than some other types of investments.

By definition, a CD or certificate of deposit is a time deposit. That means you deposit money into an account with your credit union or bank and agree to keep it there for a specific number of days. In exchange, you are guaranteed a predetermined interest rate and yield on your money. The most common CD accounts are opened for six, 12, 24, 36, 48 or 60 months.

There are two basic types of CDs, regular CDs and Individual Retirement Account (IRA) CDs. IRAs typically pay the same interest rate as regular CDs. However, IRAs offer additional federal insurance allowing investors to hold an IRA account up to $100,000, as well as other accounts valued at up to $100,000 at the same financial institution with no fear of losses. Additionally, the interest earned on IRA CDs isn't taxed until you retire or reach the age of 59.5 years. This taxation relief is perfect for individuals who have determined that their CDs will be used for retirement only, rather than short-term, quick-return investments. However, it's important to note that for an IRA to remain tax-free certain guidelines must be followed.

While CD interest rates are ever changing, those changes are a reflection of the economic health of the country. When general loan rates are high, CD rates will increase and vice versa. The length of time you commit to when you select a CD also affects your rate. Usually, the longer the term is, the higher the interest rate will be.

There are other factors which figure into the equation, and those factors aren't always so predictable. For instance, competition between financial institutions can make a difference. Among the factors that can affect CD rates are consumer pricing and spending, where you live, and even how your financial institution is doing internally. “Comparison shopping” is the key.

Credit unions typically offer better rates than banks because credit unions are non-profit organizations focused on serving their members rather than paying stockholders. Also credit unions usually have lower overhead costs and pay a bit higher on CDs than at banks. It pays to take the time to monitor the market in your area for a couple of weeks and see who has the best rate for you.

Should you pick a short-term or long-term CD? To answer that you'll need to determine how long you can let go of your money. Do you have any big purchases around the corner like a new car or a new home? Most CDs have penalties for early withdrawal which will cost you money. If you may need the money in six months or a year, pick a CD that will come up for renewal when you think you’ll need your money. If that's not a problem, a longer-term CD may offer a better rate.


Knowing when to buy requires daily tracking of CD rates over two or three weeks. If they stay steady, go for the best deal offered and look to long term. Steady rates indicate a steady economy and show no sign of rapidly increasing rates. If they are rising slowly and suddenly take a half percentage point upwards—hold off a bit longer. This could indicate that interest rates haven't peaked yet. In this situation wait until rates start to climb a bit slower or taper off completely. Gauge the market on your own observations; don't make your decisions just on what specials are being advertised. If a bank recognizes that CD rates are going to increase, it is in their best interest to push long-term CDs while the rates are lower. Don't be too hard on yourself if your timing isn't perfect; even the professionals don't hit it right every time.


When you're ready to buy, the authors of The Complete Idiot's Guide to Managing Your Money suggest you ask the following questions:

1. What are the rate and yield, and how is the interest compounded? “Rate” refers to the amount of interest added to your original amount. “Yield” is the amount paid to your account after the interest is included. “Compounded” refers to the interest that’s added to interest; the more often an account is compounded the better.

2. Is the rate fixed or variable? How long is the rate effective?

3. What is the minimum deposit necessary to open the account?

4. Can you add to the account later on—and if so, at what rate? Do the added rates mature at the same time as your original deposit?

5. How much will you receive in interest—in actual dollars and cents—when the account matures?

6. What is the penalty if you withdraw any of the funds before the account matures?

To avoid rolling a mature CD over at the new interest rate, when and how do you handle the withdrawing of your money?

7. What other benefits do you receive as a CD customer? Will they waive any fees or charges on checking accounts, ATM transactions, or annual fees on credit cards?

From LoveMyCreditUnion.org