November 2001 Newsletter

Changing Times

New Tax Laws

So you don't have to, your Silver Oak planners have been attending programs on the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). The latest round of tax law changes to come out of Washington D.C. includes some major changes in the areas of estate taxes, retirement plans, and education savings strategies that may impact you, and you may already have done some reading on the Act.

Whether we will receive the full benefit of the changes, scheduled to be phased in over the next ten years and then "sunsetting" after 2010, is anyone's guess today. However, it is prudent to be aware of the opportunities that EGTRRA currently provides.

Estate Tax: The provision that has received the most attention in the media is the planned repeal of the estate tax. Next year, the unified credit will increase from its current $675,000 per person to $1 million per person, and then gradually to $3.5 million in 2009. For deaths after 12-31-2009, there will be no estate tax, but there will be limitations on step-up in basis on inherited assets. If you leave your whole estate to your spouse, up to $4.3 million in assets can receive a step-up to date of death value. Transfers to non-spouses are limited to step-up for $1.3 million in assets. The personal residence can also receive special income tax treatment. Other assets without step-up treatment will be subject to income taxes when sold, since you will receive the same basis as the former owner.

Retirement Plans: There is very good news in this section of EGTRRA. Contribution limits for Regular and Roth IRAs, 401(k) plans and Simple IRAs are all going up. For example, the current annual "regular" maximum for a 401(k) plan is $10,500; by 2006, this will increase to $15,000 per year. In addition, there are "catch up" contributions for people over age 50 that allow even more to be saved on a tax-deductible basis.

Other provisions will decrease the attractiveness of Money Purchase Pension Plans beginning in 2002; if you have one of these plans, be sure to consult with a retirement plan design consultant and/or your CPA to see if you would benefit from a new plan design for your company.

Education Savings Strategies: The bonus that EGTRRA offers to parents with college-bound children is an enhancement to the 529 Plans we've reviewed before. Now, instead of contributions just growing tax-deferred until withdrawn (and then taxed at the child's income tax rate), now all withdrawals are going to be tax free.

The Act also increased the annual contribution limits for Education IRAs (now renamed Coverdell Education Savings Accounts) from $500 to $2,000 per year, effective 1-1-2002. You can contribute both to a 529 plan and to a Coverdell account in the same year.

Summary: There are many other provisions in EGTRRA, lowering the marginal tax brackets, repealing hidden taxes, changing other aspects of retirement plans, and more. Be sure to consult your tax advisor and/or estate planner to see whether any of these new tax laws and regulations will affect you over the next ten years. Except for the change in marginal tax brackets, most provisions begin to take effect in 2002 so there is no significant pressure to do year-end planning related to this bill.

E-Mail, Anyone?

After 9-11, we were wishing we could have a faster way to communicate with clients. If e-mail is a regular part of your life, please let us know your address so we can update our files. Thanks.

Boot Camp 2002

By popular demand, here are the 2002 dates for Silver Oak's "Investment Boot Camp:"

February 6 (Wed.), 11:30 - 1:30 pm
April 6 (Sat.), 9:30 - 11:30 am
June 6 (Thurs.), 3:30 - 5:30 pm

Call or e-mail us to register.

Giving Circle Update

We will be having the first planning meeting of the Silver Oak Charitable Giving Circle on Friday, November 2nd. If you are interested in joining us in this new endeavor, contact Deborah for the next meeting time.


The office will be closed for Thanksgiving and the day after, and again from Monday, December 24 through Tuesday, January 1st to allow employees to spend time with their families. If you anticipate year-end deadlines, please let us know before December 15th. We will be checking voice mail during that week, but cannot guarantee a timely response for major projects.

In lieu of holiday cards or gifts again this year, we will be making a donation to The Oregon Food Bank.

Warm wishes from all of us at Silver Oak to all of you. Happy Holidays and may we have a Peaceful New Year!

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