Dear Cyndy,

Thank you for your letter. I'm sympathetic with Ned's not
having time to worry about Estate Taxes, and I wish I too could
put the issue out of my mind. But I can't. I keep worrying and
working, and try to console myself with the thought that I'm
learning about law and language, government and society. I am
also embarrassed to keep harrassing you with new considerations,
new perspectives, as they occur to me. I conclude however that
in this situation, it's for you to exercise such censorship as
you deem appropriate and optimal for you. There are a number of
observations which I think I should make, which might or might
not be of interest.

1) The presentation by the Ohio Tuition Trust Authority of its
Section 529 College Tuition Plan is by far the most informative
and candid that I have found. It is a 72 page PDF document which
you can down-load at
http://www.collegeadvantage.com/
if you're interested.

2) From this offering I learn that the IRS has been yearning to
rein in the Section 529 Plans with regulations. The IRS proposed
such regulations as early as 1998, but without success. The
regulations were not adopted. On January 17, 2008, the IRS tried
again. Another 2 3/4 years have passed without new restrictions.
Who knows what Draconian measures the future will bring? What is
of most concern to me is the proposal:

=> A new anti-abuse regulation will deny favorable gift tax,
estate tax and generation-skipping tax treatment to contributions
to 529 accounts that are deemed to be made for purposes other than
providing for the qualified higher education expenses of the
designated Beneficiary.

I ask myself: what criteria will the IRS invent to divine my
"purposes" when I name Leah, Benjamin, Nathaniel, Rebekah
as "beneficiaries" of 529 Plans of which I remain the "owner"?
The very need for such an "anti-abuse regulation" suggests that
purposes other than "providing for the qualified higher education
expenses of the designated Beneficiary," is precisely how 529
accounts are currently being used. The financial industry which
is making a killing, raking in -.5 to 1 percent or more of invested
assets, will lobby vigorously to keep the loophole open. 

3) Fifth Third Bank which offers CD's and savings accounts under
the Ohio Plan, cautions that the Federal Deposit Insurance Corporation
(FDIC) protects 529 Accounts only to $100,000, whereas Fidelity
Investments reassures its investors that the limit is $250,000.
There's also uncertainty as to what the FDIC would consider a
"single" account, one suggestion being that the accounts held by a
donor for all his/her beneficiaries would be lumped together to
determine insurance coverage. Another suggestion is that all the
accounts for the benefit of a given beneficiary would be concatenated
for insurance calculations. Nobody seems to know. This is obviously
a matter of some import.

I was referred to the FDIC web-site, and what I found there was
a public relations effort which did not inspire me with confidence.
The list of banks presently in bankruptcy is very long indeed. I
came away with the impression that the FDIC makes "regulations"
ad hoc to suit its purposes "as way opens", and survives so to speak,
from hand to mouth.

Finally, I've made calculations concerning income taxes payable
on tax sheltered retirement assets. If the withdrawals are deferred
as long as possible, i.e. until the death of the account owner,
there is indeed an option for taxation of a lump sum distribution,
where the tax rate is calculated as if the payments were to be
stretched over a 10 year period. However even so, the tax rate
for a jointly filed return is so much lower than for a return 
singly filed, that it might prove advantageous for Margaret and
me not to wait until one of us had died, but to withdraw our tax-
sheltered assets and pay taxes on them before death, considering
also that ante-mortem withdrawals would reduce the taxable estate.

There is in constitutional law an assumption that in order to
be compatible with "due process of law", statutes and regulations
must be intelligible to a person of average normal intelligence.
I find it interesting that such a standard is wholly incompatible
with the contemporary culture of taxation, where laws and regulations
are so complex and so unintelligible and their interpretation is so
unpredictable that the IRS has evolved a procedure of providing
"advisory opinions" to experts in taxation and presumably also to
do-it-yourself tax lawyers. Such "advisory opinions", significantly,
do not have the force of law, and may not be relied on for guidance
in other cases. I conclude that "constituional government" is a
utopian ideal which, except in junior high school civics classes,
never was and never will be.

Laws are the consequence of political process. Adverse, competing
interests struggle for supremacy; little if anything is accomplished
without compromise. Not seldom, it seem seems to me, legislative
compromises exploit the ambiguity of language, each of the contestants
agreeing to a formula that is ambiguous, compatible with his own
conflicting interpretation, setting the stage for resolution of the
uncertainty, if it ever occurs, only by litigation and ultimate
judicial decision.

The world in which I live seems to me chaotic and unpredictable.
"Insurance" is expensive. Whenever possible, I avoid risks, but
when I find them unavoidable, I accept risks as integral to my
existence. I seldom purchase insurance. Undoubtedly I will some
day come to grief, but I doubt that "insurance" would have saved me.

Thank you for your tolerance of my mental - an emotional - 
idiosyncracies. Please give my best to Ned.

Jochen