(State) Constitutional Rights to Bear Arms

We sometimes forget–I do, anyway–that the US Constitution is not the only or even the first written constitution in the United States. The US Constitution was ratified on June 21, 1788, the day New Hampshire became the ninth state to ratify it. The first written constitution in what became the United States was Connecticut’s “Fundamental Orders,” written in 1638, superseded in 1662, by the Charter of Connecticut. New Hampshire is the first independent state to have a written constitution, ratifying its constitution on January 5, 1776. It was replaced on June 2, 1784, by its current constitution, which contains the following words:

All persons have the right to keep and bear arms in defense of themselves, their families, their property and the state.

I’m licensed to practice in Wyoming, Utah, and Michigan. I practice in the first two states. Interested in their constitutional history as it relates to the right to bear arms, I look at each of their constitutions. Here, for your reading pleasure, is what I found:

Wyoming: Article 1, Section 24 Right to Bear Arms

The right of citizens to bear arms in defense of themselves and of the state shall not be denied.

Utah: Article I, Section 6.  [Right to bear arms.]

The individual right of the people to keep and bear arms for security and defense of self, family, others, property, or the state, as well as for other lawful purposes shall not be infringed; but nothing herein shall prevent the Legislature from defining the lawful use of arms.

Michigan: Article I § 6

Every person has a right to keep and bear arms for the defense of himself and the state.

Whole books can be and probably have been written on the bolded words in these three articles. I have to tell you that I’m really interested in what Utah’s courts have said about that last sentence in Utah’s contribution to the genre, especially in what the word “defining” means. If and when I find out, I’ll get back to you.

By the way, here’s the Second Amendment to compare:

A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

I love the Second Amendment, but for my own personal protection, I’d choose any one of the three states’s declaration of my right to bear arms as my first line of defense in any prosecution for violating firearms law.

What I’ve Learned about Wills, Trusts, and Operating Agreements over the Last 10 Years

As I describe elsewhere, I began my legal career years ago as a bank attorney. I’ve been practicing estate planning and business law for 10 years now. And of course, when I started these new practice areas, I had few if any stories to tell, to share with my clients in hopes of nudging them in the direction they should be nudged.

Not anymore. Today, I have all kinds of war stories of things gone bad and things that could have gone sideways, ending right side up. Let me share three of these stories, two of which revolve around the lack of a paper trail–proper documents–and one of which had the proper documents in place. The first two stories end happily, but not because of proper planning and not without a lot of time and expense. In the last one, good documents saved the day. Before I tell the stories, let me remind you that I practice in Utah, Wyoming, and Michigan. These clients could live in any of these states. I’ll also tell you that I’m going to be as vague as necessary to protect my clients’s privacy. Finally, I could tell each of these stories–with slight variations–about many other clients; in other words, don’t waste your time guessing who’s who. You’ll almost certainly be wrong. And now for the stories:

Do You Have an Operating Agreement?

The first example involves a small business, an LLC with four owners (called “members” in the LLC world). Two were running the business. Two were essentially and–supposedly–silent investors. Those not-so-silent investors suddenly wanted to be bought out and were doing their darndest to make sure the other two wanted to buy them out. By darndest I mean they were fussing about this, complaining about that. Refusing to do something they were supposed to do, demanding that my clients do something that didn’t make any sense.

My clients were ready to see the other two gone. Problem was that the business had no operating agreement–the agreement between the owners that governs, among other things, how a buyout should be conducted, including how the sale price should be determined. Oh, the members–all four of them–had worked on an operating agreement, but one was never signed. The two complaining members knew this and demanded much more for their share of the business than it was worth. And while my clients considered their offer, the two complainers continued to apply pressure to my clients’s pain points.

With no operating agreement and no buy-sell provisions to point to, my clients had nowhere to turn. They couldn’t stand the pain, but neither could they point to an agreement that said, “this is what the buyout price should be.” Thankfully, after much time and money and as the parties were virtually standing on the courthouse steps, they were able to settle. The complainers got more than they deserved but less than they wanted. My clients got a thriving business without two pain-in-the-rear-not-so-silent investors. Everybody’s happy now. But my clients would have been even happier had they been able to say, Yes! to the question of “Do you have an operating agreement?”

You may not have a will, but the state does!

The second case involved a surviving spouse (my client) an ex-spouse (the antagonist in this story) and the lack of a will, a document that would have provided clear directions about who got what when the husband died, among other things. In this case, all we had to go on was my client’s memory of what went to whom and the antagonist’s memories concocted from thin air–in other words, made up–and the state’s laws of intestacy.

Whether or not there’s a will, there will be a probate–unless there’s a trust. In this case, there was no will, no trust, and a need for probate. And because there was no will, meaning no clear directions on what the decedent spouse wanted done with his things, the antagonistic ex-spouse with the make-believe memories (I think she may have been a Michigan fan!) saw an opening, an opening through the courtroom door, and started to make a ruckus. After a back and forth of many court filings, my client finally won out, but not after a lot of legal and court fees, something that absolutely did not have to be–if there had been a will.

Business done right.

Finally, a story with both a happy beginning and a happy (well, kind’a) ending. Once again, my clients were members (owners) of an LLC. This time they had actually taken the time to sit down with an attorney–me–to negotiate, draft, and sign an operating agreement. And then they went to work, turning a new business into a successful business. But then one of them died suddenly and very unexpectedly.

After the funeral, the question became, “what to do with the deceased member’s share of the business?” There was lots of advice from the sidelines.

“Pay the spouse this much.”

“No, that’s way to much!”

Etc. etc. etc.

Fortunately, the back and forth didn’t go on too long. Why? Because of that operating agreement, which had very good provisions governing a buyout in the event of the death of one of the members. The provisions gave great guidance on how to determine the buyout price and how it was to be paid and when. All very cut and dried. In short, good planning prevented bad feelings and saved lots of hassle.

Moral of these three stories? Get your documents in place. Whether it’s an operating agreement for an LLC or a will and trust for an estate, get them done now before the problems begin–because they will.

In the end, I can say this emphatically and without hesitation: The cost of solving business and estate problems without documents far outweighs the cost of preparing the documents in advance. Trust me.

The Best Way to Skin a Cat

No, I’m not really going to tell you how to skin a cat. The cat would never stand for such abusive behavior anyway. What I’m going to do is give another answer to the question, “Should I purchase a silencer as an individual or as the trustee of a gun trust?” As I’ve explained here and here, the answer to that question in my humble opinion, is yes, you should purchase any NFA item as the trustee of your gun trust. The other day, a new client told me why he had just purchased a gun trust from me. He reason was new to me. It made sense to me, so I’m passing it on to you.

bright bulb close up conceptual
Photo by Pixabay on Pexels.com

First, a little background. Both he and his wife were adding silencers to their gun collections. He, and maybe she, also planned to purchase more than one silencer this time and more in the future. In addition, he was preparing to submit a Form 1 application to make a short-barreled shotgun. As he said to me,

“I was concerned that I might get confused and inadvertently attach her silencer to my rifle. If I were to go hunting without her and have a run in with a ranger, I could get into trouble for a very simple mistake.” He continued, “by purchasing our silencers through a trust, neither of us has to worry about that.”

Of course, his rational only applies to situations like his. Still, one of the basic reasons to purchase NFA items through a trust–and to hold all your firearms in that trust as well–is to eliminate confusion. Confusion of the sort he worried about. The confusion that always reigns after someone dies–you, in this case. “What are we supposed to do with these silencers or short-barreled rifles? Your family will ask. A well-drafted gun trust will have the answer to those and other questions.

Actually, the more I think about this, I realize that one of the best reasons to own your firearms in a trust–all of your firearms, including NFA firearms and your regular firearms–is that in setting up the trust, you will have to give some serious thought to what firearms you own, who has access to them, who you want to receive those firearms when you die, and 1. whether they know anything about the rules and regulations governing firearms, and 2. whether they can legally possess firearms.

If you’re into firearms safety, those are always good questions to ask and answer. Establishing a gun trust incentivize you to do just that.

Your LLC: What You Don’t Know About Operating Agreements Can Hurt You

Short story: If you are a member of a multi-member LLC, make sure you and the other owners or members have an operating agreement to protect your interests.

Longer story: It’s complicated.

A lot of truth in the title of this post, a truth many owners of limited liability companies (“LLCs”) are unaware of, particularly those who share ownership with other members. After all, many assume, LLCs are easy peasy to set up: Reserve a name for the LLC, secure an EIN (if necessary), register the LLC with the Secretary of State (in Wyoming) or with the Department of Commerce’s Division of Corporations & Commercial Code (in Utah)–all for peanuts–and you’re off and running, organizational certificate in hand and all the liability protection that represents. Or if you’re short on time, any number of online service providers will do all that for you for a few additional peanuts. In either case, after literally minutes, your newly minted LLC will be ready to go. And you can get back to the real business of selling software or buying real estate or whatever else sits behind the liability shield you just set up.

Well, maybe, but again, maybe not. It depends, as they say.

I know; that’s not a very satisfying answer, but here’s the deal: If your LLC is a single-member LLC, that is, if you are the only owner, then maybe you’ve taken all the steps necessary to the formation of your LLC (more on this in another post). But if you’re just one of two or more members, you still have at least one more very important step to take: You and the other owners (aka “members”) of the LLC almost surely need what’s referred to as an Operating Agreement, an agreement between all the members of the LLC.

The operating agreement does what its name implies. It governs the operations, the daily ins and outs of the LLC, its ups and downs, its beginning and timely (or untimely) end. For example, the operating agreement can control if, when, and how new members can be admitted into the LLC. It can contain provisions that govern who manages the LLC and what powers they have or don’t have. Need power to make all decisions that involve less than $10,000.00? If the operating agreement says you’ve got it, well, you’ve got it. Power to sell the company to a suitor? Not without the consent of all the members, again, if the operating agreement says so. And so on. That’s the stuff an operating agreement is made of.

What? I Already Have an Operating Agreement?

Now it may come as a surprise to you that you already have an operating agreement, at least you do if you organized your LLC in Utah or Wyoming (and virtually every other state). The Limited Liability Company Acts of both states are essentially operating agreements. In fact, both acts say that “to the extent that [your own] operating agreement does not provide for a matter described in . . . this [act]. the [act] governs the matter.” Thus, the LLC Acts of both states are a sort of default operating agreement for those who never get around to having an attorney draft an actual operating agreement.

The target group of both states’s Limited Liability Company Acts was supposed to be small “entrepreneurs who organize their businesses without the benefit of [legal] counsel,” says Donald J. Weidner in his article LLC Default Rules Are Hazardous to Member Liquidity. At least that had been the objective of previous iterations of both Acts. The newest iterations? Not so much–and very much to the detriment of the unwary members of multi-member LLCs (“MMLLCs”).

So long and thanks for all the fish

As Weidner makes clear at the beginning of his article, the newest version of the Acts, versions that Utah and Wyoming enacted said so long to some protections tailored to the target group of small entrepreneurs. Instead, the new version,

(1) declared LLCs to be perpetual entities, and . . . (2) denied dissociated members both the right to dissolve and the right to be bought out. (3) It also took away their easy access to judicial remedies . . . (numbers added)

Let’s put some hypothetical meat on those abstract bones. Suppose you and your two best buddies form an LLC for the sole purpose of purchasing and managing a 4-plex in West Valley City, Utah, or Laramie, Wyoming. And suppose that things go great for a while. Real estate prices soar. Rents increase. Equity builds. But then, things change, at least for you. You and your family moved to another state. Your spouse is diagnosed with cancer. And right now, you’re just not that interested in part ownership of a 4-plex located in another state. You have other things on your mind.

So you ask your buddies to buy you out. Guess what: they have no obligation to do so, at least under the default “operating agreement” provided by the state’s LLC Act. In fact, you may have to wait until your buddies decide it’s time to dissolve the LLC and wind up its affairs–a time that could be years down the road, years after you really needed the money. Remember, that the life of your LLC is perpetual under the state’s LLC Act–unless your operating agreement says otherwise. Unfortunately, you and your buddies never drafted an operating agreement. In short, you’re kind of stuck.

Now, you’re not without any remedies. You might be able to sell your interest to an outside party. Of course, the person would have to buy knowing that she is buying only the rights to any distributions from the LLC and not necessarily for any voting rights or management rights. Good luck selling that.

You might also sue to force the dissolution of the LLC (thereby triggering distribution of your capital contribution) by proving that your buddies are “acting in a manner that is oppressive.” That, too, is a long shot unless they really are twisting the knife and not just exercising good business judgment under the circumstances. But if they’re simply not agreeing to buy you out because such a buyout would be a financial burden to them or the company, then oppression will be hard to prove.

So pick up the darn dollars.

There’s an old saying, don’t step over dollars to pick up dimes. Going bare, that is, setting up a multi-member LLC without an operating agreement that provides more flexible liquidity rights is picking up pennies. Just know that if you choose that route, down the road, you may find yourself battling for dollars with your former buddies because they don’t want to buy you out.

A well-drafted operating agreement can limit the life of the LLC if appropriate; it can provide for buyouts in the event of death, disability, or myriad other reasons; it can provide for judicial remedies not allowed under the default “operating agreement.” In fact, the operating can cover all kinds of bases, all sorts of contingencies that the state’s default agreement doesn’t even begin to address. In other words, a well-drafted operating agreement is a must have for multi-member LLCs.

And now you know how to avoid a world of hurt.

Long-Term Care Options and Planning in a Nutshell

First, some items to ponder about age demographics in the United States from an article[1] by Thomas Day, Director of the National Care Planning Council:

As if the current lack of planning for long-term care were not a great enough burden on the immediate or extended family, the failure to plan, for the current generation of baby boomers, could be even more devastating on spouse or family in the future. Here is a list of factors that will make long-term care in the future an even more pressing burden than it is today.

  1. We are living longer. The population segment of the “very old”, older than age 85, is the fastest-growing age group in the country. The older the person, the more likely the need for long-term care and the more likely a need for care which lasts not just months but years. Over 50% of the age group over 85 is receiving long-term care.
  2. The older the person the more likely the risk of onset of dementia. The Alzheimer’s Association estimates about 46% of people over the age of 85 have dementia or Alzheimer’s
  3. The number of overweight and obese people in the United States is increasing dramatically. Obesity is a major contributor to disability and poor health in the elderly. Estimates are that the effects of obesity will increase nursing home enrollments by an additional 15% to 20% by the year 2020.
  4. The ranks of the elderly are growing larger. The population of elderly over 65 will double from about 37 million people today to about 77 million people in 2035, 30 years from now. Based on current estimates of the rate of long term care this means that in 30 years about 17 million elderly Americans will be receiving long term care.
  5. It is estimated that 6 out of 10 people will need long term care sometime during their lifetime.
  6. With a large and growing number of single person households there is no spouse and oftentimes no children to provide care. About 40% of the population is single.
  7. The birthrate is going down, families are getting smaller. The combination of fewer children, the increasing number of single person households and a growing number of elderly will eventually create a situation where there are more people needing care than there are available family caregivers.
  8. Out of approximately 116 million women in this country who could be employed in the workforce about 60% or 69 million are employed.  With women being the traditional caregivers, this means only about 40% of traditional caregivers are at home and able to provide long term care for loved ones without having to juggle a work schedule as well.
  9. Children are moving far away or the elderly are relocating after retirement and this makes it difficult or impossible to provide the resulting long-distance caregiving.
  10. The number of elderly as a percent of the population is growing larger putting a burden on the tax base and availability of money for government programs and the availability of younger caregivers. Over the next 50 years the elderly will grow from about 12% of the population to over 20% of the population.
  11. Medical science is preventing early sudden deaths which often results in a prolonged life with impaired health and a higher potential need for long-term care.
  12. Government programs are already stretched thin for long-term care services and will experience even greater stress on available funds in the future.
  13. The government does not seem inclined to provide a national long-term care insurance plan
  14. There is a worldwide trend, in all major industrial countries, to not deal with the problem of long-term care and very few countries, including the United States , have taken the initiative to adequately address the problem.
  15. Most healthy people in their 50s and early 60s prefer to ignore this future problem and their lack of planning will further burden public programs in the future.

(source for statistics: statistical abstract of the United States, 2005) (Emphasis supplied)

Houston, we have a problem–at least most of us do, or will soon. And unfortunately, time is (probably) not on our side. The problem? Long-term care. Such care runs the gamut. Home care, whether by spouse, children, friends, in-home nursing, and the like. Assisted-living facilities. Nursing home care. Combinations of these. Whatever the method, there’s a substantial cost involved, whether it’s an expenditure of time and money caring for a spouse at home—and the possible loss of income that involves—or full on 24/7 nursing home care, which can run as high as $10,000 per month or higher.

There are essentially four ways to pay for long-term care—if it’s needed:

  1. Private or self-pay,
  2. Long-term care insurance,
  3. Medicaid, and
  4. Veteran’s Benefits.

The drawbacks to private or self-pay are obvious: few people have the money to pay $4,000 – $10,000 per month for LTC without depleting retirement funds beyond repair. If family members can pitch in—and they often do—the burden may be bearable.

Long-term care insurance—whether it’s tradition LTCI or life insurance with an LTC rider—can reduce or even eliminate the burden, and if it’s purchased early, the monthly cost can be more manageable than private pay, and better yet, the cost generally comes during the insured’s working years. That said, LTCI can be hard to come by. Many insurers have left the playing field. Nevertheless, if the client is young enough and still healthy, it’s an option worth looking at.

Medicaid can step in the often huge gap between needs and resources, but as I’ve pointed out above, that help comes with some very strong strings attached.

Veteran’s Benefits are for veterans of course and come in two varieties: Service-related benefits and VA Improved Pension. The first is for veterans with service related disabilities, the second is for eligible wartime veterans and is capped. Veterans who qualify should plan on eventually applying for Medicaid.

I Can Help

If you would like to explore these or other ideas further, schedule a virtual meeting with me by clicking on the red button in the lower right-hand corner of this webpage for a free consultation.


[1] https://www.longtermcarelink.net/eldercare/why_long_term_care_planning.htm accessed March, 21, 2019.

Trust Taxation Basics

General income tax rules. The typical revocable trust is not a separate entity for income tax purposes, and the grantor is taxed on trust income at individual tax rates. Subject to certain exceptions, the typical irrevocable trust is a separate entity for income tax purposes, and the trust pays income tax on undistributed income and on its capital gains at trust income tax rates. Another way to say this is that the trust receives a deduction for amounts distributed to trust beneficiaries.

Trust income tax rates are compressed. In fact, whereas an individual must earn in excess of $523,600 before the 37% tax rate kicks in, a trust must pay that rate on income in excess of just $13,050. Obviously, there is often an incentive for a trust to distribute income to beneficiaries.

Grantor trusts. All trusts, including irrevocable trusts, classified as grantor trusts are not separate entities and therefore pay no tax. Instead, the grantor pays the tax. Grantor trusts are trusts in which the grantor retains one or more specific powers or interests in a trust such as the power to revoke or amend the trust or the so-called swap power or power to substitute assets of equal value. When the grantor dies, these retained powers die with her. Thus, the trust becomes a taxable entity with its own tax ID.

Simple and Complex trusts. Simple trusts are trusts that distribute all income and do not distribute principal or make charitable contributions. All other trusts are complex trusts.

Estate tax planning. The terms to keep in mind here are “unlimited marital deduction,” “basic exclusion amount,” “bypass trust,”[1] and “qualified terminable interest trust” or “QTIP.” The unlimited marital deduction is the IRS’s gift to married couples because it allows couples to defer estate taxes until the death of the surviving spouse, unless 1. the surviving spouse is not a citizen of the U.S. or 2. the property interest that passed to the survivor is a terminable interest; that is, an interest that passes upon the survivor’s death.

The reason for the 2nd exception should be clear: the IRS wants to collect its pound of flesh sometime. Without the exception, there would be nothing left to tax when the spouse dies. The first exception is justified due to the worry the foreign spouse will die outside the U.S. and possibly pay not pay the estate tax bill. Non U.S. spouses do have an annual exemption of $159,000 on transfers and can defer estate taxes via a qualified domestic trust or QDOT, which is structured such that the estate tax will be paid on the 2nd death.

In addition to the marital deduction trust, the bypass trust is the other go-to tool for estate planners helping their wealthy clients avoid the estate tax. Simply put the bypass trust works like this: 1. Fund the trust with the basic exclusion amount of (currently) $11,700,000. This money/property can avoid the taxman—possibly forever. The remaining property goes into the marital trust, taking advantage of the decedent’s basic exclusion amount and ensuring the property will be taxed at the 2nd spouse’s death. This trust is often a QTIP or terminable interest trust that will qualify for the marital deduction and which will allow the grantor to take care of the surviving spouse until he dies. The trust will contain directions where the property will go after the spouse dies—typically to the children.

Disclaimer Trusts

There are disclaimers and then there are qualified disclaimers, disclaimers that don’t result in gift of estates taxes on the transfer. We’re interested in IRS qualified disclaimers.[2] To be qualified, a disclaimer must

  1. Be irrevocable and unqualified,
  2. Be in writing,
  3. Be received by the transferor, his legal representative, or holder of legal title no later than a date that is 9 months after the later of
    1. The day on which transfer is made or
    1. The day on which the transferee turns 21,
  4. Be given before the person disclaiming has accepted any interest or benefits, and
  5. Pass without any directions from the person disclaiming and pass either
    1. To the spouse of the decedent, or
    1. To a person other than the disclaimer.

Disclaimers are tool sto allow grantors and spouses to defer decision making where things are uncertain—and aren’t they almost always? For example, what if when planning was originally done, the estate was well below the threshold for application of the estate tax, where there might not have been a reason for funding a credit shelter trust. Instead, all the property either went into the marital trust or was distributed outright. Years later, the estate has grown substantially. When the grantor dies, the surviving spouse or some other beneficiary could disclaim, resulting in the disclaimed amount funding the credit shelter trust and thus saving estate taxes.

Of course, this approach has its drawbacks, chief among them being the reluctant beneficiary. Money talks after all.

Crummey Powers and the IRS

Crummey v. Commissioner[3] is the reason we have Crummey powers in our legal lexicon. The case involved a trust into which the Crummeys made annual gifts of $3,000 to each of their children (you can give %15,00 per child per year in 2021). The children, in turn, had the right to withdraw $3,000 each year from the trust. The Crummeys claimed that the withdrawal right qualified the yearly gifts as present interests and therefore eligible for the annual exclusion. Ultimately, the 9th Circuit agreed with them, even their argument that the gifts in trust to the two minor children were also present gifts, arguing that “We interpret that [that “the demand couldn’t be resisted”] to mean legally resisted and, going on that basis, we do not think the trustee would have any choice but to have a guardian appointed to take the property demanded.[4] In 1973, the IRS issued Rev. Rul. 73-405, which said

[A] gift in trust for the benefit of a minor should not be classified as a future interest merely because no guardian was in fact appointed. Accordingly, if there is no impediment under the trust or local law to the appointment of a guardian and the minor donee has a right to demand distribution, the transfer is a gift of a present interest that qualifies for the annual exclusion allowable under section 2503(b) of the Code.

Why is this important? Because using Crummey powers, people can remove assets from their estate via trusts. Because using Crummey powers, people can pay premiums on a life insurance policy in an ILIT (irrevocable life insurance trust). But remember, the Crummey power works because the donee of the power has the right to withdraw. Best practice dictates that donees receive a letter each time a gift to the trust is made, alerting them to the fact that they do have that right.

I Can Help

If you would like to explore these or other ideas further, schedule a virtual meeting with me by clicking on the red button in the lower right-hand corner of this webpage for a free consultation.


[1] Also referred to as the credit shelter trust or family trust or B trust.

[2] IRS Code §2518

[3]  397 F.2d 82 (9th Cir. 1968)

[4] Id 88

A Limited Liability Company to Hold Real Estate? Something to Think About

For individuals who own real estate, it is important to consider the best way to structure ownership of various properties. If you‘re just starting out as a real estate investor, you may hold title personally, but that may not be the most advantageous method of ownership. An option investors choose is to form a limited liability company (LLC)—or even a series LLC—to hold the real estate instead. You form such an entity through the Wyoming Secretary of State or the Utah Division of Corporations, depending on where you live.

As with any big decision, there are myriad items to think about when deciding between owning investment real estate personally or in an LLC. Here are a few:  

  1. Liability. As the name implies, limited liability companies provide liability protection to their members (i.e., owners). LLCs allow you to separate your personal assets from your business assets. In doing so, the LLC separates the liability to which each set of assets may be subject. This separation means that if real estate owned by your LLC is at risk from litigation or creditors’ claims involving the LLC, your personal assets should not be at risk. There are limited exceptions to this rule. For example, if you did something negligent or intentionally wrong that led to litigation, even during the course of the LLC’s business, you may be personally liable. However, compliance with your state’s rules and careful steps aimed at distinguishing your personal property from that owned by your business will allow the LLC to provide greater protection against personal liability.
  • Taxes. Another factor you should consider is the tax impact of creating an LLC. Single-member and multimember LLCs that hold real estate can enjoy the benefit of pass-through taxation. In some cases, the transfer of your real estate into an LLC may not have a significant immediate effect. However, depending on how many owners your LLC has, whether you have a mortgage and how much (if anything) you owe on it,  and the value of the property, you may have significant tax issues to consider.
  • Privacy. Creating an LLC may provide greater opportunities to keep information about what you own private. This increased ability to keep your identity as an owner private varies by state. Different jurisdictions have different rules regarding how much disclosure is required to form and maintain an LLC. Popular states for LLC formation like Delaware and Wyoming allow for anonymity. As a result, you may be able to structure your business ownership so that the public at large does not have knowledge about what you own. This can be a helpful asset protection strategy if you could ever be involved in litigation or if any of your properties are exposed to risk. Opposing parties will not be able to discover properties or business interests held in your LLC to pursue in their lawsuits. In states whose LLC statutes do not offer as much opportunity for privacy, you may explore creative ways to increase your LLC’s privacy. However, they are not likely to provide as much privacy as the statutory anonymity provided in certain LLC-friendly states.
  • Tailor-made terms of ownership. Finally, one of the most significant benefits of the LLC is the opportunity to tailor the structure of your business. This means that you can define how you will split profits and losses in the real estate and how decisions will be made. These are two examples of ways you can enjoy the flexibility provided by an LLC, but there are many more. Some people create multiple entities, with one LLC focused on the management of the real estate while the other LLC or subsidiary LLC owns the assets. From determining your LLC’s tax structure to deciding whether to have annual meetings, you can design the company’s structure so that it will function in a way that makes sense for the specific assets it owns..

The LLC provides a host of options for individuals interested in maximizing their protection against personal liability and determining effective tax, ownership, and management plans.

I Can Help

If you would like to explore these or other ideas further, schedule a virtual meeting with me by clicking on the red button in the lower right-hand corner of this webpage for a free consultation.

Responsible Persons Best Practices: Appointing Co-Trustees to Your Gun Trust

Introduction

If you’ve purchased a firearms trust from me, your trust–assuming it’s either a Gold or Silver trust–comes with two different trustee appointment forms: A Co-Trustee Appointment form and a Special Trustee Beneficiary Appointment form. The first form contemplates longer-term appointments. The latter form is for short-term appointments, as short as an afternoon of target shooting. The purpose of this best practices guide is to help you use those appointment forms appropriately.

My general approach is to counsel my clients to have one initial trustee in their gun trust; that’s almost always the person who purchases the trust from me. I then suggest that they can use the co-trustee form to appoint other trustees later—if they want. Once they’ve made the appointment, I explain, they can always revoke the appointment later.

Responsible Persons

After talking to some other gun trust attorneys, I’ve decided to lay out some co-trustee best practices in more detail for my clients, especially as it relates to the appointment and removal of co-trustees as those positions relate to a category of people referred to in firearms law as Responsible Persons.

  • Responsible Persons are those persons in a trust who must fill out Form 23 (the Responsible Person Questionnaire), and be fingerprinted and photographed.
  • Responsible Persons include Settlors (aka Grantors and Trustmakers), Trustees, and Co-Trustees.
  • Successor Trustees (those who become trustees when you die or become incapacitated) and Remainder Beneficiaries (those who get the guns when you die) are not Responsible Persons.  

Trustee Appointments

With that introduction, what are the best practices when using the trustee appointment forms that came with your trust? Here’s a brief summary:

  1. Co-Trustees (named in the original trust),
  2. Co-Trustees (appointed via the Co-Trustee appointment form), and
  3. Special Trustee Beneficiaries (appointed via Special Trustee Beneficiary appointment form)

will all be treated as Responsible Persons if they hold that office at the time of a Form 1 or 4 application and will have to submit a Form 23, fingerprints, and photos along with the initial/original trustee(s) of the trust.

If any of the three categories of trustees are appointed via appointment form or by amendment to the trust between the time of an application and the day it is approved, they should consult with NFA Branch, which almost certainly means filing a Form 23 etc.

None of the three categories of trustees, if they are added after the application is approved, have to file a Form 23 unless and until a new application is filed.

After an application is approved and before the next application (if any), best practice is to make short-term, temporary trustee appointments, using the Special Trustee Beneficiary form; otherwise, newly minted, long-term co-trustees should plan on filing Form 23, fingerprints, etc. at the time of the next application. They can, of course, resign their appointment rather than go through the process, but they shouldn’t plan on being re-appointed soon afterward, certainly not in a we’re-gaming-the-system-sort-of way. Substance trumps form in this case.

In all cases when you appoint a trustee, whether long-term or temporary, whether by amendment or by appointment form, always

  • have them sign the trustee declaration form, attesting to the fact that they are not a “prohibited persons,”
  • keep a copy of the appointment and declaration in your files, and
  • make sure they carry a copy/photo of the signed appointment when they are carrying the NFA item—always.

These three bullet points also apply to appointments of beneficiaries.

Important: when in possession of an NFA item, a trustee should also have evidence (copy or original or photo on phone) of the item’s tax stamp.

One final thought, just a reminder, I hope: Beneficiaries using an NFA item should always remain in a trustee’s presence. Co-trustees are free to roam.

In a later post, I’ll provide a handy table laying out these rules.

I Can Help

If you would like to explore these or other ideas further, schedule a virtual meeting with me by clicking on the red button in the lower right-hand corner of this webpage for a free consultation.

Be careful out there.

Gun Laws: Why Not Enforce What We Have?

This is not a story about Hunter Biden. No, in this post, Hunter is simply a proxy for what’s wrong with the common-sense gun laws chant. It ignores a big problem with gun laws: Too often, they are not enforced, and even when they are, enforcement is often not evenhanded. The powerful, the connected, get waved through. The rest of us, well that’s why we have little people.

Case in point: Hunter Biden and his missing .38 revolver. From Politico:

POLITICO obtained copies of the Firearms Transaction Record and a receipt for the gun dated Oct. 12, 2018.

Hunter responded “no” to a question on the transaction record that asks, “Are you an unlawful user of, or addicted to, marijuana or any depressant, stimulant, narcotic drug, or any other controlled substance?” Five years earlier, he had been discharged from the Navy Reserve after testing positive for cocaine, and he and family members have spoken about his history of drug use.

Lying on the form is a felony, though prosecutions for it are exceedingly rare.

Take a look at the the first paragraph of the 2018 GAO report at that “exceedingly rare” link. Politico wasn’t kidding:

Investigations and prosecutions. Federal and selected state law enforcement agencies that process firearm-related background checks through the National Instant Criminal Background Check System (NICS) collectively investigate and prosecute a small percentage of individuals who falsify information on a firearms form (e.g., do not disclose a felony conviction) and are denied a purchase. Federal NICS checks resulted in about 112,000 denied transactions in fiscal year 2017, of which the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) referred about 12,700 to its field divisions for further investigation. U.S. Attorney’s Offices (USAO) had prosecuted [just] 12 of these cases as of June 2018. (Emphasis supplied)

See the problem? All the time, I mean all the time, people complain about how that shooter got this gun or this shooter got that one? Here’s a guy–a well-connected guy, no less–who apparently lied and thereby skirted the vaunted background check, and everybody knows about it now–and yet, he’s free.

For now. Who knows? Maybe he’ll be charged sometime in the future. But now, he’s just one among hundreds of thousands of persons who are not being prosecuted for giving false information on Form 4473, the Firearms Transaction Record, the form that initiates the background check. Want to get serious about background checks? Get serious about prosecuting lies on Form 4473.

By the way, how would you respond to the questions on Form 4473? Check yourself out at the link. Hunter’s apparent lie was in response to question 21 e. on the form.

Webinar: The Care and Use of that Gun Trust & Ancillary Documents Tucked Away in Your File Cabinet

On Tuesday, April 6, 2021, you and your friends and family members. are invited to the first of what I hope will become an ongoing series of Gun Trust webinars. In fact, I will conduct two Gun Trust & Firearms Law webinars that day:

The GunTrust & Firearms Law Breakfast Webinar from 7:00 AM to 8:00 AM Mountain Time that morning, and

The GunTrust & Firearms Law Lunch Webinar from Noon to 1:00 PM Mountain Time.

In the webinar, I will review important provisions of your firearms trust and explain again how to use the various ancillary documents that may have come with your trust. There may even be time for questions.

 No need to attend both webinars because they will cover the same topic:

My intent is to conduct additional webinars on the first Tuesday of each month, webinars discussing the safe, proper, and legal use of firearms. More on this in another email on another day. For now, please sign up for either the Breakfast or the Lunch webinar at the links below. Again, feel free to invite family members and friends.

The Gun Trust and Firearms LawBreakfast Webinar – Tuesday, April 6, 2021, 7:00 AM to 8:00 AM Mountain Time

The Gun Trust and Firearms Law LunchWebinar – Tuesday, April 6, 2021, Noon to 1:00 PM Mountain Time

Important Notices:

Neither of these webinars establish a lawyer-client relationship, especially given the general nature and applicability of the information presented and the fact that both clients, friends, and family may attend. To state this another way: I will not be offering legal advice in any of these webinars; what I say in the webinars is of general applicability and not geared necessarily to your particular situation.

If you would like to talk to me about your specific situation, please contact me via email at gregory@gtaglaw.com or call me at 801-636-5264.

For those who wish to establish a firearms trust, you can read more about the three versions of firearms trusts I draft by visiting my website.

The Wyoming State Bar does not certify any lawyer as a specialist or expert. Anyone considering a lawyer should independently investigate the lawyer’s credentials and ability, and not rely upon advertisements or self-proclaimed expertise. This website is an advertisement.