It’s Always Fun to Read About Uncle Sam Losing In Tax Court

March 14, 2016 by Leave a Comment

United States Tax CourtThat happened in the Estate of Purdue case decided on December 28, 2015–less than three months ago. And you can read a brief summary of why in the instructively titled article Attention to How Your Farm Business is Organized Pays Off for the Heirs at Tax Time.

Bottom line, a family limited liability company formed with 1. important non-tax purposes in mind and 2. appropriate attention to the legal niceties of of running such a company paid off in big tax savings for the Purdue family. As the court’s opinion demonstrates, it’s not easy, but it can be done. Families whose net worth is tied up largely in small, closely held business or family farms or ranches should take note.

Filed Under: Asset Protection, Business Planning, Estate Planning, Estate Tax, Family Business, Farms and Ranches, Taxes, Trusts, Wealth Transfer Tagged With:

Quote for the Day

March 13, 2016 by Leave a Comment

If your goal is to ensure your retirement plan is able to provide income, tax-deferred growth, and long term security for your family, a Trusteed IRA may be a good option for you. It may give you peace of mind, knowing that your hard earned money will not be blown or diverted to spouses, creditors, or anyone else outside of your family.

Leland Stanford McCullough II, Lee S. McCullough III, L. Stanford McCullough IV, “How a Trusteed IRA Can Improve Your Retirement Plan,” Utah Bar Journal, vol. 29, no. 1

Filed Under: Asset Protection, Estate Planning, Quote for the Day, Taxes Tagged With: ,

Interesting Provision in Wyoming’s Concealed Carry Statute

March 12, 2016 by Leave a Comment

Wyoming Statutes Section 6-8-104 starts off on a serious note intended to get your attention–fast:

A person who wears or carries a concealed deadly weapon is guilty of a misdemeanor punishable by a fine of not more than seven hundred fifty dollars ($ 750.00), imprisonment in the county jail for not more than six (6) months, or both for a first offense, or a felony punishable by a fine of not more than two thousand dollars ($ 2,000.00), imprisonment for not more than two (2) years, or both, for a second or subsequent offense, unless: (emphasis added)

Fine. Imprisonment. Fine again. More imprisonment. All for carrying “a concealed deadly weapon.”

But ahhhh. There’s the word “unless,” and suddenly the clouds disperse and all is right with the world, so long as youIMG_2318

  • Are a peace officer, or
  • Possess a valid Wyoming concealed carry permit, or
  • Have a valid permit from a state that recognizes Wyoming’s permit, or
  • Don’t have a permit, but you “otherwise meet [certain] requirements” under 6-8-104.

That last one may come as a surprise to some. “You mean I don’t need a concealed carry permit to carry a concealed weapon in Wyoming?” they say.

Nope. That’s the magic of the bolded words “otherwise meet [certain] requirements.” Because of those words, and if you

  • Are a citizen of the U.S. and have been a resident of Wyoming for at least six months, and
  • Are at least 21, and
  • Can safely handle a firearm in spite of a “physical infirmity,” and
  • Aren’t prevented by Federal or Wyoming law from possessing a firearm, and
  • Haven’t been convicted of violating controlled substance laws or committed for abusing same, and
  • Don’t chronically or habitually abuse alcohol, and
  • Haven’t been adjudicated incompetent, and finally
  • Haven’t been committed to a mental institution,

you, my friend, can carry a concealed deadly weapon in Wyoming without a permit and consequently without fear of fine or imprisonment. That, and you save the $50.00 application fee.

But . . . But maybe you should consider going through the permit application process and paying the $50.00 fee anyway–plus the cost of a set of fingerprints. If you get stopped by the police for carrying, what would you rather do: Show them your permit and ID and be on your merry way or spend some uncomfortable time with them trying to prove that you meet the requirements I’ve outlined above? Fifty dollars seems a small price to pay to avoid that situation. Besides, try carrying out of state without a permit. Not a good idea. [Added this paragraph later same day.]

A note or two for those of you who do have a concealed carry permit: 1. If a police officer asks to see your permit, you “shall display both the permit and proper identification.” You should already know that, but an occasional reminder can’t hurt. 2. If you move or if you lose your permit or it’s destroyed, you must notify the division of criminal investigation of the Wyoming Attorney General’s office within 30 days or risk having your permit revoked.

There’s more in Wyoming’s concealed carry statute, but this should do for now.

Filed Under: 2nd Amendment, Bill of Rights, Firearms, Gun Trusts, Wyoming Tagged With:

Quote for the Day

March 12, 2016 by Leave a Comment

Farm and ranch estate planning and business planning involve countless choices and numerous wrenching decisions but none that ranks with pursuing fairness between and among the heirs.10 In almost every situation where it is planned for the farm or ranch business to continue into the next generation, and it appears that there will be both on farm heirs and off-farm heirs, the issue of fairness is paramount if one of the objectives of the parents as property owners is to assure harmony within the family after the deaths of the parents.

Neil E. Harl, Farm and Ranch Estate (and Business) Planning–Part 1, Farms and Ranches, March 2015

Filed Under: Business Planning, Estate Planning, Family Business, Farms and Ranches, Quote for the Day

Quote for the Day

March 11, 2016 by Leave a Comment

After years of studying family businesses, we believe it’s possible to identify one just by walking into the lobby of its headquarters. Unlike many multinationals, most of these firms don’t have luxurious offices. As the CEO at one global family-controlled commodity group told us, “The easiest money to earn is the money we haven’t spent.” While countless corporations use stock grants and options to turn managers into shareholders and minimize the classic principal-agent conflict, family firms seem imbued with the sense that the company’s money is the family’s money, and as a result they simply do a better job of keeping their expenses under control. If you examine company finances over the last economic cycle, you’ll see that family-run enterprises entered the recession with leaner cost structures, and consequently they were less likely to have to do major layoffs.

Nicolas Cacher, George Stalk, and Alain Bloch, “What You Can Learn from Family Business,” Harvard Business Review

Filed Under: Business Planning, Family Business, Farms and Ranches, Quote for the Day

Do With This What You Will

March 11, 2016 by Leave a Comment

Without comment.

Filed Under: Occasional Random Thoughts

In a Nutshell: Asset Protection and Trusts

March 11, 2016 by Leave a Comment

Asset protection for you

In a nutshell, here’s what you need to know about trusts as they relate to asset protection: the less access you have to assets in a trust, the less likely your creditors will have access to those same assets to satisfy any claims they may have against you. Of course, the corollary to that rule is: the more access you have, the more easily your creditors will be able to invade your trust.DSC02452

So, for example, if you’re the grantor/creator of a revocable living trust AND the trustee AND a beneficiary of that trust, any creditors you may have won’t be standing very far behind you in the asset/income disbursement line. They may even be standing in front of you. Heck, they may have already taken up residence in your trust.

On the other hand, if you’re only the beneficiary of a irrevocable trust set up by someone else AND if the trust document says that the trustee (also not you) has total discretion as to whether she will disburse funds to you, then your creditors would be well advised to look elsewhere for relief.

Those are two poles with a broad spectrum of options in between, a sliding scale of creditor protection, if you will. I will discuss some of the points on that spectrum in later posts (see the tags below for a kind of road map). But to repeat: the less access you have, the less access your creditors have.

Asset protection for your children

Now, stop thinking about yourself, and think instead about your children. The same rules apply to them. The less control they have over any inheritance they receive from you, the better protected that inheritance will be from their creditors.

So here’s an idea: Instead of giving them a lot of money outright when you die, or even instead of distributing money and other assets from your trust to them in stages–1/3 at age 25, 1/3 at 30, and 1/3 at 35, for example–consider giving your successor trustee discretion as to when, why, and how much he might distribute from your trust into the anxiously waiting hands of your children.

Why? Because if one of those children has creditors knocking on his door when you’re alive, you can bet those same creditors will be knocking on that child’s door even more vigorously the moment your obituary goes viral. But, if you’ve set your trust up correctly, those creditors will have to rely on the child rather than the trust for payment.

That’s as it should be, by the way. Your child’s creditors are his creditors after all–not yours.

Filed Under: Asset Protection, Estate Planning Tagged With: , ,

What I’ve Been Reading Today

March 10, 2016 by Leave a Comment

Critical Skills You Should Learn That Pay Dividends Forever

How to Get a Busy Person to Respond to Your Email

Venture Deals: Be Smarter Than Your Lawyer and a Venture Capitalist To be honest, I just started reading this one today.

Filed Under: Business Planning, Family Business, What I've Been Reading Today

Quote for the Day

March 10, 2016 by Leave a Comment

The bottom line today is that water continues to be an under appreciated and under-valued asset. But water prices will eventually start to rise more quickly – as a result of on-going population and demand growth, drought and increasing scarcity. More and more major urban areas are beginning to bump up against the challenges of true scarcity. And as water prices increase, we will gradually pay more attention and modify our behavior – toward improved conservation and more efficient use. As prices inexorably rise, we will eventually be forced to confront and solve these problems, and truly recognize water’s fundamental value. But we aren’t there yet.

Steve Maxwell, “Talk is Cheap, Water is Cheaper,” 2014 Water Market Review

Filed Under: Contracts, Farms and Ranches, Quote for the Day, Water and Water Rights

Estate Planning: Are You Prepared for Incapacity?

March 9, 2016 by Leave a Comment

Not too long ago, estate planning was all about the estate tax tail wagging a sometimes reluctant dog. That was unfortunate for a number of reasons, among them, the focus on estate taxes caused planners to look beyond all those who had no estate tax problem. Likewise, those without that estate tax problem walked around unaware that they probably should do some planning nonetheless.DSC02461

Did I just describe you? If so, maybe it’s time think again about the need to do some estate planning.

Though avoiding estate taxes still motivates some (very well off) people to plan, the driving force behind estate planning these days for most people is one or more of the following. The desire to

  • Maintain control of their property while they’re alive and well;
  • Provide for themselves and their loved ones if they become disabled or incapacitated;
  • Give what they have
    • To whom they want,
    • The way they want,
    • When they want, and
  • Minimize the impact of professional fees, court costs, and taxes–typically income taxes first, then estate.

That second item, the one about providing for your family if you’re disabled or otherwise  incapacitated, is a big one. Did you know that a 20 year old has a 1 in 4 chance of becoming disabled before they retire? It gets worse with age. According to a 2005 AARP study,

The lifetime probability facing a 65 year old of developing a disability in at least two primary activities of daily living for at least three months or becoming cognitively impaired is 44 percent for males turning age 65 and 72 percent for females. Therefore, women face a 64 percent higher risk than do men.

A well-drafted estate plan will address those probabilities and ensure that you and your loved ones are better able to deal with a disability or mental incapacity should it happen. That plan will include

  1. The designation of a trustee and/or agent to manage your property while you’re unable;
  2. A living will, so your doctor and loved ones will know what you want done when you’re unable to communicate; and
  3. A health care power of attorney, so your health care agent can do what you would do in the same circumstances–if you were able.

Those last two items collectively are known in Utah and Wyoming as an advance health care directive by the way. Do you have one in place? Do you have a trustee or agent to manage your property in case you no longer can? Then maybe it’s time to do some estate planning.

 

 

Filed Under: Advance Health Care Directive, Estate Planning, Estate Tax, Health Care Power of Attorney, Living Will, Power of Attorney, Trusts, Utah, Wyoming Tagged With:
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