Quote for the Day

“Death is not the end. There remains the litigation over the estate.”

Ambrose Bierce

Justice Scalia’s Funeral

This is a weekend, and my granddaughter is here from Connecticut, so I’m not taking time to blog today, other than to post link to a video of the entire funeral service for Justice Antonin Scalia. The highlight, for me, was his son the priest’s homily. Warm and serious–just like the Justice.

Enjoy.

I hesitate to do this, but it just occurred to me that his passing does have an estate planning, will, and trust tie-in. Was Justice Scalia like the proverbial carpenter in his own home, or had he done appropriate estate planning for his family?

It’s (Almost) All About That Basis

Because of the applicable exclusion amount, a married couple must have an estate of almost $11,000,000 dollars (2016) before the estate taxman comes and actually takes his share. As a consequence, the emphasis in estate planning–at least for smaller estates–is all about saving income taxes–capital gains, to be precise–on appreciated property.

I don’t have the time right now to go into this in detail, but I do have time to link to an extended paper on the subject by Edwin P. Morrow and to a shorter article in the Wall Street Journal. If you’re interested, both are worth a read. Enjoy.

And have a great weekend.

Oh, and here’s that song. Well, at least my favorite version.

Why Do You Want a Gun Trust?

If your sole purpose in purchasing a gun or NFA trust is so you can buy that silencer and avoid the need for your local Chief Law Enforcement Officer’s (CLEO) signature*, then I’m not your guy. As I explain elsewhere on this site, I see gun trusts as accomplishing that purpose and much more, including encouraging safe and careful ownership of firearms for both you and those who inherit your firearms when you die, as well as helping you make sure that when you die, your guns go to whom you want, how you want, and when you want.

Gun law generally and the law governing NFA firearms more particularly are complex subjects. Persons who ask me to draft their gun trust will get more than a trust, they’ll also receive advice from me and substantial documentation on how to use that trust.

* This changes on Wednesday, July 13, 2016. After that, individuals no longer need a CLEO’s sign off on their NFA purchase, though they still need to notify the CLEO.

Water Rights and Water Wrongs

IMGP3444
A very interesting article about water at ProPublica.org
. Essentially, the pieces asks whether Wall Street–the good guys on Wall Street, of course–will help us achieve this:

 

[Hedge Fund manager] Disque Deane . . . supports the idea of setting aside what policy makers call “lifeline supplies” to guarantee households some minimal amount of water. But he says if markets jack up prices on higher levels of consumption, that may not be a bad thing. Anyone who wants to fill a swimming pool, water a golf course, or use billions of gallons of Colorado River water to grow cotton in the Sonoran Desert, he says, should have to pay for that privilege.

without our farmers and ranchers and small town America ending up like this:

Eventually, though, Crowley County passed a point of no return. With so much water gone [because farmers had sold their rights for the high prices offered], the empty irrigation ditches didn’t work; one lonely farmer at the end of the run would see all his water soaked up by the soil long before it ever reached his farm. And with fewer and fewer farmers around to share the expense of maintaining the ditch systems, the cost kept rising. Farmers had little choice but to sell, and all but 11 in the county did. The place literally dried up.

Kneeling in his driveway changing a truck tire last summer, Tomky’s son-in-law Matt Heimerich recalled what the town had lost. Though tens of millions of dollars in water rights were sold, few of the proceeds were reinvested in the community, he said. One by one, families moved away. The tomato and sugar factories shut down, and without goods to ship, the railroad stopped sending trains through town. Ordway’s car dealerships closed, and the tractor store went bankrupt. As though someone had pulled a bottom block out from a Jenga tower, Crowley County fell into an inexorable collapse.

“I couldn’t have eaten enough Prozac,” Heimerich said.

We don’t take water as seriously as we should. I think that’s self-evident. And pricing water differently and more sanely is, in theory, a good idea, so that we begin allocating it better than we do. But. There is always a but. And right now, I don’t know what comes after the but.

SAMSUNG

I know I don’t want farmers, ranchers, and small town America to disappear. Oh, and water rights are assets, assets that, as this story makes clear, are becoming more and more valuable as I write this. Assets that warrant good estate planning to preserve them for future generations. So there’s that.

On a related note, if you’re interested in water and water issues, may I recommend the always interesting podcast, Water Values hosted by attorney Dave McGimpsey? I discovered about a year and a half ago and listened to it regularly as I ran. As I ramped up my estate and business planning practice, I stopped listening, intending to return after I had things moving along in estate planning. I’m thinking it’s time to begin listening again, especially since farmers and ranchers make up such an important part of the two, dry, Western states that I serve.

Trust Protectors: They Can Come In Handy When Your (Trust) Intentions are in a Pinch

What do I mean by “pinch”? Well, let’s say that you’ve created a trust, with yourself as the initial trustee. You know what you want to do with your trust, who you want to benefit, what you what to happen and what you don’t want to happen–that drug addled nephew, for example doesn’t get anything until he shapes up.

You’ve got big plans, and you think you’ve made your intentions clear, both in the trust and to the person or persons who will succeed you as trustee should you die or become incapacitated.

And then you die. And your successor trustee takes over. And as time moves on and one, your trustee begins to deviate from the path you clearly explained to him years ago. And he does this some more and some more, until he’s way off the path that leads to the fulfillment of your dreams for your beneficiaries. What do do?

Well, you could come back as a ghost and scare him straight, but that’s a long shot, right? Or your beneficiaries could all get together and petition the court to remove the trustee, but that can be a long, drawn-out, expensive, and often futile process. Though more receptive to the idea of modifying a trust or removing a trustee, courts have been and still can be reluctant to do so.

IMG_1996Enter the trust protector–that is, if you named a trust protector in your trust document. What’s trust protector, you ask? According to Lawrence A. Frolick, a law professor at the University of Pittsburgh School of Law, trust protectors

are best conceived as a means for a settlor [or grantor or trust maker] to attempt to ensure that the intent behind the establishment of the trust remains fulfilled in the future. Settlors [grantors, trust makers] appoint a protector to create and alter-ego who can supervise the trust and act to ensure that the purpose of the trust, as envisioned by the settlor [grantor, trust maker] is carried out even if the trustee must be replaced or the terms of the trust must be modified. The settlor [grantor, trust maker] by appointing a protector, overcomes the judicial reluctance to modify trusts . . . (Trust Protectors: Why They Have Become “The Next Bit Thing,” Real Property, Trust and Estate Law Journal, pg. 268-269, 50:2, Fall 2015; see here for an abstract of the article)

Now, trust protectors aren’t necessary for every trust, especially those that will close their doors once the grantor’s children reach an age appropriate to receive their final distributions free of trust–if that’s the grantor’s plan. However, for those of you who want their trust and their trustee to carry out their intentions for years and years into the future, a trust protector makes all kinds of sense. Think of it: A trustee, even the best trustee, will probably do a better job if she knows someone with the power to remove her will continue to be looking over her shoulder for years to come.

Not a bad idea.

Funding: The Second Step of the Living Trust Two-Step

Just because you have a will and a living trust doesn’t mean you’re finished with the estate planning process. There is another, essential step, a step called funding your trust.

Slide1Remember, among the reasons you have (or hope to have) a will and living trust are to avoid probate to the extent possible and to make sure your property goes to whom you want it to go, when you want it to, and with as little income and estate tax taken out on the the way. It stands to reason that for that to happen, your trustee–probably you–has to have some control over your property.

To make that happen, you must fund your trust; that is, you must transfer property you and your spouse (if married) personally own to the trustee of your trust–again, probably you. My purpose here is not to go into depth on the subject. (For an extensive Q&A on the subject of funding, I suggest you visit EstatePlanning.com.) Rather, I thought it would be interesting to give you an idea of what funding meaning in the practical sense.

Essentially, there are three basic ways to transfer property into your living trust: 1. a general assignment–a short document referring to miscellaneous personal property such as books and jewelry and signed by you, 2. transferring or changing title–title to real estate for example, and 3. changing beneficiary designations–on a life insurance policy for instance.deed-framed

What follows are lists of property that you must transfer by changes in title or beneficiary designations:

Property Requiring a Change in Title

  • Checking, Money Market, and Saving accounts
  • Section 529 educations plans
  • Certificates of Deposit
  • Safe deposit boxes
  • Stocks, bonds, mutual funds, and brokerage accounts
  • Real estate
  • Vehicles
  • Business interests

Property Requiring a Change in Beneficiary Designations

  • Life insurance policies
  • IRAs
  • Annuities
  • 401(k)s
  • 403(b)
  • Keogh Accounts
  • Pension Plans
  • Profit Sharing Plans

Sometimes the attorney will take care of all of this, generally for an additional fee. Often the attorney and client share the responsibility, the attorney taking care of, say, the deed and business interests, and the client talking with her broker and bank. And then there are the clients who prefer to do it all themselves.

The critical thing is that until the funding is complete, so that the estate plan works the way it was intended to work.

 

A Note on Why I Draft Gun Trusts for My Clients

I thought long and hard about whether I should do my gun trust business on a different website and under a different trade name than the ones I use for my estate and business planning practice. I’ve noticed that many attorneys separate their gun trust work from their other practice areas for fear, I suppose, that they might scare off potential clients who 357_IMG_2725are not interested in or even loathe firearms.

I decided to do all my business using the same website and trade name. Here’s why.

I draft gun trusts for two basic reasons:

1. Gun laws are complicated. Guns are assets, property that must be handled properly and carefully when the owner dies or becomes incapacitated. This is so because guns are regulated property and are therefore unlike virtually any other property people own. Violate one of the laws or regulations governing the transfer or possession of firearms–even unintentionally–and you or your executor or trustee could be in a fix. As an attorney who holds himself out as an estate planner, I feel an obligation to be knowledgable about and able to help my clients manage their firearms in their estate plans so my clients don’t find themselves in that fix. Moreover, since I represent clients in both Wyoming and Utah, this approach seems like a sensible plan to me.

2. Gun trusts promote safety. I believe gun trusts provide an extra layer of safety to gun owners and those who succeed them in ownership and therefore to the public. A trustee of a gun trust assumes a special or fiduciary obligation under the law when they manage firearms in a trust. The trusts that good attorneys draft make the parameters of that obligation crystal clear. The result, I believe, is better informed gun owners and improved public safety. If that’s actually the case, it only makes sense to draft gun trusts.

Of course, I could do all this without promoting my gun trust business on my estate and business planning website. I chose not to do that for two reasons: 1. Two websites are two times the work. Two trade names are twice as much to keep track of. 2. I want people who come to this website to know who they are dealing with. No surprises. I ask potential clients to disclose a lot when they work with me–that’s essential to good planning. It seems fair for me to be completely open with them as well.

 

Annie Hide Your Guns? Justice Scalia Has Died.

Betty Hutton, as Annie, couldn’t get a man with a gun. Some are worried that they won’t be able to even use their guns if President Obama gets to appoint a new justice to the Supreme Court now that Justice Antonin Scalia has died. AScalia2I don’t know if that’s a worry worth worrying about, even if  President Obama makes that appointment. Members of the court–left and right–are loathe to overrule themselves. Sure it can happen, and guns may be the issue that causes them to do so. But first, any Obama appointment has to get through the Senate and Senate Majority Leader Mitch McConnell already says that ain’t gonna happen. 

And so, I’ll just say that I’m going to miss Scalia. A lot. His humor. His writing. His intellect. No, he was not perfect as a man or as a justice, but he was good, very good on both counts. I was amazed at how the initial reports of his death stunned me.

So today, I choose not to get political. Instead, I want to praise the man. To that end and for your enjoyment and edification, I share this interview of him by Brian Lamb of C-SPAN:

When Something is Better Than Nothing: The Case for the Holographic Will

Slide1Let’s be clear on this one point: If you don’t have a will, the state has one for you. That is, if you die without a will, your state’s law of intestacy will step in and make sure your assets go to someone. If you’re lucky, your desires will coincide with the state’s. If you’re lucky.

If you live in Wyoming, your assets will be distributed as follows, if there’s anything left after the payment of debts:

  1. If the deceased leaves a spouse and children, then 1/2 to the surviving spouse and 1/2 to children or their descendants.
  2. If the deceased leaves a spouse and no children or descendants of children, 100% to the spouse.
  3. Likewise if the deceased leaves only children or descendants of children, i.e., 100%
  4. No spouse or children? Then to father, mother, brother, and sisters or descendants.
  5. Finally, to grandparents, uncles, and aunts. (Wyo. Stat. § 2-4-101)

If you live in Utah, well, it’s quite different:

  1. The entire intestate estate goes to the surviving spouse if the deceased leaves no descendants or if all of the surviving descendants are also descendants of the surviving spouse.
  2. If some of the deceased’s surviving descendants are not also descendants of the surviving spouse, the the spouse gets the first $75,000 and 1/2 of the remainder. (Utah Code §75-2-102)
  3. What’s left, goes first to the descendants of the deceased per capita–i.e., three children? Each gets 1/3rd.
  4. If no descendants, then to the deceased’s parents, then to descendants of the parents (i.e., bothers and sisters), then to the grandparents, etc. etc. (§75-2-103)

It’s a little more complicated than what I’ve just described, but the broad outline is there. What isn’t there is the ability to disinherit or direct more money to one child than to the other. Nor is there the ability to prevent a spouse from whom you are separated but not divorced from receiving the surviving spouse’s share. Have a charitable bone in your body? Out of luck.

So what do you do if you don’t like the state’s plan for you? Make your own plan: draw up a will, using an estate planning attorney, I hope.

But if money or time is really short; if you’re in a pickle and need a will right now, this very minute, an attorney might not be an option. A holographic will might solve your problem. According to Dictionary.com, a document is holographic if it is “written wholly in the handwriting of the person whose signature it bears.” A holographic will is just that, with minor tweaks, depending on where you live.Holographic Will

If you live in Wyoming, a holographic will, to be valid, must be “written entirely in the handwriting of the testator and sign by the hand of the testator himself” (Wyo. Stat. §2-6-113).

If you live in Utah, such a will is valid if the “signature and material portions are in Testator’s handwriting” (§75-2-502(2)).

In neither case are witnesses necessary.

Thus, if you’re in a pinch, pick up pen and paper and write out your will. Tell the world how you want your property distributed should you die suddenly. Then sign it and put it where someone will find it. Tell someone about it. Then, once the emergency passes and you have more time and money, give an attorney a call and get it done right.

 

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