Interested, But Not Twitterpated–Yet

So when I began this blog post about this guy, I had to look up the spelling of the word “twitterpated” for the title to the post, which led to this:

And now that I’m done with that, let me return to writing about the guy I began with, Don Willett. He’s apparently on the short lists of some who are looking forward to the next Supreme Court nominee.

I don’t know much about this Justice of the Texas Supreme Court–yet–but he appears to have a sense of humor, so he’s got my attention.

A Gun Trust in Your Future?

A recent study by the University of Chicago Crime Lab published in the Journal of Preventive Medicine, coupled with a move by Senator Tim Kaine (D-Va.) to amend Section 922(d) of the Gun Control Act of 1963 (18 U.S.C. 44), provide yet another reason for gun owners to set up a gun trust.

The Chicago study involves a survey of 99 inmates of Cook County Jail. Number one among its five principal findings:

Our respondents (adult offenders living in Chicago or nearby) obtain most of their guns from their social network of personal connections. Rarely is the proximate source either direct purchase froma gun store, or theft.

In fact, purchases at gun stores and shows accounted for just 1.5% of the guns these individuals “accessed . . . during the 6 months before the current arrest.” Or, put another way,

a majority of the primary guns (40 of the 48 for which we have detailed information on the source) were obtained from family, fellow gang members, or other social connections; the fraction is still higher for secondary guns. (emphasis supplied)

According to the study, the chain of transactions typically looks something like this:

2015-09-09_1629_Chicago Study

So now comes Kaine and his amendment to Section 922(d), an amendment which effectively puts the same burden on private persons–often family members and friends–that already rests on the shoulders of Federal Firearms Licensees or FFLs. That is,

Unless the transferor has taken reasonable steps to determine that the recipient is not legally barred from possessing firearms or ammunition under paragraphs (1) through (9), it shall be unlawful for any person to sell or otherwise dispose of any firearm or ammunition to a person who
(1) is under indictment for, or has been convicted in any court of, a crime punishable by imprisonment for a term exceeding one year;
(2) is a fugitive from justice;
(3) is an unlawful user of or addicted to a controlled substance . . .;
(4) has been adjudicated as a mental defective . . .;
(5) [is an illegal alien];
(6) has been discharged from the Armed Forces under dishonorable conditions;
(7) [has renounced his citizenship];
(8) [is subject to a restraining order because of harassment, stalking, threatening, and the like]; or
(9) has been convicted in any court of a misdemeanor crime of domestic violence. (emphasis supplied; underlined language is Kaine’s proposed amendment; aspects of items (1)-(9) have been paraphrased for length)

Among many of the knocks against this proposal is that it imposes a burden–the same potential penalty gun dealers face–without offering relief–the ability to do background checks using the FBI’s NICS database. If Kaine’s bill (or any bill like it) passes, a well-drafted gun trust could be the shelter from the ensuing storm, from the increased potential of the unintentional or accidental felony that could result from being unable to perform an adequate background check. Why? Because that trust will contain provisions that spell out, for the trustees and beneficiaries, who can and who cannot qualify as a potential transferee of any of the guns that make up the corpus of the trust. In short, they will know–without having to Google the answer–that persons who fit in categories (1) through (9) do not qualify.

Look, the NRA and other gun advocates may beat back Kaine’s attempt to impose liability on private persons who unknowingly transfer guns to legally barred dudes and dudettes. But given the Chicago study which points the finger directly at family members and social connections as the source of most illegal guns on the streets of Chicago, don’t be surprised if Kaine’s bill has legs. And if it does, it seems at least arguable that a well-drafted gun trust would be one large reasonable step towards satisfying the legal standard established in Kaine’s proposed legislation.

That’s the beauty of gun trusts. Rather than a way to circumvent the law, they’re actually a method of safely and legally transferring the guns you treasure to the people you care about–so long as those people haven’t been walking on the wrong side of the law. Should you have one?

The Best Way to Take the Stress out of Estate Planning

Slide1Brian Vnak, over at MarketWatch, just penned a piece titled “How to Take the Stress Out of Estate Planning.” He gives four ideas to support his title, among them, number 3: “Gift assets while you’re still living — addition by subtraction.” That’s a good idea, by the way, if only to take the monkey off your back, put there by Andrew Carnegie, who famously said:

The man who dies rich, dies disgraced.

Yankee’s short piece could have been even shorter, had he talked to me first. The best way to take the stress out of estate planning is to get it done. To do it now. To be done with it.

Six Things to Ask Yourself as a Business Owner

Another helpful link, this one from Northern Trust: 6 Things to Ask Yourself as a Business Owner. Sorry for the quick spate of links to videos and webinars. I happen to be on the look for something else, and found these instead. I thought they may be of interest to my readers. This one is short–about 2 minutes–but the six questions may prompt you to think more deeply about what you want to do with your business. Enjoy.

Estate Planning: How to Get Going and Why You Shouldn’t to Do It Yourself

Slide1Courtesy of the ABA, here’s a link to an on-demand webinar that should answer a lot of your questions about estate planning. As the brief description of the webinar says, “The program is intended for the general public and does not require a background in the law of wills or trusts or tax.” Click on the link near the bottom of the page, enter your e-mail address and a few other details, and you’re set.

The webinar is 1 hour long and covers a lot of issues. If you have any questions, feel free to contact me.

By the way, access to the webinar ends in October 2015, so take advantage of access now.


5 Reasons You Might Need a Trust

Virtually everyone should have a will. To see why, go here. But most people would do well to have a trust. Get that? You don’t have to be Bill Gates to need a trust. Here are five reasons why:

1. Avoid probate. Probate is the word we use to describe the legal process, the court proceedings, that virtually all wills must go through, so that your property goes where you want it to go, so that the court can decide whether the guardian you chose for your children is the best person for the job, so that . . . the list goes on and on. A revocable trust saves you from all that. Rather than passing your property via your will, set up a revocable trust, then title your bank accounts, your home, and your other property in the name of the trustee–you–and you can avoid probate, at least for all the property in the trust. A by product of that process is that you can . . .

2. Preserve your privacy. Hand in hand with probate is the loss of your privacy. What do you think “the public record” means if it doesn’t mean the record of what goes on inside a court room? Go down to your local clerk of court’s office and ask for the court file for a recent probate, and you’ll see what I mean. Revocable trusts? They don’t go through probate; hence, your maintain your privacy.

3. Keep control. If you’ve ever seen Brewster’s Millions or Easy Money, you know all about control. In Brewster, Richard Pryor must spend $30 million in 30 days in order to inherit a larger estate. In Easy Money, Rodger Dangerfield has to turn his vices into virtues before he can inherit. Control. In some cases, it might come in handy. A trust can give it to you–even when you’re long gone.

4. Protect your property. Protect it, that is, until your intended beneficiaries are old enough or mature enough to take care of it on their own. Trusts can do that. Wills can’t.

5. Take care of you should you become incapacitated. Coupled with what is called a durable power of attorney, the trustee of your living trust can step in an manage your estate should you become incapacitated. With the power of attorney and the trust powers, he or she will essentially walk in your shoes and speak in your voice–be you . . . essentially.

Bonus: Reduce or eliminate your estate tax. Of course, if you have a lot of money, that is, if you have $5,430,000 or you and your spouse together have twice that amount–$10,860,000–you can use a trust to avoid or delay the estate tax on amounts over those sums. It gets complicated, so we’ll stop here.

Trusts 101

Slide1A trust is a fiduciary relationship between a trustee and beneficiaries of the trust. Trusts can be implied and express. Implied trusts are court created in order to prevent unjust enrichment (a constructive trust) or to carry out what the parties intended, but failed to do properly.

In estate planning, we concerned almost entirely with express trusts, trusts set up intentionally to achieve some goal or purpose, to avoid taxes or direct money to a charity, for example. To set up such a trust, a person–the settlor–must have the intent to do so and then must comply with three formalities:

1. There must be a res or property, a bank account, a piece of real estate, a life insurance policy, or some such.

2. The trust must have ascertainable beneficiaries. Why have a trust if there are no beneficiaries, right?

3. Finally, the trusts must have a trustee, though a court can appoint the trustee if the trust document doesn’t name one.

Express trusts are almost always laid out in a trust document that names the res, the beneficiaries, and the trust. Those documents also explain the trust’s purpose, list the trustee’s powers, and the like.

Express trusts can be testamentary, that is they come into existence upon death. Such trusts are generally established in a will and must always comply with the formal requirements of a will, In Wyoming that means the testator or maker of the will must sign the written/typewritten document and that at least two disinterested people must witness the testator’s signature. Though testamentary trusts are irrevocable upon death, the testator can change the terms of the trust while he is still alive.

Express trusts can also be established during the settlor’s lifetime. They are called inter-vivo trusts. People often set up revocable inter-vivos trusts, so they can test drive them before they die. Revocable trusts are not separate taxable entities. Thus, if you have a revocable trust with an investment account as part of the trust property, you will have to report the trust’s taxable income on your 1040 form. Upon the settlor’s death, that revocable trust become irrevocable.

Intervivos trusts can also be irrevocable from the beginning, but by doing so, you may also create a taxable event because, remember, the trust has to have a res, and if that res is large enough, you will have to transfer that property from your pocket to the trust’s pocket, if you will. We call that a gift, and a large enough gift will be subject to the federal gift tax system. Why? Because a revocable trust is a separate taxable entity, a separate person. But that’s enough on that subject for now.

Though the wealthy often use trusts to save estate taxes, they can also be a valuable estate planning tool for the middle class. But more on that later, in another place on this site.

Guardians 101

Slide1A guardian is a person appointed by another person or a court to care for another person or their property. That other person will be either a minor or a legally incompetent adult and is referred to as the “ward.” Guardians of the ward’s person are always called guardians. Sometimes guardians of the estate or property are referred to as conservators. In either case, they are fiduciaries; that is, they must act with special care towards the ward or their property.

If you have minor children or have responsibility for an incapacitated adult, you should consider making provision in your will for a guardian. But take care to choose someone with the ability and wherewithal to do the job. Fail to do that, and you may find the court re-doing what you didn’t do properly.

Elective Share

As we discussed in 5 Reasons You Need a Will, a valid will controls where your money goes when you die–except when it doesn’t. In some states for instance, the maker of a will–the testator–can’t disinherit a spouse.  In Wyoming for example, a disinherited spouse can “elect” to take 1/4 to 1/2 of the property disposed of by the will (reduced by certain items), depending on whether there are children and whether the disinherited spouse is a “parent of any surviving issue of the decedent.” In other words, the will won’t control where all the money goes in this circumstance.

Once again, whether the disinherited spouse has an elective share and how much that share is, depends on where the decedent is domiciled. If the decedent is domiciled in Utah, the surviving spouse’s elective share is 1/3 of the augmented estate–essentially the property disposed of by the will, reduced by funeral and administrative expenses, certain exemptions, and the like.


Wills 101

Slide1When a person leaves a will, we say that he died testate as opposed to intestateBlackstone defined a will as “The legal declaration of a man’s intention which he wills to be performed after his death,” a definition that maybe gives us some idea of where the legal term “will” comes from. Thomas Atkinson’s Handbook on the Law of Wills is a little more expansive and a lot more helpful (all emphasis in these quotes is mine):

A will is a person’s declaration of what is to be done after his death, which declaration is (1) revocable during his lifetime, (2) operative for no purpose until his death, and (3) applicable to the situation which exists at his death. Usually a will relates to the disposition of the maker’s property.

In other words, a will only functions after the maker, or testator, dies. Until then, the testator can change her will when she wants, willy nilly, if you will. (I’m sorry.) That is, while she’s alive, her will is revocable.

A person who receives money or property as directed by a will is called a beneficiary. Often a will names more than one beneficiary or classes of beneficiaries. For example, a testator might name her son James and daughter Julie beneficiaries, or she might simply refer to them as a class, as in “all my children, share and share alike.”

To make sure her wishes are carried out, the testator generally names an executor, the person who acts on behalf of the testator after she dies. (A quick note on terminology: If someone dies intestate {without a will}, the court appoints an “administrator.” If someone dies testate {with a will}, the will names an “executor.” Both the terms administrator and executor are included within the meaning of the term “personal representative.” Sometimes people use the terms executor and personal representative interchangeably.)

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