When Dave Ramsey’s Wrong, He’s Really Wrong

Zander_2016-04-15_1200I’ve listened to Dave Ramsey. My wife owns a couple of his books. I get what he does, and I think he probably does a some good–in the debt area, at least. But he’s not always right. For example, I don’t care for some of his opinions about life insurance and much of his investment advice is off the mark as well. Further, his one-size-fits-all approach and his dismissive attitude towards insurance agents and other financial advisors are a real turn off for me. Seems that everybody’s out to get you but Dave and those he recommends. (I have more to say on this point, but I won’t.)

In short, I’m basically not a fan.

So you will not be surprised that I’m posting this link to a blog post by attorney Richard Chamberlain in response to a wildly uniformed excerpt about living/revocable trusts from one of Dave’s books. Make sure to read the entire post and the links in the post.

I must add my two cents on living/revocable trusts: Though they are just one part of a well-executed estate plan, they are an important part. Among many good reasons to establish a living/revocable trust, there’s this: setting one up and funding it will help you and yours get your minds around what you own, how you own it, and how you want it distributed or handled upon your death or incapacity. Mind you, I could add more than two cents to this conversation, but I’ll stop here.

Quote for the Day

From the article “Communicating an Estate Plan to Heirs,” posted at Successful Farming at Agriculture.com:

“For some children, money equals love. Therefore, if they receive fewer dollars, they assume they are loved less. With farm distribution, there are times when the farming heir appears to get a financial advantage on paper. Sometimes this may be very legitimate if the farming heir has worked hard and helped to grow the farm. Other times, the truth is that person has just hung around waiting for the farm to fall into his or her lap. Know the difference and be honest with that in your planning, and it will be much easier to explain to all.”

Quote for the Day

“While many people have an inherent aversion to talking about both death and taxes, leaving a positive legacy is something we all care about. Unfortunately, numerous studies show that over 50% of Americans have no estate plan, no will and no medical directives. Why do so many people fail to properly plan for what happens at the end of their life? Simon & Garfunkel may have gotten to the heart of things in one of their songs: So I’ll continue to continue to pretend / My life will never end….

“The tragedy of failing to properly plan is not visited upon the dead. It is the living that suffer its unexpected and unforgiving consequences. By failing to properly plan, many of us are creating problems for our loved ones that do not exist. Estate planning sounds as if it is for the über-wealthy when in fact it applies to everyone. Below are some of the areas that need to be addressed as a part of the estate planning process.”

John J. Scroggin, AEP, J.D., LL.M., Wall Street Journal

Four Great Paragraphs about Lawsuits Involving Trusts and Estates

Thinking about suing to get your fair share from your dad or mom’s estate? Think again.

From a post on the Colorado Construction Law Blog about a piece in the Utah Bar Journal:

One of the most important points set forth by Mr. Adams [in the Utah Bar Journal] is to remind the parties that the assets everyone is fighting about actually belong to someone else. The person who sets up the will or the trust gets to decide who gets the assets, and that decision doesn’t have to be logical or even what others might consider “fair.” It may also contravene what the decedent has previously stated orally to a family member or members. But the court is placed in the position of doing its very best to see that the decedent’s estate plan, whatever it may be, is carried out.

The Utah judges were asked about the success rate of claims of undue influence, which is routinely alleged in contested cases. Their answers revealed that while undue influence is often alleged, it is rarely found to exist at the time the decedent executed the document in question. The same goes for claims of lack of testamentary capacity. In Utah, and most other states, a testator is presumed competent to make a will or a trust and the contestants must prove by the preponderance of the evidence that the decedent was not competent. The standard for such capacity is quite low and therefore it is difficult to establish that the decedent was incompetent at the moment he or she signed the will or trust. In fact, the success rate extrapolated from the survey for contestants bringing such claims was only 5-6 %.

While observing that technical breaches of fiduciary duty don’t often prevail, the author concludes that what does catch a judge’s attention “and raises their ire is when persons who have fiduciary obligations knowingly and repeatedly refuse to comply with their responsibilities.” The judges cited self-dealing, blatant violation of ethical or fiduciary duties, and failure to keep beneficiaries informed as examples of such conduct that would justify removal of a personal representative or trustee.

In discussing no-contest provisions, a small minority of the judges reported having enforced them, but one judge observed that a custom-drafted no-contest clause that includes details and mentions specific concerns would be much more likely to be enforced than one that is plain boiler-plate. That judge also suggested that if the testator or trustor is concerned about a specific heir or beneficiary, they might consider identifying them by name in the document if they want in increase the likelihood of enforcement of the no-contest clause.

From a drafting perspective, that last paragraph makes a lot of sense.  Lots of sense.

Just Say So


Sometimes feel confused? Wonder why the left hand can’t understand what the right hand is supposed to be doing? Imagine what your family will feel like the day after you’ve passed on to the great beyond, then think about how a well-drafted trust might clear things up for them.

I’ve written more than a few blog posts about trusts, about the legal elements necessary for a trust to be enforced, about five reasons you may need  a trust, about decanting as a way to correct or improve a trust, about how trusts are an effective way to handle the issues that come with blending families, about using trusts to plan for disability, about the all-important funding step in the process of establishing a trust, and on and on. But it wasn’t until I was reading someone else’s blog post when it hit me (maybe because the writer kept repeating it): if you want something to happen when you die, just say so. Just speak your mind. Tell your loved ones what you want to happen. Tell them who gets what and why. Don’t hold your piece. Tell them now.

In essence, that’s what a well-drafted trust does. Tells them now, so they’re not confused later, so what you want to happen–happens.

Just say so. If you fail to do that before you die, life will get pretty complicated for your loved ones after you die. Trust me.

Quote for the Day

“Family business succession planning is the cornerstone of any successful family business owner’s estate plan. As is often the case, however, planning for the inter-generational transfer of ownership and control of the business becomes complicated by the intra-generational conflicts of the business owner’s heirs. These onflicts among members of the second generation, if severe enough, can render the effective management of the business by the second generation virtually impossible, leading to a loss in productivity and profitability with a resulting decline in the enterprise’s value.”

Michael V. Bourland and Dustin G. Willey, “Setting the Stage for Planning with the Family Business Owner: Tax-Free Division,” ALI CLE Estate Planning Course Materials Journal, April 2015.

Quote for the Day

Actually, this is not a quote but a paraphrase of some information I found the other day on the Internet. Can’t remember the source–I think I may have found it on Farm Bureau website and repeated in a variety of other places, including a Nationwide Insurance brochure I discovered online. With that, this:

Almost 97% of farms in the U.S. are owned by families, and only 11% of those families have succession or transitions plans in place to ensure that the farm stays in family hands after the current owner dies.

Some Things I Learned Answering Questions on a Forum for Asking Legal Questions

Yikes_2016-03-07_0843So I sometimes forget that everybody’s smart, just on different subjects. For example, I don’t know much about physics. My teachers tried, but my head could only hold so much gravity and speed of light and such. Well, today I was online in an online forum where non-lawyers posed legal questions to attorneys. These were real life people experiencing real life problems that involved the law in some way or the other.

Now let me be crystal clear: I don’t think these people are dumb. To repeat: we are all “smart,” just on different things. I happen to know a lot about the law, but boy am I at a loss about some other subjects (heck, even about some legal subjects). With that, here are a few things I learned while answering questions:

  1. Many, if not most people, don’t realize that estate taxes are no longer a concern for most of us. Did you know that you and your spouse must be worth almost $11 million before the tax man comes knocking? Yes, you may need to do some planning to make sure you take full advantage of that $11 million threshold, but still.
  2. Many people don’t realize that the First Amendment doesn’t protect them from employers, friends, parents, and the like from infringing on their free speech rights. No, the First Amendment protects us from the government infringing on our rights. And even then the right is not absolute.
  3. More than a few people confuse a living will with a plain old will, also known as a last will and testament. A living will is a document that tells your family and doctor whether you want life support and such should you become incapacity and unable to speak for yourself. A will or last will and testament is what you use to appoint guardians for your children and to give your property away when you die. You can read more here.
  4. A lot of people–especially people down on their luck financially–aren’t aware of the legal resources available to them that are free or at a reduced cost, nor are they aware of the state agencies that might be of help to them–child protective or family services, for example. For the record, in Wyoming you can go to the Wyoming State Bar to find free or reduced-rate legal services. In Utah, you should go here.  In Wyoming, you can find child and family services here.  In Utah, you’ll find them here.
  5. Finally, too many people are way too quick to pull the trigger; that is, they get angry and immediately shout “Medic!!!” I mean, “Lawyer!!!” To those I say, try to work out your problems by yourself and amicably first, especially if it’s family, then resort to the law. But the corollary to that is, if the proper response is legal, then hire an attorney. Trust me on that one.

Now where do I go to find out how fast the speed of light was back in the days of horse and buggy?

Trusts: You Can Avoid Probate, but You Can’t Avoid (All) the Costs

Onassis_NYTThere’s a misconception out there that if you use a revocable living trust in your estate planning, you avoid probate and save on all those costs associated with probate. Well, maybe and maybe not.

First, in order to avoid probate, virtually everything you own has to be owned in a way that will do just that–avoid probate. Sounds circular, I know. What I mean is that if you own property

  1. As joint tenants with rights of survivorship–it will avoid probate.
  2. In so-called POD or Payable on Death accounts–it will avoid probate.
  3. That allows for you to name beneficiaries–a life insurance policy, for example–it will avoid probate.
  4. In a revocable trust–it will avoid probate.
  5. That doesn’t amount to much–you may avoid probate, or at least be eligible for some sort of simplified probate.

Put all that together, and you may avoid probate. But if you have a will, it will need to be proved valid in court–usually a routine process. If you own property that doesn’t fall in one of the categories I just listed, it will probably have to go through probate.

Bottom line, you may be able to avoid probate if you do everything right, own all of your property correctly, dot all your “i’s” and cross all your “t’s.” But if you don’t . . .

That said, to the extent that you do own your property as described above, you reap the big benefit of probate: You keep things private. For example, if your will says who gets the Picasso that hangs over the fireplace and who gets the cabin in the mountains when you die, anybody with the time to go down to the court and check can find that out. If, however, you say who gets what in your revocable trust, nobody has to know except for the people receiving the property. Maintaining your family’s privacy and saving time are the main benefits of avoiding probate to the degree possible. Don’t believe me? Ask Jackie Onassis’s family.

Now, about those costs. Yes, there are costs to probate. Attorney’s fees. Executor’s fees. Court costs. They all add up and can be expensive. But you know what, it costs money to administer a trust when you die: Attorney’s fees, again. Trustee’s fees, again. But typically no court costs. So yes, your estate will probably save money by avoiding probate, but your estate will still spend some money.

One more thing, a thing about revocable living trusts as an estate planning tool: They are predictable. You set them up. You outline all your plans, appoint trustees you trust, and tell them what you want them to do–in writing–and it’s all so predictable and happens almost seamlessly.

You turn that all over to the court in a probate proceeding, and predictability goes out the window.

Revocable living trusts are the way to go–for most people.

NFA Firearms in an Estate: What’s an Executor (or Trustee?) to Do?

Question Mark_YellowYou’re the executor or personal representative of an estate (they’re the same thing, by the way) or a trustee of a trust. The owner of some NFA firearms has died, and you’re left to deal with the aftermath. (Of course, the real “owner” of any NFA arms in a trust is the trustee, but generally, the initial trustee is the grantor of the trust, who we on the outside looking in, view as the owner.) What can you do with the NFA firearms? If you turn them over to the decedent’s heir under the will or the beneficiaries of his trust, do you have to pay the transfer tax?

Fortunately, the BATFE has been fairly helpful on this point, though it could have been more clear. On September 5, 199, the Bureau issued a letter in which it said the following:

If there are unregistered NFA firearms in the estate, these firearms are contraband and cannot be registered by the estate. The executor of the estate should contact the local ATF office to arrange for the abandonment of the unregistered firearms.

So now you know what to do with unregistered NFA items–if you’re an “executor of the estate,” that is. Did the Bureau also mean “trustee of a trust”? Maybe. Later in the same letter, after the word “heir” has been repeated a number of times, we do see this language:

NFA firearms may be transferred directly interstate to a beneficiary of the estate.

Beneficiary. Is that the same as an heir? Though they are often used interchangeably, the two terms are not precise synonyms. Often the word heir is use to define someone who receives property under a will or via a state’s intestacy laws. Beneficiary, on the other hand, is just as often used to describe someone who receives property under trust. Again, they are also used interchangeably. How is the BATFE using the terms in this letter? Inquiring minds would like to know. Maybe this line from the letter helps,

A lawful heir is anyone named in the decedent’s will or, in the absence of a will, anyone entitled to inherit under the laws of the State in which the decedent last resided. (emphasis supplied)

Hmmm. This sounds like intestacy, but is that all? Does “under the laws of the State” mean the same thing as “operation of law” (see below)?

Well, recently, the Bureau issued the final Rule 41F, which affects so-call NFA or gun trusts, among other things:

It [the new rule] also adds a new section to ATF’s regulations to address the possession and transfer of firearms registered to a decedent. The new section clarifies that the executor, administrator, personal representative, or other person authorized under State law to dispose of property in an estate may possess a firearm registered to a decedent during the term of probate without such possession being treated as a “transfer” under the NF A. It also specifies that the transfer of the firearm to any beneficiary of the estate may be made on a tax-exempt basis. (emphasis supplied)

Such transfers are not taxable transfers because they are not “voluntary”; that is, the executor, personal representative, etc. must follow the terms of the will (or trust?) or law. He or she has no choice. That’s all fine and dandy, but are transfers from trust to beneficiaries tax exempt? Come on. Tell us BATFE. You can do it.

In the commentary on the new rule, the Bureau gets a clear as it’s probably going to get in answering that question, when it says:

Transfers of NFA firearms from an estate to a lawful heir are necessary because the deceased registrant can no longer possess the firearm. For this reason, ATF has long considered any transfer necessitated because of death to be involuntary and tax-free when the transfer is made to a lawful heir as designated by the decedent or State law. However, when an NFA firearm is transferred from an estate to a person other than a lawful heir, it is considered a voluntary transfer because the decision has been made to transfer the firearm to a person who would not take possession as a matter of law. Such transfers cannot be considered involuntary and should not be exempt from the transfer tax. Other tax-exempt transfers—including those made by operation of law—may be effected by submitting Form 5. Instructions are provided on the form. (emphasis supplied)

Operation of law would seem to include transfers mandated by language in trusts, trusts which are created under state law, laws that include fiduciary standards that compel trustees to carry out the wishes of the grantor of the trust, whose wishes are stated in the language of the trust. I’m hanging my hat on that.

There are a couple of other things I’d do to make sure that hat fits in every circumstance, but I won’t go into that here.


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