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

March 1, 2016 by Gregory Leave a Comment

You’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.

Filed Under: 41F, Administration, Estate Planning, Firearms, Gun Trusts, NFA Trusts, Probate, Trusts, Wills Tagged With: BATFE, NFA firearms

What’s on Your Family’s Wish List?

February 26, 2016 by Gregory Leave a Comment

I listened to an interesting seminar yesterday titled “Estate Planning in Agriculture: Protecting a Way of Life” sponsored by WealthCounsel.com. Stan Miller and Robert Serio were the presenters. Serio covered the Farm Service Agency (FSA) Subsidy Programs and the Natural Resource Conservation Service (NRCS) Programs. He cautioned attorneys to be careful to not to do anything in an estate plan that would cause their farmer and rancher clients to lose benefits under those programs. Quite interesting. I briefly reported on the take-a-way yesterday.

Then Miller took over beginning with what he called “The Farm Family Wish List”:

Don’t disqualify for USDA subsidy payments and other government benefits,
Keep the court system of of the family business,
Keep the farm in the family forever,
Treat non-farming family members fairly,
Avoid the need to liquidate the farm in order to pay for the cost of long-term care, and
Avoid estate tax.

To that list, I would add “Avoid capital gains tax on appreciated property.”

Does Stan’s list mirror yours? What would you add to it or subtract from it?

More importantly, what have you done to make sure your wish list becomes a reality?

Filed Under: Business Planning, Estate Planning, Farms and Ranches, Probate, Trusts, Water and Water Rights, Wealth Transfer, Wills Tagged With: Robert Miller, Robert Serio, Wealth Counsel

Quote for the Day

February 26, 2016 by Gregory Leave a Comment

“Serving as an executor or trustee is neither an honor, nor a game for beginners to play. Acting as an executor or trustee requires technical skills, experience, and an ability to deal with the family members involved. Nevertheless, clients often choose an executor and the trustee without fairly evaluating the needs of the estate or trust against the named fiduciary’s abilities to meet those needs.”

Schlesinger, Edward, Fifty-Two Questions to Ask Before Choosing Your Executor and Trustee, Successful Estate Planning Ideas and Method Service (1986).

Filed Under: Estate Planning, Trusts, Wills

Justice Scalia’s Funeral

February 20, 2016 by Gregory Leave a Comment

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?

Filed Under: Estate Planning, Trusts, Wills Tagged With: Justice Antonin Scalia

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

February 12, 2016 by Gregory Leave a Comment

Let’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:

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

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

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.
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)
What’s left, goes first to the descendants of the deceased per capita–i.e., three children? Each gets 1/3rd.
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.

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.

Filed Under: Estate Planning 101, Wills Tagged With: holographic will, intestacy, intestate

Practicing Law without a License: What Could Go Wrong?

February 10, 2016 by Gregory Leave a Comment

So a relative just gave me a blank copy of her parents’s will and trust, documents prepared for them by a financial planner, a guy not licensed to practice law. I have no idea what this guy knows about financial planning. I know that he knows very little about wills and trusts. Here’s a short list of problems with the documents:

1. Both documents are simple, fill-in-the-blank forms. How do I know that? The blanks. I have no idea whether the financial planner guy discussed with his clients the who, what, where, and why of filling in those blanks. For example, both the will and the trust provide spaces for appointing executors, guardians, and trustees. Was any discussion had about who should occupy those positions and why–maybe–they should not?

2. And about that guardian. The article in the will providing for the appointment of a guardian speaks only of acting on behalf of “a minor child.” The clients are both in their 80s. Obviously, the will was prepared especially for them–not!

3. The will gives the impression that the executor has the power to administer the clients’s estate with little or no court supervision when, in fact, state law grants that power, but only if the size of the estate does not exceed certain maximums. In Utah, that maximum is $100,000. The provision is misleading and, frankly, unnecessary, especially given that the clients’ home is worth at least $400,000, well in excess of the $100,000 maximum for informal probate in Utah or $200,000 in Wyoming. In such cases, the law already allows a simplified probate variously called informal probate, unsupervised probate, distribution by affidavit and summary procedure, and the like. My impression is that the will in question makes a big to-do about this “power” so as to appear like it’s actually accomplishing something beyond wasting paper.

4. In Utah a will is valid if it is in writing, is signed by the testator (the husband), and is witnessed by two competent persons. In Wyoming, the requirements are virtually the same, though the witnesses must also be disinterested. This will has that, plus an affidavit that the testator is also supposed to sign and which, apparently, needs to be witnessed by three witnesses–and all these signatures are supposed to be acknowledged before a notary public. This is overkill masquerading as thoroughness and an indication that this is a one-size-fits-all-states document. Worse, the affidavit is poorly written. To wit, it says.

I sign and execute this instrument as my Will . . . (emphasis supplied)

Which instrument would that be? Arguably the affidavit. Since the affidavit is a separate document and because it refers to just any “Will” and not to the “Last Will and Testament of Joe Blow,” the word “instrument” is ambiguous and virtually worthless.

5. By the way, I see no “Last Will and Testament” for the wife. She is referred to in the title of the trust, but only by first name! The same goes for the signature line at the end of the trust.

6. The will is a so-called pour over will, a document that essentially directs that all property the testator owns at the time of his death goes into a trust, either a testamentary trust (one created by the will and which comes into existence at his death) or an existing living trust (a trust he created during his lifetime and which he’s been using while he’s alive). In this case, the trust is a living will. So far, so good. But here’s the problem: it is not apparent that anything has been done to ensure that the testator’s property has been transferred to the living trust. If that’s the case, then there will be formal probate and the living trust is of no value until the testator dies. NO VALUE.

7. And when he dies? Well, the trust has some value at that point, but just some. I’ll be brief:

a. The lifetime dispositive provisions–the directions on income and property while both grantors are alive–are minimal and leave a lot to the imagination.

b. The directions on what happens upon the death of the first-to-die are even more unclear and attempt to do a few things that I’m not sure you can do. Can a trust become irrevocable at the death of the first-to-die, but only as to certain property? I don’t think so. What should happen–and what often happens under a well-drafted trust–is that at death a separate trust is created for that property and that trust is irrevocable. The provision in the trust in this case is a mishmash of gobbledygook.

c. The provisions regarding specific distributions of personal property or financial assets is likewise poorly drafted and confusing. To boot, the provisions introduces new terminology that is not defined elsewhere in the trust. As trustee, I could guess, but could I be sure that I’m doing the grantors’ bidding when such ambiguity exists?

d. There is no discussion of marital deduction, applicable exclusion amount, portability, basis or other potentially estate and income tax saving concepts.

I could go on. Did he even talk about durable powers of attorney? About health care directives? The list of potential problems is endless, bu I’m going to stop here. The closer I read the documents, the madder I get. And that’s without contemplating the very likely fact that little or no counseling took place when the financial planner handed this garbage to his clients.

The grantors/testators paid good money for this mishmash of words, money they may never get back. As a person licensed to practice law in Utah and Wyoming, I have my differences with the whole idea of licensing, but what I’ve just described is a big argument in the other direction.

And so, dear reader, CAVEAT EMPTOR. Buyer beware. Better yet, simply don’t buy. You can do as well as this guy by yourself. But when it comes to wills and trusts, you can do a lot better by talking to a licensed attorney, particularly one who practices in the area of wills and trusts. Trust me.

Filed Under: Administration, Estate Planning 101, Probate, Trusts, Wills Tagged With: unlicensed practice of law

Death Certificates: For Those Who Won’t Take Your Word That Your Loved One Died

January 29, 2016 by Gregory Leave a Comment

Your loved one has died, and you discover that you are the personal representative or executor of his or her will. What do you do now? Well, possibly the first thing you should do is order the death certificates; you’re going to need them–in spades:

To file an estate tax return–if necessary.
To prove to the life insurance company that the insured has died.
To transfer ownership of cars, trucks, boats, and any other titled vehicle.
To the bank.
To a creditor.
Etc. etc. etc.

Order multiple copies, maybe 10 or more. Though some will be satisfied with a copy of a death certificate, many will not, and if you don’t have an original at hand, things come to a stop. So place ordering death certificates at or near the top of your to-do list.

In Wyoming, go to the Office of Vital Statistics at the Wyoming Department of Health. The cost is $10.00 per certificate.

In Utah, go to the Office of Vital Records of the Utah Department of Health. The cost is $18.00 per certificate.

Filed Under: Administration, Wills Tagged With: death certificate, executor, personal representative

Personal Property Memorandum: Where There’s a Will, There’s an Easier Way

January 28, 2016 by Gregory Leave a Comment

So you have a will and maybe a revocable trust, documents you’ve paid your attorney good money for. And in your will–and probably in your trust as well–you’ve said you want this item of personal property to go to him and that item to go to her and some other item to go to someone else. And weeks, maybe months or years later, you’ve acquired some more personal property–tangible things like rings or paintings or bikes or books or even a new car. Is it time to return to your attorney and revise your will or trust? Maybe. Maybe not.

For many of you, it’s maybe not, at least for those of you in Utah or Wyoming. You see, both of these states as well as some 40 others, allow you to “add” those new items to your will with what is called a personal property memorandum. It’s a simple document that is essentially a place to list each item you want to dispose of at death. Simply jot the name or description of the item on the memo, then right next to it, write the name of the person or organization you want to receive it when you die.

Your attorney probably discussed personal property memorandums with you when you first met about your will. To find out if she did, simply read your will. If it refers to something like “a written statement or list to dispose of items of tangible personal property not otherwise specifically disposed of by the will, other than money,” your will allows for this simple procedure. (Actually, it will probably use very similar words since they appear in both the Utah and Wyoming Probate Codes.)

If words like that do appear in your will and if your attorney hasn’t already provided you a personal property memorandum, then it’s a simple matter of typing one up, say something like this:

Personal Property Memorandum for the Will of John Doe

My will referred to a list of tangible personal property. This is such a list.

Property Description Person to Receive the Property

_____________________ ________________________

etc. etc. etc.

Dated _______________________

Signed by:_____________________

John Doe

To be even more clear, you might include serial numbers or other identifying characteristics of each piece of personal property. You might add the address, even phone numbers of the person or persons who will receive that property upon your death. But you get the idea: the personal property memorandum is a relatively simple document.

Now, if it were me, I’d probably still consult my attorney about something like this, just to make sure I get things rights. But the relevant statutes are pretty clear: If the will refers to a written statement or list of the sort described above and if that list exists at the time of your death, is dated, signed by you, and includes “a description of the items and [persons who are to receive those items] with reasonable certainty,” that personal property memorandum will do the job intended. See for yourself at Wyoming Statutes Annotated § 2-6-124 or at Utah Code § 75-2-213.

Filed Under: Estate Planning 101, Wills Tagged With: personal property memorandum

Not Everything or Everyone has to, or will, Blend in a Blended Family

November 3, 2015 by Gregory Leave a Comment

To those couples who’ve decided to blend their families and to those who already have, know this: Just because the two of you fell in love, doesn’t mean your children are going to fall in love with each other or with your new spouse. While you wait for that to happen–if it ever happens–shoot for like, for tolerate. Pray that they’ll be kind to one another. But don’t insist that your children–the children who’ve already suffered through the divorce or death that turned you into a single person–don’t insist that they love one 1805-Gillray-Harmony-before-Matrimony.2 another, not right now. Love, even like, takes time.

So hope, pray, and work to the end that they will at least tolerate and be kind to one another.

And then do your best, your very best, to model for them the way they should treat each other. You do this by treating your new spouse–the new love of your life–the way you hope they–the newly blended children–will treat each other. Then be patient because becoming friends, especially when each child is struggling to fence off his or her space in a new family, is not easy.

Yes, be patient. You are the adults after all.

Filed Under: Blended Families, Estate Planning, Stepfamilies, Wills

Hard Questions Make Strong Foundations: Estate Planning and Second Marriages

October 27, 2015 by Gregory Leave a Comment

The day my wife and I finally met with our estate planning attorney, Don Owen, was anticlimactic. We sat across from him, my wife Janet to my left, Don sitting on the other side of his desk. We were there to resolve what we then realized were thornier issues than what we had imagined when we began the process, issues that most families don’t face–because most families aren’t blended families.

Very wealthy couples deal with estate planning issues most of us can only imagine. Business owners whose companies make up the bulk of their net worth likewise confront estate planning problems foreign to those who work for someone else. Add to that list, couples who head up blended families. In fact, maybe put them at the top of the list. Courageous, often twitterpated, souls, these couples enter into second marriages and all the responsibilities that entails and deal with some thorny problems. Often, many of those problems first make their appearance years down the road. For my wife and me, they made their appearance when we decided to do some estate planning six years after we married and joined my three and her four children together.

The idea to do some estate planning was mine. I stood to inherit some money from my grandfather’s estate. He’d worked hard and invested well, and he’d set up his estate to benefit his children first, then his grandchildren when his children died. His children were now in their late 80s and 90s. I wanted to make sure that when they died, and after both my wife and I died, my share of my grandfather’s estate would pass on to my children–his great-great grandchildren. I wanted to keep the Taggart family money in the Taggart family. My wife was fine with that. And so I set up an appointment with Don HermanWeissFamily600 to get that done. This should be easy, I thought. Silly me.

Facing the Facts. For couples in second marriages, estate planning can be difficult, more complex. Think about it: Each party comes into the marriage with their own assets; their own debts; and often, their own children–sons and daughters who have their own special needs, often known only to their biological parent. Add an “ours” to the mix of yours and mine, and the family photo quickly goes out of focus.

Frequently, at least one but probably both of the step-parents have made promises to their own children, promises that often involve dollars and cents. Maybe one parent made a promise to pay for college or for a car when his child graduates high school. Maybe the other guaranteed a trip to Europe if her young son or daughter graduated college.

All too often such promises were made in the heat of the battle in the previous marriage. No matter, already feeling guilty about a failed marriage, the parent making the promise will not drop this ball. Not this time. His or her promises, wise or unwise, will be kept. No more disappointed children. Nope.

And so it is when the newly married couple finally decides they should do some estate planning. So it was when my wife and I sat down with Don Owen to make sure that promises we had made were kept–to each other and to our children.

Like I said, the experience was more intimate than sex.

Why? you ask. Well, try this list of issues on for size. One or both of us had:

Made promises to our children.
Made promises to each other leading up to marriage.
Insecurities created or exacerbated by the previous marriage and not yet fully healed by the second.
Secrets that had yet to be discussed with the the other.
Allegiances that were at the time stronger to blood than to water.
More insecurities, as in, will this marriage last?
Age, maturity, and wisdom not present the first time around, thus a willingness and ability–and need–to look beyond the unicorns of true love and ask the hard questions.
Etc.

Now this list isn’t particular to my wife and me. I suspect most anyone in a second marriage can see at least some of themselves in it. The point is, parents in blended families face lots of issues that in-tact families typically don’t. But that’s only part of the story, the hard part. But can I tell you, what I had anticipated would be a cake walk–at least I did after my wife said she was fine with what I wanted to do with my inheritance from my grandfather–turned out to be a slog. Not because my wife was hard to deal with. She wasn’t. In fact, she was a gem. No, it was a slog because the issues grew more complicated the deeper we probed, one question leading to another and then another. When we got to the end of the slog, I was amazed, both at what an experience it had been and at how refreshing it was to have done it.

Reaping the Benefits. It gets better. If the planning is hard and the issues complex, the aftermath is long lasting and satisfying. With each hard question asked and answered, a stronger bond forms between husband and wife. As each secret is revealed, trust and respect grows. In the end, the new marriage stands on a more firm foundation. I know ours did.

I don’t have any statistics to support the following claim, but I have to believe that good, thorough estate planning will strengthen the marriage of the man and woman who blend their families. It did ours. It can do the same to yours.

Filed Under: Blended Families, Estate Planning, Stepfamilies, Trusts, Wills