Who can granny leave her guns to? page 2
Got Medicare? Then you have health care! page 4-6
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2 retirement planning
Estate planning for firearm owners By William H. Kain, Kain & Burke, PC
pproximately 34 percent of American households have firearms. It is estimated that there are approximately 270 million guns in the U.S. Therefore, a large number of people that come to our law office for estate planning have concerns about the laws affecting the transfer of their firearms to their heirs. For example, a 60-year-old man wants to leave his hunting rifles and a few handguns to his grandchild. It may not always be enough to simply add to his Last Will and Testament a phrase, which states, “I leave my hunting rifles and handguns to my grandson, Jake.” There are a number of federal and state laws that need to be considered. Hunting rifles and most handguns do not need to be registered at the death of an owner, and can be delivered to the beneficiary named in the will. But like much in the law, there are exceptions. Also, while many states, including Colorado, do not require registration, some states do, such as California, New York, Michigan, Connecticut and New Jersey. The National Firearms Act (NFA) applies special rules and restrictions when an NFA firearm owner dies. The definition of an NFA firearm is
lengthy, but it includes sawed off shotguns, machine guns, sawed off rifles, some handguns, guns with silencers, umbrella guns, knife guns, grenades, and other types of unusual weapons. The Bureau of Alcohol, Tobacco and Firearms (ATF) handles registration of NFA firearms. It generally cannot release firearm registration information, except to the executor (also known as personal representative or PR in Colorado) of an estate. The PR is the person named in a decedent’s will to settle his estate. Therefore, the PR is to contact ATF and check on the registration status of the NFA firearms in the estate. ATF will want proof of the PR’s appointment by the probate court. Usually, it is sufficient to present the Letters Testamentary issued by the probate clerk. If there are unregistered NFA firearms in the estate, ATF will require the PR to go through the process of abandonment of unregistered firearms, unless ATF approves registration of the firearms. ATF allows the PR a reasonable time to arrange to register NFA firearms from the estate, which were previously registered by the decedent. This should be done during the probate process. (Probate is the court process for probating a will, marshaling assets, paying debts,
expenses and taxes, and ultimately, paying the net estate out to the beneficiaries.) Sometimes it is appropriate and clear from the decedent’s expressed wishes that a firearm be sold and the cash added to the residuary of the probate estate. Other times, the decedent expressed a desire that a particular person receive the firearm. Hopefully, the decedent’s wishes are made clear in the Last Will and Testament. However, some wills simply give the PR authority to make the decision to either divide personal property including firearms among the beneficiaries of the will, or alternatively, to sell personal property and add the sales proceeds to the remainder of the estate. One of the PR’s first tasks is to determine whether the firearms will be sold or distributed to a particular heir. If the PR is going to sell the firearms, it is permissible to have a licensed firearms dealer act as a broker. However, it is not permissible to transfer NFA firearms for consignment or safekeeping. Having the dealer handle the sale is a simple, safe and effective way to handle the issue. This usually avoids the dangers of the PR breaking the law. If the PR is going to transfer an NFA firearm to a particular beneficiary, the PR needs to apply to ATF on ATF Form 5, Application for Tax Exempt Transfer and Registration of a Firearm, and a copy of the Letters Testamentary appointing the PR should be included. A transfer to a lawful heir is tax exempt under the NFA. A lawful heir is anyone named in the will, or if there is no will, the intestate heirs per Colorado statute (assuming that the decedent died a resident of Colorado). The heir’s fingerprints on FBI form FD 258 must accompany the transfer application. Consideration should also be given to whether the PR or the beneficiary who will receive the firearm, is disqualified by law to possess a firearm. It would certainly be an estate plan-
October 2013 ning mistake to name a PR to handle the disposition of firearms, if the PR is disqualified. Similarly, you would not want to name a beneficiary to receive a firearm if the beneficiary is disqualified. Generally, the following persons are disqualified from posessing a firearm: anyone who has been convicted of any crime punishable by imprisonment for a term exceeding one year; a fugitive from justice; an unlawful user of controlled substances; someone who has been adjudicated mentally defective or has been committed to a mental institution; an alien who is illegally or unlawfully in the U.S.; anyone dishonorably discharged from the armed forces; anyone who has renounced his citizenship; anyone subject to a restraining order from harassing, stalking or threatening an intimate partner; anyone convicted of a misdemeanor crime of domestic violence; and anyone adjudicated as a juvenile for an act that would have been a felony if committed by an adult. In addition to federal law, a person planning his estate as well as a PR administering an estate should consider several Colorado state laws. Section 18-12-112, CRS, deals with private firearm transfers and has a number of requirements. The requirements for most private transfers of firearms include a mandatory background check of the transferee and approval of the transfer by the Colorado Bureau of Investigation. However, subsection 6c of that statute specifically states that section 112 does not apply to a transfer of a firearm at death by an executor or trustee under a will, at least where the firearm is being transferred to a named beneficiary in a will. House Bill 13-1229, (amending 18-12-112) requiring universal background checks on transfers, will not apply in the event of transfer to an heir upon death of the owner. In what may be nothing more than a drafting error by the legislature, 131229 specifically exempts transfers from the background check requirement where the transfer is made at death by an executor or administrator of an estate, or by a trustee of a
October 2013 trust created in a will. It is not clear whether the legislature intended to leave out a trustee of a living trust as an exempt transferor at death. For this reason, until a definitive answer is available, some estate planning lawyers are considering passing firearms at death through a will instead of through a revocable living trust. Perhaps the legislature has a policy reason for treating transfers pursuant to a living trust differently than a transfer through a testamentary trust, but it is difficult to imagine what that policy might be. Also, the legislature did not make it clear in the new act whether the exemption from the transfer requirement applies only to transfers at death to the named beneficiaries in a will, or whether it also applies to a sale and transfer by a PR to a third party. To be safe, it might be best to comply with the universal background check law in the case of a sale. However, House Bill 13-1224, prohibiting large capacity magazines, will apply to firearms transferred at death. A PR faced with an estate including a large capacity magazine has a dilemma. If the PR takes possession of the offending magazine, he commits a class 1 misdemeanor. On the other hand, he cannot transfer it to the heirs and he cannot sell or transfer it to anyone. How a PR should dispose of such an illegal magazine is not made clear by the statute. This problem appears to arise even if it had been legal for the decedent to possess the magazine. The statute does not prohibit possession by the decedent if he already owned a large capacity magazine on the effective date of the statute, namely July 1, 2013, and maintained continuous possession. But having solved the problem for the decedent, the statute offers no solution for the decedentâ€™s PR after death. One possibility is to arrange through ATF for the abandonment of the magazine or perhaps the sheriff would cooperate in a friendly seizure of the offending magazine. Other Colorado statutes such as section 18-12-102 may apply. This section deals with possession of
www.BeaconSeniorNews.com dangerous or illegal weapons such as firearm silencers, machine guns, short shotguns, short rifles, ballistic knives, blackjacks, gas guns, metallic knuckles, gravity knives and switchblade knives. It is also illegal in Colorado pursuant to section 18-12-103 to possess a defaced firearm, which means one where the serial number has been removed, defaced, altered or destroyed, except by normal wear and tear. A PR who finds illegal or defaced weapons in the estate after the death of the decedent should not pass those illegal weapons on to a beneficiary. It is illegal under Colorado law for a juvenile under the age of 18 to possess a handgun. Suppose Granddad leaves his hunting rifle and his handgun to his beloved 10-year-old grandchild. It would be illegal for the PR to actually deliver the handgun to the child. On the other hand, does the PR need to keep the estate open for eight years until the childâ€™s 18th birthday? What do you do if the court is pressuring the PR to close the estate promptly after six months? A well drafted Last Will and Testament would deal with this issue, perhaps by including language which would direct the PR to hold any handguns in trust until the beneficiary is of lawful age, thereby allowing the PR to close the estate timely with the court. When a person who owns handguns is working with his attorney to draft his Last Will and Testament, careful consideration should be given to the choice of PR, trustee and beneficiaries to receive handguns. The above is only a brief summary of Colorado and federal law. It is not intended as specific legal advice and does not cover every law applicable. Anyone planning or settling an estate, especially where firearms are involved, should consult with a qualified estate planning attorney. William H. Kain is an attorney with the law firm of Kain & Burke, PC. He holds a Juris Doctorate degree in law with honors, and has obtained two post-doctorate law degrees: an LLM in Estate Planning and Elder Law; and an LLM in Tax
retirement planning 3
4 retirement planning
Questions about Medicare Open Enrollment and Health Insurance Marketplace? RSVP offers free help. By Ruth McCrea, RSVP SHIP Project Manager
he potential for confusion and misinformation is especially high this time of year, since the Health Insurance Marketplace Open Enrollment period (October 1, 2013 to March 31, 2014) overlaps with the Medicare Open Enrollment period (October 15 to December 7, 2013).
Do you have Medicare and wonder how the new Health Insurance Marketplace affects you? Put your mind to rest. Do not worry about marketplace options. Your Medicare benefits aren’t changing. If you have original Medicare or a Medicare health plan, you already have insurance. The Health Insurance Marketplace is designed to help people who don’t have any health insurance. However, if you have Medicare
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now, you still need to review your SHIP volunteers are also trained drug/health plans to make sure they to recognize and report suspected will be right for you in 2014. If you’re Medicare fraud as part of the Senior satisfied with your coverage, there’s Medicare Patrol (SMP), if you see or no need to do anything. If you want hear something suspicious, call RSVP to make a change, attend a Medicare right away. Open Enrollment event between In addition to telephone counseling October 15 and December 7 or make and face-to-face appointments, the an appointment with RSVP SHIP offers walk-in a Senior Health Insurcounseling between ance Assistance Program Mesa County RSVP 9 a.m. and noon on (SHIP) navigator. has trained Senior Health Thursdays. No appointRSVP SHIP will host Insurance Assistance ment necessary. The four Medicare Open Program (SHIP) volun- RSVP SHIP also holds Enrollment events durteers who offer free, monthly Medicare 101 ing this period: Monday, unbiased information to educational sessions for October 21; Wednesday, help you make informed newly eligible Medicare November 13; Tuesday, Medicare decisions. No beneficiaries. Remaining November 19; and Thurs- question is too small 2013 dates are October 2, day, December 5. Walk-in and counseling is free. November 6 and Decemtimes are from 9 a.m.Call RSVP at 243-9839 ber 11. Call to reserve 3 p.m. Well-trained SHIP for more information or a seat. navigators will be glad to make an appointment Another SHIP program to help you. with a SHIP navigator. is the Money-Saving New this year is a Medicare Project (MSMP). SHIP-sponsored Medicare After checking income Part D Plan Finder Lab from 10 a.m. and assets, if you qualify, we can to noon on November 15 at the help you apply for Social Security Mesa County Central Library. SeatExtra Help to defray the cost of your ing is limited to 12 computer-literate prescription drugs. You may also be people. Call RSVP for details and eligible for benefits under the Medirequirements. care Savings Program (MSP) through What if someone contacts you about Mesa County Department of Human Services to cover part of your Medisigning up for a Health Insurance care Part A and B premiums, deductMarketplace plan? ibles and co-payments. During these two overlapping Wherever you are in Colorado, you enrollment periods, the potential can find a regional SHIP counseling for fraudulent activities is huge. If office by calling the statewide toll someone knocks on your door or free number (1-888-696-7213). In calls to sell you a health plan, you Mesa County, your Medicare quesneed to report the incident as fraud. It is against the law for someone who tions can be answered by calling the RSVP SHIP office at 243-9839. Call us. knows you have Medicare to try to You’ll be glad you did. ■ sell you a Marketplace plan. Since
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Medicare experts to provide answers for 2014 Medicare changes 1, 2013 for enrollment starting January 1, 2014. The deductible for Medicare Part edicare beneficiaries are again D will decrease from $325 in 2013 to faced with that time of the year, $310 in 2014, a benefit for consumers from October 15 to December 7, in who are looking at ways to save monwhich they must review their preey. Similarly, beneficiaries will have scription drug coverage and decide lower out-of-pocket costs in 2014 for whether to enroll in a Medicare prescriptions during the Advantage Health Plan initial coverage period, as or stay with their curwell as during the donut rent coverage. Premiums, Medicare Monday, hole. deductibles and co-pays In addition to the Part October 21, 2013, from often change from the 9:30 a.m.-11:30 a.m., D deductible, beneficiacurrent year, causing even join us at The Commons ries will pay an additional more confusion for benefiat Hilltop, 625 27-1/2 $635 of their prescription ciaries. Road in Grand Junction. drug costs in the initial Many beneficiaries recoverage period, which is port being confused about Or you can join us less than in 2013. When on October 29, from the launch of the Affordthe total cost of the drugs 9:30 a.m.-11:30 a.m., able Care Act on October exceeds $2,850, the 1, 2013, in which Connect at the Third Street Cen- beneficiary will be in the ter, 520 S. Third St. in for Health will begin to donut hole. Beneficiaries Carbondale. enroll Colorado consumwhose drug costs are beers in Obamacare. Meditween $2,850 and $6,455 care beneficiaries are not eligible will pay 47.5 percent of the costs for for Obamacare and must stay with brand name drugs and 72 percent for Medicare as their primary health ingeneric drugs. When the total cost of surance. Although Obamacare made the drugs exceeds $6,455, the benefisome changes to Medicare, beneficia- ciary will be responsible for 5 perries are not subject to any of the rules cent coinsurance, or $2.55 co-pay for for the individual market through generics and $6.35 co-pay for brand Connect for Health. or nonpreferred drugs. On Medicare Monday, October 21, No changes have been made by Medicare experts will present the Congress to Medicare Supplements. 2014 changes to help beneficiaries Medicare recently reported that 90 understand the changes in costs and percent of the Medicare physicians coverages for 2014 in Medicare Part are accepting new patients. A, B, C and D. Medicare Monday is Individuals who are having diffisponsored by the Colorado Gerontoculty paying for their Medicare Part logical Society and will be held in 15 B and Part D premiums and co-pays locations throughout Colorado durmay be eligible for assistance and can ing October and November. call 1-855-293-6911. Monthly premiums for Medicare Medicare Advantage plans and Part B are expected to increase, but representatives have been invited final announcements are not availso that beneficiaries can do some able as of the writing of this article. comparison shopping following the Similarly, the deductible and copresentations. Light refreshments insurance for Medicare Part A are not will be served at both locations. Preavailable. registration is encouraged to ensure Medicare Advantage plans or Part enough food and materials. IndividuC are expected to have stable premials who want to register for Medicare ums, co-pays and other out-of-pocket Monday, or who want assistance with expenses. Information is available at enrollment and counseling can call 1-855-880-4777. â– www.medicare.gov starting October By Eileen Doherty, Colorado Gerontological Society
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6 retirement planning
Understanding the difference between Medicare and the marketplaces By Ron Pollack
f you have Medicare, you may be confused by the buzz surrounding the launch of the new health insurance marketplaces, which are part of the Affordable Care Act (also known as Obamacare). What do these marketplaces mean for you? It’s important to understand that Medicare and the marketplaces are entirely separate. If you have Medicare, you should make the same kinds of decisions about your Medicare coverage that you make every year during open enrollment. You should not sign up for a marketplace plan. But if you know people who don’t have insurance, they should look into this new option. Here are some frequently asked questions about Medicare and the marketplaces.
Q. If I have Medicare, should I look for insurance in my state’s marketplace? No. The marketplaces are intended
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to help people who don’t have health insurance. If you have Medicare, you already have health insurance. You should make the same kinds of decisions about your Medicare coverage that you make every year.
Q. If I have Medicare, do I need to worry about the new requirement to have health insurance? No. If you have Medicare, you already meet the requirement that people have insurance starting in 2014. This is true even if you have only Medicare Part A. You do not need to buy any supplemental coverage to comply with anything in the Affordable Care Act.
Q. So what should I do about my Medicare coverage? Similar to last year’s schedule, Medicare’s open enrollment period runs from October 15 to December 7, 2013. During Medicare open enrollment, you can decide whether to change plans, join a new plan, or
What’s your plan when you have a long-term event? Who will care for you and how will you pay for it?
for anyone to sell you a marketplace keep the same Medicare coverage you have. If you have a Medicare plan if he or she knows you have Advantage or Part D Medicare. Also, represcription drug member that Mediof plan, you should care supplemental check to see if (Medigap) plans are Health Care Scams your plan will be Scammers will be calling on behalf of not sold through changing in 2014, the marketplaces. Medicare and will ask your personal and you should asinformation for a new “national insur- Never give your sess whether your Medicare number ance card” they say is part of the Afmedication needs fordable Care Act, but it doesn’t exist. or Medicare card have changed. If to someone you you have traditional Medicare will not contact you by don’t know. Report phone asking for personal informaMedicare, you can suspected Medithink about wheth- tion. If you receive such a call, hang care fraud at www. up and call Medicare at 1-800-633er you want to join StopMedicareFraud. 4227 to report it. a Medicare Advangov. tage plan. Thanks Never provide personal information to Q. What about to the Affordable anyone over the phone. people I know Care Act, Part D who do not drug coverage will have Medicare or other health continue to improve in 2014 and Medicare will continue to cover most insurance? preventive benefits with no copayThere is good news for these folks. ments. People who do not have insurance You can learn about your Medicare will be able to buy health plans choices by visiting www.medicare. through the marketplaces or they gov or by calling 1-800-MEDICARE. may qualify for expanded Medicaid. For personalized counseling, see a Coverage starts on January 1, 2014. RSVP State Health Insurance AssisMany people will also be eligible tance Program (SHIP) counselor. for financial assistance to help pay Q. What if I have Medicare and their premiums. These folks include someone tells me I need to get early retirees who are waiting for a new plan because of ObamMedicare coverage, or they could be acare? your adult children or grandchildren. This is not true. Watch out! Dishon- Help your friends and loved ones by letting them know they have new opest people may try to take advantage tions. They can learn what’s available of consumers by telling them they by visiting www.healthcare.gov or by need to buy a plan when they don’t need to. In fact, it is against the law calling 1-800-318-2596. ■
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Should I use a will, a trust estate plan, or neither? By Baird Brown, Brown & Brown, P.C.
hould I use a will or a trust to pass my estate to my heirs when I die, or neither? Here are some points to ponder. Without a will, when you die your assets pass in accordance with the statutes of the state where you die. The laws control who gets your assets, although the general rule is they will pass to your family. With a will, certain assets pass to heirs through a court process known as probate, which typically takes about six months. A personal representative is appointed to handle the proceeding. Creditors can file claims and ultimately, assets are distributed to individuals named in the will. Non-probate assets, such as retire-
ment accounts, life insurance and joint tenancy assets are not controlled by a will. These assets need to be coordinated with your probate estate. With a trust estate plan, probate assets are essentially converted into non-probate assets. The trust sets forth the distribution for the estate. Upon the death of the person creating the trust, the successor trustee administers the trust and distributes assets in accordance with the trust terms. The terms typically remain private upon the person’s death and a probate usually is not needed. We advise clients that there is not necessarily a right or wrong decision, and individual situations and goals need to be considered to ensure your wishes are followed. ■
Do you have a written income plan?
ge 85 is a bad time to go broke,” retirement planner Jeff Gorton said. “Budgeting how you spend money before retirement can often be a misleading measurement of how you’ll actually spend it during retirement. You need to be exceedingly realistic in your planning and the five years before retirement are actually the most crucial in solidifying postemployment stability.” To prevent a rude awakening during retirement, start with a written income plan (WIP). Why? • A comprehensive list paints a clearer picture. For a 65-yearold married couple today, there is a 72 percent chance that at least one spouse will live to age 85, a 45 percent chance that one will live to age 90, and an 18 percent chance that one will reach age 95. You may not think of listing things like pet care, yard maintenance, and regular visits to salons or spas, but if you enjoy those services now, you may want them during retirement. That’s also not including gifts to children and grandchildren.
• The forecast of a two-legged stool. A WIP helps you appreciate the reliability of retirement income. What sources of income do you anticipate having? Traditionally, retirement funding has been viewed as a “three-legged stool,” implying a balance between Social Security, retirement plans and savings/investments. As the baby boom generation ages, Social Security benefits may decrease and the age at which an individual can collect benefits may increase. Changes in employment may affect retirement plans. As a result, the third leg of the stool, savings/investments, may become even more important. • Who is authoring your WIP? As with all written documents, you must always consider the source. Just like a retailer may have an incentive to move certain brands of products, many planners are paid to have you invest in specific financial vehicles from major institutions. What plan works best for you? Seek advice from an expert who isn’t trying to sell you something. ■
retirement planning 7
Do You Need Help During the Medicare Annual Enrollment Period? Between October 15 and December 7, 2013 you can review your Medicare Drug and/or Health Plans to make sure they still fit your needs. • Attend either the morning or afternoon session at RSVP, 422 White Ave., Lower Level US Bank • These events are primarily for Medicare Part D information and enrollment
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The choice(s) you make during the Annual Enrollment Period become effective on January 1, 2014.
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By Jason Alderman If your retirement is not far off, you’ve probably already started to estimate what your living expenses will be after the regular paychecks stop. Most would-be retirees remember to include routine expenses like housing, medical bills and prescriptions, insurance premiums, transportation and even food and entertainment. But don’t forget to factor in taxes, which can have a substantial impact on your cost of living, depending on where you live and what your sources of retirement income will be. Here are a few tax-related issues to consider when budgeting for retirement. Social Security. Most people can begin collecting Social Security benefits as early as age 62, albeit at significantly reduced amounts than waiting until their full retirement age (65 for those born before 1938 and gradually increasing to 67 for those born in 1960 or later). Although many states don’t tax Social Security benefits, the federal government does. Depending on your “combined income” (adjusted gross income plus nontaxable interest earned plus half of your Social Security benefits), you could end up owing federal income tax on a portion of your benefit. Basically: • Single people whose combined income is less than $25,000 aren’t taxed on their Social Security benefit. For combined income between $25,000 and $34,000, up to 50 percent of your benefit may be taxed. Over $34,000, up to 85 percent may be taxable. • For married couples filing jointly, benefits aren’t taxable for combined income below $32,000; benefits for income between $32,000 and $44,000 are up to 50 percent taxable; over $44,000 is up to 85 percent taxable. To learn more about taxation of Social Security benefits, read IRS Publication 915 at www.irs.gov. Some people discover that after beginning to collect a reduced Social
Security benefit that they can’t make ends meet and must go back to work, which can backfire: If your annual wages exceed $15,120, you will lose $1 of Social Security benefits for every $2 you earn over that amount. Investment income doesn’t count. Rest assured, however, these benefit reductions are not completely lost. Your Social Security benefit will be increased upon reaching full retirement age to account for benefits withheld due to earlier earnings. IRA and 401(k) withdrawals. After age 59 ½, you can start withdrawing balances from your IRA without paying the 10 percent early withdrawal penalty, although exceptions are made in cases including disability, qualified first-time homebuyer distributions and certain medical expenses. However, you will pay federal (and state, if applicable) income tax on IRA withdrawals except for Roth IRAs held at least five years, whose contributions have already been taxed. With 401(k) plans, you can withdraw funds after age 55 without the 10 percent penalty if you are no longer employed by the company sponsoring the plan. Other taxes. Some people move to another state after retirement, thinking they’ll lower their tax burden. Seven states do not tax personal income, another two tax only dividend and interest income and five states charge no sales tax. But because other taxes and cost of living expenses vary significantly by community, you should do thorough research beforehand. The Retirement Living Information Center (www.retirementliving.com) features breakdowns of the various kinds of taxes seniors are likely to pay, state by state, including those on income, sales, fuel, property and inheritances. Be sure to consult a financial advisor long before retirement to make sure you fully understand all the many tax and income implications. ■