BEACON - Retirement Planning (October 2013)

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Your Guide to Retirement Planning

2 retirement planning www.BeaconSeniorNews.com October 2013

By William H. Kain, Kain & Burke, PC

Approximately 34 percent of American households have fire-

arms. 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 deliv-ered 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, Michi-gan, 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

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 imprison-ment for a term exceeding one year; a fugitive from justice; an unlawful user of controlled substances; some-one who has been adjudicated men-tally 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 ad-ministering 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 ex-ecutor 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 back-ground 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, 13-1229 specifically exempts transfers from the background check require-ment where the transfer is made at death by an executor or administra-tor of an estate, or by a trustee of a

Estate planning for firearm ownerslengthy, 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 registra-tion of NFA firearms. It generally can-not release firearm registration infor-mation, 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 fire-arms in the estate, ATF will require the PR to go through the process of abandonment of unregistered fire-arms, unless ATF approves registra-tion 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 ben-eficiaries.)

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 alter-natively, to sell personal property and add the sales proceeds to the remain-der 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 fire-arms, it is permissible to have a licensed firearms dealer act as a broker. However, it is not permissible to transfer NFA firearms for consign-ment 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 Fire-arm, and a copy of the Letters Testa-mentary appointing the PR should be included. A transfer to a lawful heir is tax exempt under the NFA. A law-ful 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 dis-qualified by law to possess a firearm. It would certainly be an estate plan-

October 2013 www.BeaconSeniorNews.com retirement planning 3

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 fire-arms at death through a will instead of through a revocable living trust. Perhaps the legislature has a policy reason for treating transfers pursu-ant 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 require-ment 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 pos-session of the offending magazine, he commits a class 1 misdemeanor. On the other hand, he cannot trans-fer 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 pos-session 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 decedent’s PR after death. One pos-sibility 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

dangerous or illegal weapons such as firearm silencers, machine guns, short shotguns, short rifles, ballistic knives, blackjacks, gas guns, metallic knuckles, gravity knives and switch-blade knives. It is also illegal in Colo-rado 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 pos-sess 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 child’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 lan-guage 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 hand-guns is working with his attorney to draft his Last Will and Testament, careful consideration should be given to the choice of PR, trustee and ben-eficiaries 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 appli-cable. Anyone planning or settling an estate, especially where firearms are involved, should consult with a quali-fied 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


By Ruth McCrea, RSVP SHIP Project Manager

The potential for confusion and misinformation is especially high

this time of year, since the Health Insurance Marketplace Open Enroll-ment 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 chang-ing. If you have original Medicare or a Medicare health plan, you already have insurance. The Health Insur-ance Marketplace is designed to help people who don’t have any health insurance.

However, if you have Medicare

SHIP volunteers are also trained to recognize and report suspected Medicare fraud as part of the Senior Medicare Patrol (SMP), if you see or hear something suspicious, call RSVP right away.

In addition to telephone counseling and face-to-face appointments, the

RSVP SHIP offers walk-in counseling between 9 a.m. and noon on Thursdays. No appoint-ment necessary. The RSVP SHIP also holds monthly Medicare 101 educational sessions for newly eligible Medicare beneficiaries. Remaining 2013 dates are October 2, November 6 and Decem-ber 11. Call to reserve a seat.

Another SHIP program is the Money-Saving Medicare Project (MSMP). After checking income

and assets, if you qualify, we can help you apply for Social Security Extra Help to defray the cost of your prescription drugs. You may also be eligible for benefits under the Medi-care Savings Program (MSP) through Mesa County Department of Human Services to cover part of your Medi-care Part A and B premiums, deduct-ibles and co-payments.

Wherever you are in Colorado, you can find a regional SHIP counseling office by calling the statewide toll free number (1-888-696-7213). In Mesa County, your Medicare ques-tions can be answered by calling the RSVP SHIP office at 243-9839. Call us. You’ll be glad you did. ■

now, you still need to review your drug/health plans to make sure they will be right for you in 2014. If you’re satisfied with your coverage, there’s no need to do anything. If you want to make a change, attend a Medicare Open Enrollment event between October 15 and December 7 or make an appointment with a Senior Health Insur-ance Assistance Program (SHIP) navigator.

RSVP SHIP will host four Medicare Open Enrollment events dur-ing this period: Monday, October 21; Wednesday, November 13; Tuesday, November 19; and Thurs-day, December 5. Walk-in times are from 9 a.m.- 3 p.m. Well-trained SHIP navigators will be glad to help you.

New this year is a SHIP-sponsored Medicare Part D Plan Finder Lab from 10 a.m. to noon on November 15 at the Mesa County Central Library. Seat-ing is limited to 12 computer-literate people. Call RSVP for details and requirements.

What if someone contacts you about signing up for a Health Insurance Marketplace plan?

During these two overlapping enrollment periods, the potential for fraudulent activities is huge. If someone knocks on your door or calls to sell you a health plan, you need to report the incident as fraud. It is against the law for someone who knows you have Medicare to try to sell you a Marketplace plan. Since

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Questions about Medicare Open Enrollment and Health Insurance Marketplace? RSVP offers free help.


By Eileen Doherty, Colorado Gerontological Society

Medicare beneficiaries are again faced with that time of the year,

from October 15 to December 7, in which they must review their pre-scription drug coverage and decide whether to enroll in a Medicare Advantage Health Plan or stay with their cur-rent coverage. Premiums, deductibles and co-pays often change from the current year, causing even more confusion for benefi-ciaries.

Many beneficiaries re-port being confused about the launch of the Afford-able Care Act on October 1, 2013, in which Connect for Health will begin to enroll Colorado consum-ers in Obamacare. Medi-care beneficiaries are not eligible for Obamacare and must stay with Medicare as their primary health in-surance. Although Obamacare made some changes to Medicare, beneficia-ries are not subject to any of the rules for the individual market through Connect for Health.

On Medicare Monday, October 21, Medicare experts will present the 2014 changes to help beneficiaries understand the changes in costs and coverages for 2014 in Medicare Part A, B, C and D. Medicare Monday is sponsored by the Colorado Geronto-logical Society and will be held in 15 locations throughout Colorado dur-ing October and November.

Monthly premiums for Medicare Part B are expected to increase, but final announcements are not avail-able as of the writing of this article. Similarly, the deductible and co-insurance for Medicare Part A are not available.

Medicare Advantage plans or Part C are expected to have stable premi-ums, co-pays and other out-of-pocket expenses. Information is available at www.medicare.gov starting October

Medicare experts to provide answers for 2014 Medicare changes

1, 2013 for enrollment starting Janu-ary 1, 2014.

The deductible for Medicare Part D will decrease from $325 in 2013 to $310 in 2014, a benefit for consumers who are looking at ways to save mon-ey. Similarly, beneficiaries will have lower out-of-pocket costs in 2014 for

prescriptions during the initial coverage period, as well as during the donut hole.

In addition to the Part D deductible, beneficia-ries will pay an additional $635 of their prescription drug costs in the initial coverage period, which is less than in 2013. When the total cost of the drugs exceeds $2,850, the beneficiary will be in the donut hole. Beneficiaries whose drug costs are be-tween $2,850 and $6,455

will pay 47.5 percent of the costs for brand name drugs and 72 percent for generic drugs. When the total cost of the drugs exceeds $6,455, the benefi-ciary will be responsible for 5 per-cent coinsurance, or $2.55 co-pay for generics and $6.35 co-pay for brand or nonpreferred drugs.

No changes have been made by Congress to Medicare Supplements. Medicare recently reported that 90 percent of the Medicare physicians are accepting new patients.

Individuals who are having diffi-culty paying for their Medicare Part B and Part D premiums and co-pays may be eligible for assistance and can call 1-855-293-6911.

Medicare Advantage plans and representatives have been invited so that beneficiaries can do some comparison shopping following the presentations. Light refreshments will be served at both locations. Pre-registration is encouraged to ensure enough food and materials. Individu-als who want to register for Medicare Monday, or who want assistance with enrollment and counseling can call 1-855-880-4777. ■

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By Ron Pollack

If you have Medicare, you may be confused by the buzz surround-

ing 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 Medi-care and the marketplaces are en-tirely separate. If you have Medicare, you should make the same kinds of decisions about your Medicare cover-age 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 insur-ance, 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

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 deci-sions about your Medicare coverage that you make every year.

Q. If I have Medicare, do I need to worry about the new require-ment 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 cover-age 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 Decem-ber 7, 2013. During Medicare open enrollment, you can decide whether to change plans, join a new plan, or

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Understanding the difference between Medicare and the marketplaces keep the same Medicare coverage you have. If you have a Medicare Advantage or Part D prescription drug plan, you should check to see if your plan will be changing in 2014, and you should as-sess whether your medication needs have changed. If you have traditional Medicare, you can think about wheth-er you want to join a Medicare Advan-tage plan. Thanks to the Affordable Care Act, Part D drug coverage will continue to improve in 2014 and Medicare will continue to cover most preventive benefits with no copay-ments.

You can learn about your Medicare choices by visiting www.medicare.gov or by calling 1-800-MEDICARE. For personalized counseling, see a RSVP State Health Insurance Assis-tance Program (SHIP) counselor.

Q. What if I have Medicare and someone tells me I need to get a new plan because of Obam-acare?

This is not true. Watch out! Dishon-est people may try to take advantage of consumers by telling them they need to buy a plan when they don’t need to. In fact, it is against the law

for anyone to sell you a marketplace plan if he or she knows you have

Medicare. Also, re-member that Medi-care supplemental (Medigap) plans are not sold through the marketplaces. Never give your Medicare number or Medicare card to someone you don’t know. Report suspected Medi-care fraud at www.StopMedicareFraud.gov.

Q. What about people I know who do not

have Medicare or other health insurance?

There is good news for these folks. People who do not have insurance will be able to buy health plans through the marketplaces or they may qualify for expanded Medicaid. Coverage starts on January 1, 2014. Many people will also be eligible for financial assistance to help pay their premiums. These folks include early retirees who are waiting for Medicare coverage, or they could be your adult children or grandchildren. Help your friends and loved ones by letting them know they have new op-tions. They can learn what’s available by visiting www.healthcare.gov or by calling 1-800-318-2596. ■

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Scammers will be calling on behalf of Medicare and will ask your personal information for a new “national insur-ance card” they say is part of the Af-fordable Care Act, but it doesn’t exist.

Medicare will not contact you by phone asking for personal informa-tion. If you receive such a call, hang up and call Medicare at 1-800-633-4227 to report it.

Never provide personal information to anyone over the phone.


By Baird Brown, Brown & Brown, P.C.

Should 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 as-sets, 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 repre-sentative 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-

“Age 85 is a bad time to go broke,” retirement planner Jeff Gor-

ton said. “Budgeting how you spend money before retirement can often be a misleading measurement of how you’ll actually spend it during retire-ment. You need to be exceedingly realistic in your planning and the five years before retirement are actually the most crucial in solidifying post-employment stability.”

To prevent a rude awakening dur-ing retirement, start with a written income plan (WIP). Why?

• A comprehensive list paints a clearer picture. For a 65-year-old married couple today, there is a 72 percent chance that at least one spouse will live to age 85, a 45 per-cent 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.

Should I use a will, a trust estate plan, or neither?

Do you have a written income plan?

ment accounts, life insurance and joint tenancy assets are not con-trolled 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 creat-ing 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. ■

• 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/invest-ments. 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, sav-ings/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. ■ for lodging call 970-268-5467 ✦ expires 12/30/13

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Between October 15 and December 7, 2013 you can review your Medicare Drug and/or Health

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By Jason AldermanIf your retirement is not far off,

you’ve probably already started to es-timate what your living expenses will be after the regular paychecks stop. Most would-be retirees remember to include routine expenses like hous-ing, 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 sourc-es of retirement income will be.

Here are a few tax-related issues to consider when budgeting for retire-ment.

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 inter-est earned plus half of your Social Security benefits), you could end up owing federal income tax on a por-tion of your benefit. Basically:

• Single people whose combined income is less than $25,000 aren’t taxed on their Social Security ben-efit. For combined income between $25,000 and $34,000, up to 50 per-cent 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 Pub-lication 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 ben-efit 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 with-drawing balances from your IRA without paying the 10 percent early withdrawal penalty, although excep-tions are made in cases including dis-ability, qualified first-time homebuyer distributions and certain medical expenses. However, you will pay fed-eral (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 with-draw 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, think-ing they’ll lower their tax burden. Seven states do not tax personal in-come, another two tax only dividend and interest income and five states charge no sales tax. But because other taxes and cost of living expens-es 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 advi-sor long before retirement to make sure you fully understand all the many tax and income implications. ■

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BEACON - Retirement Planning (October 2013)

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Transcript of BEACON - Retirement Planning (October 2013)