ATF 41P/GUN TRUST RULE CHANGES UPDATE

According to the ATF/DOJ, the rule changes we have previously discussed are coming, but not until June. 

So, if you want to get a National Firearms Act listed item (silencer/sound suppressor, short barreled rifle or shotgun, etc.) do it before June. 

Also, the ATF has started using an online filing or E-Forms system that accepts FFL's 4473 gun transfer applications and the Form 4 required for NFA items. Check out the website here.  This is "allegedly" going to speed up the wait process to by a couple months from the currently absurd 9 month wait time. 

I haven't explored the new ATF website too extensively, as its frequently "down for daily maintenance" as seen here: 

The other sections of the website seem mostly for gov/law enforcement use, and come with strict warnings, but at least they have fun pictures (from the bomb-arson tracking system logon):

Who knows what this all means in the long run. I would have hoped that an electronic submission system would eliminate the need for the new proposed regulations (requiring CLEO to sign off, fingerprints, and photos to be submitted for NFA items) but it seems they are pushing ahead with those as well. 

Stay tuned. 

Rules for Inherited IRA's

IRA's have many fans, including this young lady

IRA's are still a pretty good deal (see HERE if you need an explanation of what an IRA is). If you have not started one, do. Granted, they are not as good as many pensions or employer sponsored plans, but even if you have those, an IRA can be a great way to achieve tax savings or deferral. Remember, if you plan on making more later or think tax rates will go up, pick Roth. If you think you will make less or taxes will be less, go with traditional.

Enough investing, lets talk about death.  Often times the bulk of someone's estate can be in the form of an IRA, which they call, appropriately, and inherited IRA.

General Rules for Traditional Inherited IRAs

Spouses have the flexibility to roll it over into their own plan. This is usually the way to go, unless you are a young widow(er): you get popped with penalties for early withdrawal if you need money before age 59.5, so its best to wait to make the rollover. Else, you can delay distributions until your spouse would have been 70.5. Remember, they general key with IRA's is delay as long as possible.

If a non-spouse inherits an IRA, then all movement of money must be from one IRA custodian to another. Be sure to specify a "trustee-to-trustee" transfer if changing brokerage firms! You can get in trouble on this one if you screw it up.

You must re-title the IRA, including the original owner's name and indicating it is inherited, e.g., "Sally Smith, deceased, inherited IRA for the benefit of Bob Brown, beneficiary." Just do it. Don't ask why.

Distribution rules:

Must take distributions before Dec. 31 in year following death of decedent.

The Required Minimum Distribution (RMD) is calculated differently than for your own IRA. You take the balance on Dec. 31 of the previous year and divide it by your life expectancy listed in the IRS' "single life expectancy" table, rather than the table used by IRA owners. The next year you use the same life expectancy, minus a year, and so on.

Exception, "5 year rule" : If the original IRA owner died before reaching age 70½ (before required minimum distributions would be required) you also have the option to distribute your inherited IRA under the five-year rule. This allows you to take distributions however you like without penalty, as long as all assets are completely distributed from your inherited IRA by December 31 of the fifth year following the IRA owner's death: just remember these are taxed as ordinary income, so plan accordingly (however, if there was any estate tax pain, you might be able to take a deduction here, but I digress).

General Rules for a Roth Inherited IRA

If you inherit a Roth IRA and transfer the assets to an Inherited Roth IRA, unlike the original owner, you must take RMDs. As long as the assets have been in the Roth IRA for five or more years, these RMDs can be withdrawn federally tax-free.

Otherwise, see above.

Take Aways:

Ira's are good. If you don't have one, set one up.

Make sure you name your beneficiaries, and name backups. There are harsh rules with it ends up in an "estate" and you will likely not have the flexible tax options.

If you inherit one, ask for professional help. Play by the rules, transfer them correctly, and you can achieve maximum tax savings and deferral. 

Comment period open on ATF 41P/Proposed Gun Trust Rules

As I have previously discussed, the public comment period for the proposed rules that affect "Gun Trusts" is currently open, but only until December 9th. If you have not done so already, please take the time to comment on the proposed rule.

If you are too lazy to scroll down or click to read my previous post, here is a recap:

Current system:

"Gun Trusts" are a special trust used to own and purchase National Firearms Act ("NFA") items. These include silencers/sound suppression devices, short barrel shotguns and rifles, and machine guns.

The current system requires you to apply to the ATF, pay $200, and wait 9 months. What they do is a mystery, but if you use a trust or LLC, you can name multiple authorized users, and you can bypass getting fingerprinted and having your sheriff/chief of police sign off on the form. The real benefit is if you borrow someone's NFA item outside of their presence, it is a felony. The trust fixes that. It does not, and should not, bypass the background check.

New Proposed Rules:

The new rules would require every "responsible person" in a trust or LLC (settlor, trustees, even beneficiaries) to have to get fingerprinted and have their chief law enforcement officer sign off on the application. This costs roughly $15 per set of fingerprints (more or less) and will require time with the law enforcement officer, if you can get it. The fear is the added cost and time on local officials will result in a blanket "no" that will be a defacto ban on all NFA items.


Recap:

This is an attempt at gun control that misses the mark. It just will make it harder, more expensive, if not outright impossible, for legal citizens to posses legal items.  The fix is requiring the ATF to run background checks on all "Responsible persons" if they do not already do so (which baffles me), and require the vendor who sells the items to run the NICS background check as well. This is easy, simple, and would accomplish the same goal without the additional time and expenses to both citizens and local governments.



Should you wish to comment, a full text of the rules and the comment page are available here.

Government shutdown, Obamacare, now what?

Maybe you, like "the markets" just don't care about a government shutdown. I am still at work, but I do have friends who are sitting at home and not working, not by choice, which means they are not getting paid.  Here is a quick rundown of the what/why.



Image from Cnn.com

1. What's going on?
Congress is supposed to pass a budget so the government can pay for things, aka their "power of the purse". As a new fiscal year has started, there was no  new budget, so there is no purse. Also, the first "Obamacare" healthcare exchanges are opening up, albeit with some glitches.

2. But why?

House republicans (and Texas' own Ted Cruz in the senate) are using this stalemate/government shutdown rhetoric to continue to attempt and get the Affordable Care Act (AKA Obamacare) defunded, cut back, or delayed because they just don't like it. The Senate, with its Democrat majority, continues to offer a budget that contains implementation of Obamacare, while the Republican majority in the House continues to not approve the Senate proposals and offers in return a plan that defunds/delays Obamacare, but funds the government. Think ping pong, with Obamacare as the ball.


3. What does this mean, really?

This shutdown means different things to different people. If you're a furloughed government worker, you don't really care as much about the healthcare squabble as you do about your job. As long as they fight, you sit at home idle, as does the mars rover and the pandacam.  (Disclosure, I love the national zoo, and the pandacam).

Obamacare is a trickier position. The general pro-obamacare argument can be summarized in this quote from the Washinton Post's Ezra Klein: "this is all about stopping a law that increases taxes on rich people and reduces subsidies to private insurers in Medicare in order to help low-income Americans buy health insurance. That's it. That's why the Republican Party might shut down the government and default on the debt."

Yes, but also no.

The conservative view, is generally that Obamacare is another handout to the poor, a tax on those who already work hard, that anything mandatory is an affront to personal liberty, and it will be another costly step into the ever growing welfare state where we now live.

Yes, but also no.

Universal healthcare seems to work in other countries. Can it work here? I don't know, but if yes, it will take a while to get it right. The grandstanding of the President and Congress that it if its good enough for America, it is good enough for them as well seems to be a sham, and even the new IRS agents that will be enforcing the law do not want it for their own plan.  Seems fishy.

See how the coverage of today's shutdown taken from the frontpage of foxnews.com, is slightly different than that of cnn.com:


Foxnews.com front page 10/1/2013

Cnn.com frontpage, 10/1/2013



Image from cnn.com

Two very different approaches to the same story. Notice how shutdown changed to slimdown,  on foxnews.com  and things really are not that bad. Here, we have heroes of WWII "storming" the monument after it was closed by big bad government on the day they were supposed to visit, with bagpipes as their war cry. Cnn.com mentions it too, but not as the lead story. The lead story is that there is a no deal, which is a big deal.

Yes, the fight against Obamacare is the fight of the "rich" against the poor and uninsured or underinsured, sort of. But its also the fight against the middle against insurance companies who already took too much of their paycheck, and against the government for making the insured pay for the uninsured who abuse emergency rooms as if they were their private physicians, and for making a mandatory system that you pay a fine into even if you don't use.

I am a relatively healthy person with insurance I pay for. My insurance costs are rising, substantially, under Obamacare. Thus, I don't really like the plan. However, I do know some people who are not healthy, tried to find private insurance, but due to pre-existing conditions, could not get any insurance at all. These are not the "poor" or the "morbidly obsese" or any other of the ridiculed "other" that get the blame for rising healthcare costs, they are just sick folks who got cancer, or ALS, or were born with whatever they suffer from. So, I can see why they would want Obamacare, and I can't argue that too much.

Also, the government "shutdown" really is a "slimdown," as only "non-essential" workers go home or get furloughed. Mail still gets delivered, social security and medicare benefits still go through, planes can still take off and land, and our armed forces are still getting paid. So there's that, but I have friends sitting at home who have jobs they deem "essential," to their families.  A slimdown is not a good thing either.
 
Take aways:

The shutdown is bad. Congress is a mess, and it has been for a long time.  The Affordable Care Act was passed over 3 years ago, yet Republicans are still not letting the biggest pieces of the President's legacy go without a fight that he will refuse to lose...seem like an impass? Is it perfect? No. Do I like it? No, but that is only because it just costs me more money: I'd love it if it helped me out. Do I have a better idea? No, and neither do the Republicans as of yet, which is why this fight can really do no good.  Lets just give this a try, if it doesn't work, we can change it. This is America, that's what we do. Albeit slowly.

The bigger issue is going to come in 16 days, when we have to place the Full Faith and Credit  of the United States on the line again when we run up against our debt ceiling, which we have to raise again or run the risk of default. This is even a bigger deal than the shutdown. And the fight starts all over again.

President proposes Executive Action on Gun Trusts

If you haven't heard already, the President took the path of Executive Action to continue his attempts at so called "gun control", this time taking action against gun trusts. If you don't know what a gun trust is, my previous post will catch you up.  Since Congress did not act, the President could only use executive orders, and that means it only affects NFA (National Firearms Act) items. Those are silencers/suppressors, short barreled rifles/shotguns, and machine guns. As I understand it, this will not affect normal shotguns, pistols, rifles, or even the much maligned AR-15.

 

The text of the new  proposed rules can be found here. It is long, so I'll summarize:

 

1. All "responsible persons" to a trust, LLC, partnership or other entity will be required to submit photographs and 2 sets fingerprints along with a full ATF Form 4 
2. The Chief Law Enforcement officer of your community must sign off on the application for every responsible person.
3. All responsible persons must fill out an ATF Form 5320.23, which I don't think exists yet, as will people added to trusts and entities (within 30 days of changes).
4. Clarifies that executors and administrators of estates qualify for "tax-exempt" transfers of decedent's firearms, if they go to a member of the estate.
5. Limits importation of curio/relic antique firearms from foreign countries to military and museums only.

 

Thoughts:

 

First off, "Responsible person"  will include the trustees, beneficiaries, settlor, grantor, basically everybody who possesses, directly or indirectly, the power or authority, under any trust instrument or other document, or under state law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.

 

This is silly. Allegedly, the "White House" said that "At present, when the weapon is registered to a trust or corporation, no background check is run,”.  If this is so, why does it take (by current ATF estimates, as of this afternoon) 9 months to process the application? I do not believe that they are not already checking every associated name on a trust or other document. If that is the case, what are they really doing here?

 

Next, I do not know of any dealers that do not run the NICS (national instant criminal background check system) on a person who wants to buy an NFA item. This is the same background check as you get for any other gun.  I am sure some are out there, but that is the first line of defense. Next, the ATF has the name and address of the people that are applying, it is just simply not feasible that they are not running the checks already.

 

What this really means is that its just an added pain to get fingerprinted, get a passport photo, and get the chief of police or your sheriff to sign off on every application. What's great is they estimate the time and cost of this...several hours of time for the applicant, about $40 extra, and millions in costs for local communities and the feds. In some communities (San Antonio is famous for not signing any applications) this will be a defacto ban on NFA items. In others, it is just more of a nuisance and time consuming.

 

What I don't understand is why you wouldn't just list 1 person on your entity, then add the others later, depending on what this magical Form 5320.23 requires. As of today, it does not exist on the ATF Form database.  Also, I think a trust can be tailored to make just the settlor the "responsible person," but that will ultimately be up to the ATF.

 

More thoughts:

 

I understand political agendas. I think with the tragedies that we have seen over the past few years, we needed a measure of gun control, but that is on the background check end.  Close the "gun show" loophole. That is just fine.  This does not do that.

 

If gun stores and dealers are not running background checks before they sell NFA items, then they should have their licensed revoked, and they should be prosecuted. This does not do that. This is not gun control. This makes it more difficult for legitimate gun owners to legally acquire legal items. The ban on importation of gun used in foreign countries? How many Korean War M1 garands do you hear about in violent crimes? Again, a waste of a law and an unnecessary restriction on a collector who would otherwise be spending money and putting it back into the economy.

 

Summary:

 

This will do little to keep items out of the wrong hands. All that had to be done was for the ATF to do "officially" what I have no doubt they are doing "unofficially" which is to just run a background check on everyone who applies. That is not hard. This is just pushing toward a complete ban of these type of items.  I encourage people on both sides of the gun debate to get involved in the public comments for this proposed rule. This does nothing to stop the violence that claimed lives at Sandy Hook, or the tragedies in Colorado and elsewhere. All this does is require the legitimate firearms owners to submit more personal information to the government, at a higher cost to the individual and the taxpayer.

 

Let's hope the powers that be can change this one before its set in stone.