Gifts to Grandchildren

I have had the opportunity over the last few decades to write and review many estate plans.   In the vast majority of the plans that I have seen the typical estate plan for a married couple is to leave everything to the spouse and then upon the spouse's death the remainder is to be divided between the children.   That is a good basic plan.   In the eventual course of life those children will likewise die and leave their property to their children.   Included in that property will likely be some of the wealth that was passed down by the grandparents.  Unfortunately, the grandchildren will most likely never realize that they inherited anything from their grandparents.  They will just assume that it all came from their parents.

Most grandparents have a very pleasant relationship with their grandchildren.  Grandparents are usually not required to raise their grandchildren, so they are not involved in discipline and the other hard decisions of raising children.  Therefore grandparents can focus on the pleasant aspects of loving and encouraging their grandchildren.   It seems natural that upon the passing of the grandparents they may want to do something in the disposition of their property to cause them to be remembered by their grandchildren.   Ironically most grandparents do nothing with their estate that would cause them to be remembered by their grandchildren.

I am now reviewing a trust agreement where the grandparents are using a trust to provide annual gifts to their grandchildren for five consecutive years after the death of both grandparents.  This is probably the most unusual and most effective gift strategy that I have seen to demonstrate a grandparent's concern and affection for grandchildren.   I believe that it is particularly effective because it spreads the gifts out over five years.  Those grandchildren will receive a very clear message that grandmother and grandfather were thinking of them.

I do not think that large gifts of the majority of the estate are in order for the grandchildren.  But often at the time of the grandparents' death, grandchildren are in college, graduate school,  trying to buy a home or otherwise trying to get their start in life.   This is a time in life when a gift of a few thousand dollars may be especially needed and appreciated.  Even if grandchildren are younger,  some assets could be held in trust until the grandchildren became young adults before the gifts from the grandparents are distributed to the grandchildren.   This is something that I want to better address in my own estate plan and suggest that it might be a wonderful thing for others to also consider.

Posted on October 5, 2014 .

Now is the time to get things started.

The end of the year is an important time to get things done to improve our financial well being.  It is also a very busy time with family and friends.  So now is the time to look at what needs to be done and then get things started so that they get done by the end of the year.

Some of the things to think about are taxes and investments.  This is the time to calculate 2014 taxes so that we can make necessary payments before the required deadlines.  If we do not have the cash on hand we need to start looking for sources for the needed money.  Equally important is to analyze what changes we need to make in our finances to make tax payments next year and to take advantage of deductions, credits and other tax strategies next year.  In sum,  if we do not start doing our tax work now, it is likely that we will not make the improvements needed for 2015 and will procrastinate until 2016.

The same is probably true about our investments.  If we do not start the process of moving our idle cash into more productive investments, and if we do not start the process of changing our current investments into those which we believe to be safer and more productive, we will likely continue our current investment portfolio for a number of months.

Likewise our estate planning strategies need to be reviewed and modified as needed.

In each of the areas, if we will just note our goals and the steps that we desire to take, then in the next couple of weeks take an hour or two to start gathering the information that we need, we will find that it will be easier to take a couple more steps.  Then hopefully we will find that during a snow day or some other late fall or early winter day, our normal activities will slow a bit and we can see the culmination of our plans with the resultant added benefits we are looking for coming our way.  This happens because, except in retail sales, the upcoming couple of months are often the slowest of the year in real estate, estate planning, and many other areas that are critical for tax and financial planning.  So, lets get started.

Posted on September 28, 2014 .

How to own a rental home.

An article in the Wall Street Journal this weekend explained different ways to own a rental home.  Here is the link:

The article mentioned 4 methods....1. just buy it and rent it, 2. find a company that will do it all for you, 3. REITs, and 4. crowd funding.


Number one is self explanatory.  The investor just does his/her research.  Locates and buys a home and rents and maintains it.


Number two requires a finding a management company that will locate, help with the purchase and then rent and maintain the property.   Most all property management companies do the renting and maintaining parts.  According to the Wall Street Journal article, there are some that now will do the locating and assist in the purchasing, so that owning a rental property is something that the owner can do with almost no is all done for a fee by the management company.  Obviously the savvy investor could save the fees paid to the management company if she/he did all that work him/herself.  But if the investor is highly compensated in her/her own profession, they may earn more much more money per hour at their own profession then the management company fees, which would make it cost effective to hire the property managers.  Another aspect to look at is the management firm's expertise.  If the managers can find better and less expensive properties to buy; and if they can manage them more efficiently than the investor can, then again hiring the property manager would be the better choice.


Number three is the REIT which stands for Real Estate Investment Trust.  REITs are publicly traded companies that raise money from investors to purchase real estate.  The company owns the properties, but the investors own the company.  For the investor, this is exactly like any other stock, in that to be successful, the investor must closely study all aspects of the REIT prior to investing and then after investing, the investor hopes nothing changes for the worse.  In a REIT, the investor has no control except to pay into the fund and then withdraw from the fund.  The hope is that the investor makes money in between those two events (just like any other passive investment).


The fourth way of investing is through crowd funding with companies like Groundfloor, Infunding and Patch of Land.  Apparently those companies and other like companies find a property and then ask people on the internet to invest a small amount...such as $50 or $100 for a share of the property.   When they obtain investments from a sufficient number of people, they buy the property and all of the investors own a small portion of the property.  Since crowd funding is a new method of investing, a potential investor needs to very carefully investigate such a company before investing.   Looks to me like these could very easily be operated by criminals who will steal the money being invested.

There are many ways for an investor to buy that rental property.  Once you decide that you want to invest CAREFULLY CHECK OUT ALL THE DETAILS OF THE PROPERTY AND THE COMPANY AND PEOPLE YOU WILL BE WORKING WITH.  YOU CAN NEVER BE TOO CAREFUL.  If you decide to invest, good luck.

Posted on September 21, 2014 .

How President Obama is messing with your IRA

Over the past several years I have been turned off by the overheated rhetoric between the Democrats and the Republicans.   I figured a more thoughtful approach would be to sit on the sidelines above the fray.

Over the past few decades I have decided that the ROTH IRA would be one of the pillars of our retirement planning.   It is perfect for us.

Before becoming president, Mr. Obama was a law professor.  In order to become a law professor, he was required as part of his law school training in contracts and other courses to spend many hours thinking about reliance and how important it is as a principal of a civilized society.  Despite this background, as leader of the Democrat Party he has, in his 2015 budget, proposed to eliminate at least two key provisions of the ROTH IRA law that will severely alter the tax advantages enjoyed by that investment. (see Adrea Coombes article in the Wall Street Journal )

The simple explanation of the current ROTH IRA is that it is a fund that can grow tax-free over your lifetime, your spouse's lifetime and your children's lifetime.  President Obama has proposed that Roth owners will be required to start taking distributions at age 70 years and 6 months, and that children will be required to disburse within 5 years of the the owner's death.  For most of us, that knocks off at least 50% of the advantages of the ROTH. 

To say that I am upset about this proposed change is an understatement.   Anything that can be done to defeat this proposal will be a great benefit to those of us who invested in the original ROTH IRA proposal.  Sitting on the sidelines is no longer an option for those who want to preserve this great investment.

Posted on September 14, 2014 .

Fort Collins, Windsor, Timnath, Loveland, Greeley and Wellington Parade of Homes

From the title of this blog, you can see a big change in this region.  Years ago there were several very separate communities here in northern Colorado.  Now we are a region, and for the next couple of weeks the home builders and realtors in our region are conducting a Parade of Homes.  Though you may not be planning on building or remodeling, or may not even like the types of homes that are on display, you may enjoy touring one or more of these homes to see the colors, materials, and other ideas that are on display that can make our living spaces more comfortable and livable.  This year the parade is not as well advertised as in years past, but just call the Group or Remax or JR Horton Builders and ask them where a parade home is located near you. Then drop by that home to pick up a listing of all the homes being shown or maybe the person you call will give you several addresses near you.  The homes are open today, and for the next 2 Saturdays and Sundays.

I enjoyed seeing a small bedroom that was made into a very well designed sleeping room for 8 children by using some plywood and structural lumber, nails and paint.  A great idea for a mountain cabin, basement, or any where you may need a place to sleep a bunch of children.

I also noticed the use in, what to me were expensive homes, of inexpensive white shower bases available at Lowe's or Home Depot for a couple hundred dollars.  Those bases really looked good with the great tile products that are available.  I remember a decade or more when I needed to redo a shower in our basement and was told that about the only option was to have a contractor come in and remove the old base and pour a new concrete base for over $500.

Speaking of showers and other tile work, I noticed the frequent use of the old fashioned 6 inch square white porcelain tile with white grout.  It looked great.  Of course there was also the whole gamut of tile sizes and materials that are available today with a wide array of grouts.

I am also intrigued by showers without doors and was not disappointed.  If you have not noticed, these take a look.  They are simply designed where the shower head is pointed away from the entry area, so that there is no need for a door to open and close and to clean.  Maybe someday, I will live in a home with such a shower.

Besides the things that I have mentioned, there were the latest faucets, fixtures (plumbing and lighting) as well as  windows, paint colors, textures, etc.  We noticed several French doors that we liked.

We had a couple of enjoyable hours driving around our community and seeing the latest and greatest (at least in the opinion of local builders and designers) in living spaces.  So when we inevitably need to replace or fix something in our living space we will have some ideas on what we like.  Its not fun for everyone, but I am sure many people who have never visited the local parade of homes would enjoy it if they tried it.  May you are one of them.

Posted on September 7, 2014 .

A Trustee for a Special Needs Trust for a Disabled Person

Often one of the biggest challenges is to find a trustee for a special needs trust for a disabled person.  The difficulty may involve finding someone that will be around for years to come.  This is an especially difficult problem for older parents of a disabled person.  They realize that their time left is very limited, but that their disabled child will likely live for many decades after the parents are gone.

Another big problem is to find a trustee that knows public benefits.   The point of a special needs trust is to not cause the disabled person to lose benefits while enhancing their life with the extra money that a family member may provide.  The public benefits system is created by complex rules and regulations, usually initiated by the federal government and then added to by the state or county that administers the programs.  So there are usually hard to understand federal, state and local rules and procedures that change frequently.  It takes some expertise to understand what can and cannot be done.

Colorado has a nonprofit that intends to be around forever and has the experts to navigate the public benefit world, that acts as trustee for these trusts.  Its called the "Colorado Fund for People with Disabilities" or CFPD.  Here is the link to their website:

I have not had any direct involvement with CFPD.  I have heard about them at legal seminars and from lawyers who work with the disabled.  CFPD is a pooled trust.  That means that if you want to establish a special needs trust for a disabled friend or relative, you establish your trust, make arrangements for CFPD to act as trustee and then your funds are added to all the others managed by CFPD.   Then CFPD keeps an account for your trust and makes sure that monies are appropriately used to help your friend or family member.

The ongoing nature of this nonprofit corporation and its expertise are huge benefits in establishing a special needs trust.   One of the very real dangers of establishing a special needs trust with a trustee that does not know all the rules of the various programs benefiting the disabled is that the trust may violate some of those rules which could have very serious consequences for the disabled person.

Therefore, anyone considering a special needs trust in Colorado should consider using CFPD.  I will follow up with more info about CFPD soon.l

Posted on August 31, 2014 .

Planning for a disabled family member

Hal Wright wrote an excellent article for the Denver Post newspaper's Sunday, August 24, 2014 edition entitled "Special-needs children need lifetime plan for expenses."   In this excellent article Mr. Wright discusses the need for all aspects of, financial, life goals, etc.

The legal consideration mentioned is a special needs trust.  The basic concepts for the special needs trust are:

1.  In the United States government programs for the disabled just provide for very basic life preservation needs.  Put more bluntly, these programs may support a disabled person at a poverty level.

2.  Many families want to supplement that poverty level existence by leaving money to be used for extras that the government does not provide.   Such extras may be to:  provide travel expenses to visit family members, and cosmetic dentistry and surgery.

3.  The trust deals with the above by stating that the trust monies cannot be used for anything that would jeopardize the government benefits providing for the bare necessities while providing for the enhancements that the extra money may provide.

The big issue that Mr. Wright omitted is a discussion of the fact that the disabled person, especially if a child, may live longer than a parent who may wish to act as a trustee.  In other words, it is important to have a trustee who will be around for a very long time.  To resolve this concern there has been at least one nonprofit corporation established to administer these trusts long term.  I will obtain information regarding this organization and post it in next week's blog.

Posted on August 24, 2014 .

Reasons to have a trust

Most people in Colorado do not need or want a trust.   They are happy with a will which is inexpensive and works very well.  So why create a trust?  The following are a few reasons that may apply:


1.  To shield assets from creditors.   If you are at high risk and are willing to give up control, this may be a good reason.

2.  Provide for a child or other loved one with a disability.   This is one of the best reasons to create a trust.

3.  Avoid probate and maintain privacy.   Usually not compelling reasons for most of us.

4.  Provide a caretaker for your assets if your heirs are not responsible.  This is a great reason if  your heirs cannot manage for themselves.

5.  Make sure that your estate qualifies for all estate tax exclusions.   Since the estate tax only applies to estates in excess of $5 million dollars, most of us do not need to worry about this one.  If you are on the edge...maybe have a taxable estate or maybe not...this is a good thing to put into a will, to remind your heirs to be careful around this issue.

6.  If your estate is worth more than $5 million dollars there are many opportunities to reduce estate tax and benefit charities.  If you are fortunate to be in that situation, you should definitely explore the many opportunities.

Since many people think that they need a trust, consult this list to see if there is a valid reason to do so.   If you have a reason that is not on this list, consult with your legal adviser to see if it makes sense.

Good luck in your estate planning endeavors.

Posted on August 17, 2014 .

Fort Collins, Baghdad and Jerusalem

Unfortunately the politics of the world is becoming similar in many diverse places...such as Fort Collins, Colorado; Baghdad, Iraq; and Jerusalem, Israel.  This worldwide problem is the inability to compromise to solve current issues.   In Iraq and Israel people are killing each other.  Fortunately in Fort Collins, Colorado and the rest of the United States of America we are not using tanks and missiles to kill each other, but we are suffering from the same root problem of being unable to compromise.

As I hear my friends and neighbors and associates discuss issues such as same sex marriage, gun control, health care, the environment (oil fracking, global warming, etc.), most of the discussions are not on common sense plans for resolution that both sides might agree to, but the discussions are about how stupid and evil the people are on the other side of the debate.  Since many of these discussions involve our political leaders, all the personal animosity also disrespects the offices that these people hold, such as the President of the United States of America.

Though we are not yet killing each other in Fort Collins, Colorado as part of our disagreement over political and social issues, we, like the people of Baghdad and Jerusalem are not making progress in working out these differences.   Without resolution, the problems only get worse and the behavior of the people involved will likely get worse as the animosity and frustration increases over time as we struggle to progress in a society that has lost social progress' most useful tool....the art of compromise.

To turn things around, each of us can do the following:

1.  Individually we can refuse to engage in any conversation where the focus is on the persons on the other side.  Instead we can propose practical solutions to the problem that all might be able to accept. 

2.  We can encourage those we speak with to do likewise...a. not vilify the opposition; and b. propose common sense solutions that all might accept.

3.  We can break the current trend of supporting the candidates and other leaders with the most extreme views, but support candidates and leaders that focus on compromise and building consensus, even if those candidates and leaders may not be the most popular or affiliated with the major political parties.  Unfortunately, in Baghdad, Jerusalem and the USA, the most popular candidates are often those who take the most extreme views and look at compromise as a sign of weakness.   As long as that trend persists, the world will continue to decline as an enjoyable place to live.

I believe that we should not compromise the principles that guide our lives.  On the other hand, living with others must be based on compromise.  Lets look at an example to see how this might work.  If person A believed that sexual relations between people of the same gender was wrong, how could that person follow his/her belief, yet compromise in living with others.  The answer could be:

a.  Person A could refrain from any negative comments about persons who may not agree with his/her belief.

b.  Person A could share his/her thoughts with other sabout the benefits of heterosexual marriage.  Here is where the fun begins...because those who disagree will interpret Person A's positive comments about heterosexual marriage as an attack against them.  The challenge is not to let the conversation turn negative with personal attacks going both ways.  Maybe the best strategy is for Person A to realize the volatile nature of expressing his/her views and save them for family and friends, or one on one conversations, where the possibility of a negative outcome are less.

c.  Person A when confronted with comments by those who disagree with his belief can remain silent and only discuss those beliefs one on one with persons that may be edified by the discussion.

d.  The focus of Person A's discussions in the public square should be to present ideas how medical benefits,  inheritance rights, etc. can be implemented to help people that may in a same sex relationship.  Those in the community who disagree with Person A's moral belief, may support some of his/her ideas to help people in same sex relationships and may not consider him/her an evil enemy if he/she does not try to convert them to his moral beliefs and if he shows good will towards those who do not share his views.

The bottom line is that people do not need to abandon their guiding principles as they work to make life better for their neighbors that may not share those guiding principles.  That is what the people in Fort Collins, Baghdad and Jerusalem need to learn and practice.

Posted on August 9, 2014 .

Special Needs Trust

Because of a disability there are children and adults who must rely on government benefits to live.  Most of these programs will not provide benefits if the disabled person has assets in excess of $2,000.  There are many things that government programs do not provide.  Such things include cosmetic dental work like braces or travel to visit a parent, sibling or friend.   With the $2,000 limit most disabled persons receiving those government benefits are unable to have those things (cosmetic dental work, travel to visit family, etc.).  To meet those non essential needs, like cosmetic medical/dental care, travel and the like; the family and friends of a disabled person may consider putting money into a trust to provide those "special needs" not provided to the disabled persons by public assistance.  To make sure that the trust does not disqualify  the disabled person from the government benefits that covers most of life's basic needs it is important that: 

1.  The disabled person not have direct access to those funds.  Therefore the disabled person should not be the trustee.  The trust should not provide anything to the disabled person directly, but only provide those things that are not provided by government and other providers, and only at the discretion of the trustee.

2.  It is essential that the trustee become knowledgeable as to what uses of the trust funds will not jeopardize the benefit eligibility of the disabled person; and in the management of the trust to be very careful in not causing periods of ineligibility.  In Colorado there is a pooled fund that is very experienced in administering these trusts at a very reasonable cost.  Therefore if a family member does not have the needed expertise, that family can utilize the pooled trust to provide their disabled person with the enriched life that may come from having assets available in addition to the government benefits to meet special needs.

Special Needs Trusts have the potential to enrich a disabled person's life.  Let us help you make that happen.

Posted on August 3, 2014 .

Rentals in SD-IRA?

When I read my Sunday morning newspaper today, I saw an article by a personal financial columnist who said that the average investor should not invest in a Self Directed Individual Retirement Account because it is necessary to have expensive legal and tax advice before doing so.

Probably the most common use of a SD-IRA is to invest in rental real estate.  In my opinion the best arena to invest in is in an area where you have knowledge and are comfortable.  There are areas in the country such as Fort Collins, Colorado where residential real estate has been an excellent investment for more than 50 years.  If you understand the laws and best practices regarding renting a residential property, and live in an area, like Fort Collins, which has a great history for residential real estate and by most accounts a great future for residential real estate, I cannot think of a better investment.   You can touch it, see it, and understand most everything about it.

Compare that to investing in a mutual fund owning hundreds or thousands of stocks.  You will never understand or even see much of any of the companies that you invest in.  Even if you did, most of us are not sophisticated enough understand corporate books if we were allowed to review any record kept by any of those companies.

So, if you accept my idea that for many, investing in local residential real estate may be an ideal investment, what about the SD-IRA part?  That is a very legitimate concern.  The giants in the IRA industry such as Fidelity and Vanguard do not want to have anything to do with the SD investors.  That, of course, is due largely to that fact that they have a huge chunk of the highly lucrative and mostly low risk market of individual investors in the stock and bond markets.  The SD (self directed) is obviously more risky in that, instead of Fidelity or Vanguard making and controlling investments in the stock and bond markets for their investors, the SD custodians handle the paperwork for transactions made and largely controlled by the investors themselves.  In these SD transactions the purpose of both of the custodians and the investors is to try to convince the IRS that all of its rules are being complied with.  Fidelity and Vanguard likewise must assure compliance with IRS rules and regulations, but they control everything...all the investor does is send them the money.  In the SD world the custodians only control the paper trail...they can only hope that the investor is complying with all of the IRS rules and regulations.  The custodian's risk is that when there is an IRS audit that finds noncompliance, the investor will blame the custodian and the custodian will blame the investor.  Fidelity and Vanguard do not need that headache.

Thus, the SD investor in local residential real estate must accept the additional risks of working with the smaller and less sophisticated custodians and the risk of being on their own  in complying with the IRS rules and regulations.   As usual this decision rests on risk analysis----is the benefit of having an ideal investment worth the risk being found out of compliance by the IRS?  Certainly that is only a decision that can be made on an individual basis.  Weigh the risks and happy investing.

Posted on July 13, 2014 .


Its July 6, 2014 in Fort Collins, Colorado and things are cooking.

First, today and the upcoming week is the hottest temperature wise this year.

Second, there is significant construction throughout Larimer County.  Here is a rundown of some of the projects that have caught my attention:

1.  The town's major mall that was built in the 1970s is being remodeled as is its sister structure "The Square".

2.  The Fort Collins bus system just completed a huge update known as Max.

3.  Trader Joe's and Costco...a couple iconic retailers are opening for the first time in Fort Collins.

4.  The Church of Jesus Christ of Latter-Day Saints is constructing a new temple in Fort Collins and a new chapel in Windsor.

5.  Colorado State University is in the process of considering the construction of a new football stadium on campus to replace its current stadium near the foothills.

6.  There are new residential subdivisions throughout the area but most heavily concentrated in the southeast quadrant and across I-25 into Timnath and Windsor.

7.  Otter Box is just completing its huge headquarters building in downtown Fort Collins and Woodward Governor is in the process of building its much larger headquarters campus on the north east corner of Old Town.

8.  There are hundreds of new student apartments recently or currently being constructed west, north and south of the Colorado State University campus.

The above list, though involving hundreds of millions of dollars was just off the top of my head from driving about town the last few months ie.  I have not checked with the building department or the Chamber of Commerce or any source that might actually be making an effort to keep track of all of this activity.  So, unless you are a diehard no growth advocate, there is a great deal of interesting change occurring in this area.  We can only hope that this change results in increased prosperity for all of our residents.


Posted on July 6, 2014 .