New law governing disposition of remains of deceased members of Armed Forces

The Governor has signed HB 4639, enacted as Public Act 63 (2012), amending the provisions of section 3206 of the Estates and Protected Individuals Code regarding the disposition of the bodies of decedents who were members of the armed services. A new subsection (11) is added, to provide that the "designated person" has the authority to direct the disposition of the remains if

• the decedent was a member of the armed forces, a reserve branch, or the Michigan national guard;
• the decedent made a designation under a Federal statute or a "regulation, policy, directive, or instruction" of the Department of Defense;
• the designated person is his or her surviving spouse, blood relative, or adoptive relative.

There is nothing in Public Act 63 that limits its applicability to service members who die in the line of duty. It could apply to a reservist who is killed in a motor vehicle accident or who dies of natural causes.

The procedure followed by the Defense Department is to have the member execute form DD-93, called "Record of Emergency Data", to identify the persons to be notified "if you become a casualty" and to designate beneficiaries for certain benefits. Under section 13a of the form, the member identifies a "person authorized to direct disposition" of his remains.

The purpose of Public Act 63 is thus to ensure that this form, if completed, will control in lieu of the other provisions of section 3206.

A doctor on the end of life

NPR profiles The Best Care Possible: A Physician's Quest to Transform Care Through the End of Life, by Ira Byock, M.D.  His advice to patients about advance directives:

"This is a way for you to take care of your family if a crisis happens and you're unable to speak for yourself, and they, those that you love, will be left to struggle with decisions about your treatment and care ... You can perhaps lessen the burden that they're going to feel as they struggle with these decisions by shouldering it a little bit, by telling them what you think you would want. They're still going to have to fit those values and preference to the particular condition and treatments being offered, but at least you can lighten the load a touch."

New IRA proposal

Reuters reports that the Obama Administration's proposed 2013 budget includes a new provision for distribution from IRAs. If all accounts owned by the participant hold less than $75,000, he will not be required to take mandatory distributions even after the age of 70. Of course, many will take distributions because they need to, but if they have the option, they will be permitted to forgo the distribution. Ultimately, this will allow them to leave more to their designated beneficiaries. The beneficiaries (other than the spouse) will have to begin taking distributions beginning the year after the participant's death, as is currently the case.

Another scam reported

The Marquette Mining Journal reports:

Marquette Police Department officers are investigating a possible scam that relieved an 89-year-old Marquette woman of $30,000 this week and almost cost her an additional $20,000... Police said the woman had mailed out two packages containing more than $50,000 in cash to addresses in New York and Florida after scammers told her she had won a vehicle and $2.5 million. She was told she needed to post money up front to pay for federal taxes.
Detectives contacted the Marquette Post Office, which was able to recover one of the packages containing $20,000.
The second package, containing $30,000 had already been delivered.

The Kochs and Cato

Charles and David Koch have sued the Cato Insitute and its president, Ed Crane in state court in Kansas, where Cato was organized, claiming violation of the non-profit's shareholder agreement. Prior to October 2011, there were four shareholders - the Koch brothers, Crane, and William Niskanen. Niskanen died in October 2011, leaving a great deal of uncertainty as to what will happen to his 25% interest.

Many non-profit corporations are organized and operated as non-shareholder entities. It is relatively unusual for a non-profit that has qualified as a 501(c)(3) entity to be owned by shareholders. Clearly the assets of the corporation cannot inure to the benefit of its shareholders, even if it is dissolved.

The value of the shares is not monetary. Their value lies in the ability of shareholders to nominate new members to the Board.

The shareholder agreement, which was first signed in 1977 and then updated in 1985, was attached as an exhibit to the Complaint. It was poorly drafted in several respects. Its essential provisons were:

• Each shareholder has 16 shares, with a value of $1 per share. (In 1977, there were five shareholders, each owning 12 shares.)
• Any shareholder who wishes to transfer his shares to any other person must first offer them to the corporation, which has a 30-day option to purchase them for the price paid for them - i.e., the $16.  
• The agreement does not say what happens if the corporation does not exercise the option. The conclusion would be that the shareholder is then free to transfer the shares to another person. 
• The complaint asserts that the remaining shareholders may exercise the option if the corporation does not do so. I do not see that in the agreement. 
• A majority of the shareholders may buy out a shareholder involuntarily. (Effectively, with four shareholders, all of the other three would have to agree to buy out the fourth.) 

The complaint alleges that Niskanen's wife has not tendered his shares to the corporation. But if she is the executor of his estate, she has a period of several months while the estate is being administered before having to make any distribution of property. So the lawsuit may well be premature. If the widow wants to distribute the shares to any beneficiary of the estate as successor, she would have to make the resale offer to Cato before she did so.

The wife, Kathryn Washburn, is herself a member of the Cato board, and would certainly want to move cautiously.

Since the lawsuit is essentially aimed at forcing the executor to comply with the agreement, it is likely that it should have been filed in the probate court in D.C. where the estate was presumably opened.  (The Last Will and Testament of Niskanen was attached as an exhibit to the complaint, which means an estate has been opened and the will has been filed.)

The will provides for a cash bequest to Niskanen's children, and then the residuary estate is to be divided among his wife, the Cato Institute, and the Institute for Justice. It does not mention or direct the disposition of the Cato shares. Thus, if the executor makes the offer and Cato does not act on it, the 16 shares could have to be divided equally, or as close to equally as possible, among those three recipients. Thus the Cato Institute itself would succeed to the ownership of five or six shares.

The shareholder agreement does not even mention the death of a shareholder, which was a major omission. It should have provided for automatic redemption of the shares on the death of a shareholder. Then there would be no need to wait for the executor to do anything, and no need for the corporation to make any decision.

This situation leaves Ed Crane and the board in a quandary. If the shares are in fact absorbed by the company, this would leave the Kochs as two of the three remaining shareholders, amplifying their ability to continue their current course of adding members of their choosing to Cato's Board of Directors. If the Board declines to repurchase the shares, then the executor would be free to sell or transfer the shares to a person of her choice, assuming that she could get approval of the probate court or consent of the residuary legatees - one of which is the Cato Institute itself - to do so.

Theoretically, as this situation replays itself - and it will, as the current shareholders age - the number of shareholders could shrink until only one person is left. The last one alive would then have full control of the board of the organization.

Senator wants to raid inherited IRAs

Bloomberg reports that Sen. Max Baucus (D-Mont), chair of the Finance Committee, has proposed requiring that inherited IRAs and retirement accounts be paid out to beneficiaries within five years of the death of the participant. This would generate something in the neighborhood of $4.6 billion for the U.S. Treasury. Under current law, an IRA that is inherited by a properly-named designated beneficiary (other than the spouse) is usually paid out over the life expectancy of the beneficiary, a benefit that can significantly delay mandatory distributions of taxable income. Sen. Baucus, mischaracterizing the system that Congress created and that has been in place for many years, complains that beneficiaries are "abusing" the system by delaying distributions.  "They’re being used by some taxpayers to give tax-free benefits," he is quoted as saying. Tax-deferred, Senator, not tax-free. The money will be paid out, and tax will be paid.

Reports soon arose that Sen. Baucus was "backing off" a little bit on his proposal, but we can expect that legislators will continue to cast covetous glances at the accounts that are building wealth by keeping money out of the hands of the tax man for extended periods of time.

Update Feb 22: AdvisorOne reports that the provision, added by Sen. Baucus on February 7 during committee markup, remains in the bill. So much for backing off. The Financial Services Institute is "mobilizing" its members to press for the removal of this provision.

Scams targeting the elderly

Local news is reporting another upswing in scams targeting elderly victims, particularly the "Grandma scam". In this one, the victim receives an e-mail, purportedly from a grandchild somewhere in Europe or Mexico, saying that he has been arrested or robbed, and asking for money to be sent by wire to help him get home. The message also conveys a sense of urgency - the money has to be sent right away.

A call to a local police department or the state police can help to confirm that these requests are not legitimate.

Another precaution: If the e-mail message says that it's from Johnny, call Johnny directly, or call his parents to ask them to contact him. In many cases, this step will help to reveal that the request is a scam.

The Marquette Mining Journal reported in its Police Log in the February 2 edition:

9:54 a.m. - Client wiring money to relative in Mexico claiming to be in trouble; believed to be a scam; advised client it is a scam, but they refused to believe it; officer warned them as well, but they sent the money anyway. 600 block of West Washington Street.  

Even with intervention from an astute clerk (kudos to Check and Cash for being alert) and the local police department, it is not always possible to prevent this kind of victimization.

And the Marquette Monthly published this in its February 2012 edition:

Marquette County Sheriff’s office warns of sweepstakes scam - 
An unknown caller from a 1-888 number recently advised a Republic Township resident that she had won a million-dollar sweepstakes contest. The caller identified himself as being a representative of Publisher’s Clearing House, in Las Vegas (Nevada). He advised the resident she had won a million dollars and wanted to set a date and time for an individual to appear at her residence to be awarded the prize; all she needed was a “Money Pack” or “Money Order” for approximately $400.00.
 Publisher’s Clearing House does not notify winners via telephone and will never request payment from a winner to claim any prize. Residents are reminded to use caution when dealing with unfamiliar telephone numbers and unsolicited contacts.

Update: See and listen to Stepping Up and Stepping In for an Aging Parent on American Public Media's Marketplace (played on Saturday, February 4).