Making the Most of Your Money NOW

This is a tricky question because state laws vary so much. Compounding the problem is that law enforcement doesn’t pay attention to who inherits guns unless the heir gets into trouble. If it turns out that the heir owns the gun illegally, it will make his or her problems worse.

Rifles and shotguns can usually be transferred easily (ID cards are needed in some states), but pistols generally require permits. You can’t mail guns to the resident of another state. The only way to send guns, legally, is to take them to a gun dealer, who will mail them to another dealer in the heir’s hometown. When the heir picks up the guns, he or she will normally have to show any required permits and undergo an instant background check.

Some people aren’t allowed to own guns at all — for example, people convicted of domestic violence, drug users, or those dishonorably discharged from the military. Many states have special laws for “assault rifles,” which are high-powered target or hunting rifles tricked up to look like the military AK-47s.

The laws are especially tough on weapons that have to be registered under the National Firearms Act (NFA), such as machine guns, deactivated war trophies, silencers, and sawed-off shotguns. They can be transferred to new owners only with the approval of the federal Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE).

What’s more, the local law-enforcement chief has to sign off on the transfer. Most do, but you can’t count on it. For example, some suburban cops might resist silencers, which can make it … more

Yet another lost lawsuit should be a wake-up call to everyone who’s divorced. Change the beneficiary forms on your 401(k) or IRA to remove your ex-spouse. Otherwise, your ex will become unexpectedly rich.

In recent Virginia case, a couple divorced and the husband signed a waiver, agreeing not to exert his legal rights against his wife’s 401(k). A few years later, she died without having taking his name off the beneficiary form. The husband sued and won the money.  Federal law requires the retirement-plan trustee to distribute the account to the person named, regardless of circumstances. It doesn’t matter what the will or living trust says, or what promise the ex signed. If your exis on the papers, he or she wins. (As a consolation prize, the wife’s estate was allowed to sue the ex-husband for the money, if he still has it.)

It’s not only exes who become surprise heirs. A found another case where a man named his sister as beneficiary of his IRA, years before he married. He never changed the beneficiary form. The IRA grew to more than $1 million and — yes — when he died, his sister, not his wife, got the money.

You can read more about this, and the error of leaving your IRA or 401(k) to your estate, in my Dimespring column.

The NRA says we need guns at home to protect ourselves and our children from home invasions. But such invasions are rare. Few people actually wake up in the night, hear footsteps, grab their pistols and shoot (with perfect aim) a genuine intruder. Guns in the home are a far greater danger to the people who live there–parents, kids, spouses, live-in mates, friends. That’s why I’m collecting these pieces, as I find them.

1. A 3-year-old shot himself in the head, after picking up his aunt’s handgun. The aunt had taken the pistol into the bathroom, intending to help the child draw a bath. She left the room for a moment, leaving the gun on a counter-top. The child is in critical condition. No info on why the aunt had the pistol with her.

2. A troubled teenager was charged with attemped murder, after shooting his parents in the head. They kept their pistol in a gun safe but he pried it open.

3. After Newtown, the Highland (NY) Central School District assigned an armed police officer to rotate among its three school buildings. The officer accidentally discharged his pistol in a school hallway. No one was hurt. The schoolboard is rethinking. (Not a “home gun” story, but guns in schools can be dangerous, too.)

4. A North Carolina dad, cleaning his shotgun, accidentally shot and killed his 10-year-old son.

5. In Tennessee, a deputy sheriff was showing his guns to a friend. A four-year-old picked up one of the guns and accidentally discharged it, killing the deputy’s wife.

6. In New Jersey, two small boys, 4 and 6, were playing. The four-year-old ran into the house, picked up a .22, came back and playfully shot the six-year old in the head. There’s no information as to why the gun was lying around. The injured boy is in “serious” condition. UPDATE: The boy died.

7. In Sumpter, SC, a three-year old finds a gun, fires it and kills himself.

Investors searching for yield are falling in love with high-rated bonds that also pay high interest rates.

Hmmm, I hope you just said. Don’t bonds highly rated for safety bonds carry lower interest rates? The answer is yes–but a clever financial adviser can make you think you’re getting a higher yield than is actually the case.

The manipulation lies in the price you pay for the bond. The adviser finds an older bond, nearing maturity, that carries an older, and higher, interest rate than is being paid today. You pay a premium for the bond — meaning that you pay more than its $100 par value. You happily pocket the high interest payments.

When the bond matures, however, you get only its $100 par value back, losing the premium you paid. Putting the gain from the interest together with your loss on the principal gives you today’s market yield. There’s no free lunch. You’ve paid the adviser to pull the wool over your eyes.

I’m indebted to money manager Alan Roth of WealthLogic for an excellent example of this legerdemain…. more

Young people with retirement funds should be 100 percent invested in stocks. They’re not. They’re too spooked by the market (who isn’t, after the decade just passed?). But young people have a lifetime of paychecks ahead, probably adding up to $2 million or more. That gives them far more capacity for risk than people in middle age.

You might start transferring money to secure investments when you reach your early 40s. But until then, it makes sense to put 401(k) or other retirement money into stocks.  You can read more about this in my DimeSpring column, here. (Whenever I say “stocks,” by the way, I always mean stock-owning mutual finds. My case against buying individual stocks is here.)

As for conditions today, they favor stocks. The economy is recovering only slowly and there’s not a big demand for loans. The Federal Reserve is pursuing an easy money policy, to offset the federal spending cuts that would otherwide become an economic drag (and might still be a drag — we don’t know yet). Fixed-income investments are unattractive, at such low interest rates, so all that “easy money” will go into stocks, says Allen Sinai, chief global economist for Decision Economics. He could be wrong, of course, but I found his analysis pretty interesting.

As for those of you who keep looking for hyperinflation around every corner — inflation (measured by the price deflator) dropped to 1.2 percent at the end of last year, from 1.8 percent the year before. Japan has been printing huge amounts of money money for years, Sinai says, and is fighting deflation. At some point prices might run away, but not when business is so slack. Economist Lacy Hunt of Hoisington Investment Management thinks that big debts and weak demand will hold down interest rates for years.

So far, I’d say that the iflationistas have yet to prove their case.