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Dear Shareholder:
Joint Accounts and Estate Problems: At the recent death of a very dear friend of mine, I had the unpleasant task of having to tell his wife that she could not redeem shares of his Kentucky Tax-Free Income account to pay the immediate funeral costs. The shares were registered in his name only. Until she could give us a death certificate, together with evidence that the will had been probated and an executor appointed, we could not transfer the shares.
A "Joint Account with rights of Survivorship" will normally take care of this problem for spouses, providing you have not elected to refuse the ability to make telephonic redemption of shares. If you have retained telephonic redemption privileges the surviving spouse can call to redeem shares without first reregistering the account. Another way to be sure your spouse has access to funds in your share account with us, or with anyone else, is to give her/him some of those shares in advance, registered in the spouse's name alone.
On Having Money Wired to Your AccountIt is possible to have redemption money wired to your account, which saves your having to wait for a check in the mail, or having to come into our office to pick up a check. We do not charge for this service, but you must elect this service at the time you fill out the application to open your account, or instruct us in writing after the account is opened. Some folks assume that, since we have wiring privileges, they can just wait until they have need for this service and then give us telephone directions. We can only accept instructions in writing over your signature. We are audited closely to see that we don't do so by mistake. To make sure we are dealing with your instructions, we won't accept telephoned wiring instructions (or an address change). This is to avoid an unauthorized person getting the funds.
While we are on the subject of wiring let me be sure you understand the distinction between true wiring and ACH. ACH means Automated Clearing House and is a computerized way to transfer funds without cost. ACH takes two days for the funds to get to your account after you request the redemption.
If you ask that the funds be wired direct, they are credited to your account the same day they are wired, arriving one day sooner than the ACH system. While we do not charge for either method, the disadvantage of wiring vs. ACH is your bank will probably charge you for the service, maybe $10 or more.
Potential New Tax Law and Municipal Bonds: If Congress and the new Administration actually take a shot at writing a new tax law; this may be the time to get changes to some small but onerous rules that affect municipal bonds.
For at least the last thirty years there has been a distinct bias against municipal bonds among senior professional staffers in the Treasury Department. These are the people that give "expert" advice to the Congress on tax matters as new legislation is being debated. Over the past few years several new rules detrimental to municipals have been implemented, one by one. For example: there is a recent rule that municipal bonds bought below a certain "de minimis" price are partially taxable as ordinary income. This severely affects the price of low coupon bonds in a down market and, therefore, their liquidity.
Another worrisome rule applies AMT tax rules to certain "private purpose" municipal bonds. Airport bonds would be an example. Our fund has simply had to avoid such bonds when adding to our portfolios. This limits our choice at times. The rule is ridiculous since the bonds are clearly issued for public purposes and otherwise tax-free. But not in the eyes of a few Treasury Department professionals who slip these rules into tax legislation at every opportunity.
We will be working on this problem in the weeks to come. If you know Congressmen or others who will be key people in the formulation of new tax legislation, we would appreciate your help in making those contacts. Our success may be in doubt, but not trying isn't an option.
…and Speaking of Trying: Don Kohler, now retired from J.J.B Hilliard, tells a story on me that I don't vividly remember, but is probably true. I joined my father in Dupree & Company, Inc. in 1955 in Harlan, Kentucky. Harlan, an Eastern Kentucky mountain town was then regarded as pretty tough country.
I was trying to break into selling to the big trust companies in Louisville and one of the people I called on was Don, then at Kentucky Trust. I am sure Don, a Princeton grad, spent a lot of his day talking to brokers in New York. So who was this yokel who kept sending in his card with a Harlan, Kentucky address? Apparently I arrived one day, sent in my card, and Don let it sit on his desk. After awhile his secretary came in looking embarrassed and asked for my card back. "Why?" "Well", she said, "he says, since you're busy, he needs his card to use across the street at Citizens Fidelity". (Mountain boys have to try harder.)
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