2024 Law Update (Episode #292)

0:31 Well, good afternoon, Michiganers, and happy new Year. It is Tuesday, January two, twenty twenty four, and of course this is Tuesday with Tom, Michigan's only weekly podcast where we do answer your questions about estate planning and a state settlement in Michigan, and we don't send you a bill. As always, I'm your host, Tom Doyle, a state planning attorney, lifelong Michigan resident, ambassador for all things good in this great state of Michigan. Welcome, Welcome, Welcome to two Days program. Well, if you're a regular listener to the program, you probably note that I took a little time off at the end of twenty twenty three recharge my batteries, think about what we're going to be doing in twenty twenty four. Some of those things are going to include an updated website that we're actively working on, and a list of hopefully many individuals who will be guests on the program talking about various topics that would be of interest to you. But my last episode at the end of October was to know the limits of your Power of Attorney. So if you have a power of attorney and you're wondering what sort of limits you have, I would invite you to listen to that last episode. Today though

2:02 first program of twenty twenty four, I'm going to spend some time talking about law updates, things that are changing in twenty twenty four. But as always, please remember what I'm about to discuss during the program is, as always for educational purposes. It is not intended to be legal advice. You need to work with your attorney and tax advisor to determine what is appropriate for you and your estate plan. So change of the law in twenty twenty four, and I'm going to start with federal estate tax exemption. That's the amount of money that you or amount of assets total estate that you can own at the time of your death before you have to worry about a federal estate tax being paid. In twenty twenty four, that number is now for a single person thirteen million, six hundred and ten thousand dollars. That means, if you're a single person and you die in twenty twenty four and you do not have

3:34 an estate that exceeds thirteen million, six hundred and ten thousand, you estate will not own any federal state tax. For a married couple, that number basically gets doubled to twenty seven thousand, two hundred and twenty dollars, So that's a lot. Those are sizable estates that people can have in twenty twenty four and they're not going to have to worry about federal estate tax do The concern though, because we're looking ahead is in twenty twenty six, so you have two years before we're going to be in twenty twenty six under the current law. In twenty twenty six, those significant federal estate tax exemptions that we have now are going to expire, and when they expire, they will drop down to what they were before the law was passed. That cause those amounts to go up. So a single person in twenty twenty six, that number is going to drop down to five million dollars. For a married couple, that amount is going to drop down to ten million dollars. Now, between now and the first of twenty twenty six, the IRS will calculate an inflationary factor, so we're not really sure what those amounts are going to be, but they'll start at five million dollars for a single person, ten million dollars for a married couple. So projecting out to years from now and that's what we're beginning to talk to our clients about. You might not have a federal

5:04 state tax now, you might not have a federal state tax in twenty twenty five, but if you're going to be looking at a significant federal state tax, which can be forty percent of your estate in twenty twenty six, now's the time to start thinking about what are your options. What are you going to be able to do between now and then Now. Maybe maybe you're not going to pull the trigger on any of the options, but you need to start thinking about planning options to have them in place before January first of twenty twenty six. Good news, the concept of portability is still going to be available for married spouses. That concept again is if I have an estate and I only use up a portion of my federal state tax exemption at the time of my death, I can pass on the balance of that federal estate tax exemption to my spouse the other federal tax somehow. That now the federal state tax assumption we usually talk about death, but it's also an overall gift tax exemption which has to do. It's a unified credit, which means you can either this year die as a single person with thirteen million, six hundred and ten thousand or give away thirteen million, six hundred and ten thousand and not owe a gift tax. But in the gift tax area, the exclusion that we normally think about is how much can I give somebody in any one year

6:34 before I need to worry about either reporting that gift to the IRS and or possibly paying a federal gift tax, or at least notifying the IRS and making an exemption to defer it till later. Well, in twenty twenty four, that federal gift tax exclusion amount is now eighteen thousand dollars. That means you can give any one person during twenty twenty four assets totaling eighteen thousand dollars, and as long as you don't exceed that amount, you don't have to worry about federal gift tex. It's estimated that that exclusion amount, because it does get adjusted for inflation, will be nineteen thousand dollars in twenty twenty five.

7:20 So, looking ahead twenty twenty six, if you've gotten a state that's going to be too large might be subject to federal state tax exemption, possible consideration could be to look at using gifts of eighteen thousand dollars or less as ways to shrink the size of the estate in twenty twenty four, using gifts again, if it goes up to nineteen thousand dollars a piece to shrink the size of the estate in twenty twenty five. That's why you need to start looking at what options might you have available now, and how do you start using those options, because obviously January first, twenty twenty six, you can't go back and retroactively make gifts in twenty twenty four. You can't go back and make retroactively gifts in twenty twenty five. So you should be talking to your financial advisor, your attorney about what strategies might be out there that you will consider looking at to shrink the size of your state. Another area is in the area of IRA contributions. Every year we're looking at new IRA contribution amounts.

8:28 Well, in twenty twenty four, it's gone up a little bit, up to seven thousand dollars a year. But if you're looking if you're age fifty and older, you've got that catchup contributionability which makes it eight thousand dollars. So if you're under fifty, you can give seven thousand dollars to your IRA. If you're over fifty, you can actually increase that to eight thousand dollars. Now if you've got a four to one K plan similar type plan four or three b's, et cetera. The contribution limit for twenty twenty five four is twenty three thousand. An area that has had a potentially significant change for many of you is in five twenty nine plans, and hopefully you're familiar with five twenty nine plans. I've had previous episodes of the program about what five twenty nine plans are a way to set aside funds to pay for college, et cetera, for children, grandchildren, et cetera. As in the past. Tuition as in past, five twenty nine plans can be used to pay for tuition at accredited private public colleges, universities, community college, trade school, graduate schools, professional schools, wherever those happen to be in the United States. Additionally, for students who are in college, you can use your five twenty nine plans to pay for things like books and supplies, computers, software, internet access, room and board, at least if you're half

9:58 if there halftime student and special needs equipment. Now, in addition, over the last few years, some changes to five twenty nine plans have now allowed up to ten thousand dollars of money in a five to twenty nine plan to be used to pay off a student's student loans, So that can be helpful in using the money for that as well as well as you can use up to ten thousand dollars to be paying towards the cost of tuition at K through twelve schools. So maybe you've got a child, a grandchild who's in private school K through twelve, you can you can put a five twenty nine plan together use up to ten thousand dollars to pay for that K through twelve tuition.

10:46 But the change, the change that's occurring in twenty twenty four has to do. It's a result of the Secure Act. Don't worry about what that stands for. But the change due to the Secure Act is now in twenty two twenty four, amounts that are sitting in those five twenty nine plans can be rolled over. So if they're not used for tuition, they're not used for college, they're not used for cost of higher education, you still have money sitting in those plans, they can be rolled over into a ROTH IRA for the beneficiary of the five to twenty nine plan. Now, there are some limits on it. One of the limits is that the beneficiary has to have owned the IRA for at least fifteen years. So if you've got a child out there who's got an IRA and they've had the IRA for at least fifteen years, that would be eligible to roll over unused funds that are in the five twenty nine plan. You cannot exceed in any one year the ROTH contribution limit for that year. So if you look at the ROTH contribution limit and if at seven thousand dollars this year, that means you can't roll over more than seven thousand dollars in twenty twenty four. The beneficiary will also have to have earned income at least to the at least equal to the amount that you are rolling over, and currently there is a thirty five thousand dollars lifetime

12:20 limits. However, for some clients the ability to roll over some of those unused funds because in the past, the option was, well, we're done with college, We've got money sitting in this account. If I take the money out, I'm going to have a ten percent penalty on it. You now have the ability to roll over some of those funds potentially into a rough ray and avoid the ten percent penalty that would be assessed on taking the funds out, as well as the taxable consequence of taking the funds out. Michigan, let's talk about something specific with Michigan. There's a couple of areas that I want to at least bring to your attention. In the probate world, when we're looking at probating the estates, we look at having under the probate code what are called statutory allowances, and those are things like the family allowance, spousal allowance, and the exact property allowance. Those are certain amounts that the probate Code recognizes are distributed out out from an estate before we actually get to distributing the balance of the estate. Those allowance amounts will go up in twenty twenty four. Every year the Michigan Department of Treasury issues its new regulations indicating what those amounts are going to be for twenty twenty four. And the other amount that will be going up in twenty twenty four is once you get pass those allowances, if you have an estate that's going to a spouse.

13:54 There's a certain amount of the estate, what is the spousal share that they are allowed to reach. See perhaps before other people are going to receive it. Maybe that's going to be children, step children, or children and parents, and that amount of that spousal share will also be increasing in twenty twenty four. Again, those are non amounts that you plan for. Those are simply amounts that are going to be effective when we are looking at probating states. The big change though, in Michigan, that's going to be coming, and we're not exactly sure what's going to end up resulting. It is. On November seventh, twenty twenty three, the governor signed a new statute, and under that statute, Michigan adopted what is called the Uniform Power of Attorney Act. The purpose of the Uniform Power of Attorney Act is to try and create powers of attorney that are uniformed throughout the country so they can be used as you move from state to state. But we we adopted this new statute, it does not become effective until July one, twenty twenty four, so it's not effective right now. It's not applying right now. Under the new statute, though, there are going to be some changes to the requirements in order for a durable power of attorney to be what we call durable and durable under a durable power attorney means that it would continue to be effective relative to

15:28 your named agent even if you become incapacitated, and that, quite frankly, is the reason most clients have durable powers of attorney is they want something to be in place that if they become incapacitated, that their agent can manage their business for them. So there's going to be some changes in the requirements that make durable powers of an attorney durable. There's also some changes in the statutory requirements of what sort of acknowledgments have to be in the durable power of attorney that your agent is going to have to understand and agree to. There's actually under the statute a form for these new uniform powers of attorney that are going to be where attorneys are obviously at our stage working on how do we take our current existing powers of attorney and adapt all of those to the new statute.

16:22 But the question, the unknown, the uncertainty, is this, how are your banks and your financial institutions going to treat your existing powers of attorney. You already have an existing power of attorney. It doesn't become invalid simply because of the new statute, because it was created before the statute existed. But it is unclear now how banks and financial institutions are going to treat those existing powers of attorney. Are they going to allow them to be used, or are they going to insist that they will only recognize powers of attorney as of July first, twenty twenty four that are created and executed under the new statute. This is similar to a problem that we ran into with banks and financial institutions the last time powers of attorney were changed, where we had to start adding acknowledgments of responsibility to them. Banks and financial institutions began rejecting the use of a power of attorney that did not have an acknowledgment of responsibility section, even though the statute said that powers of attorney that were in existence before that statute took effect were still legally valid. As a practical matter, we're running into our clients were ringing into with banks and their financial institutions simply refusing

17:53 to accept them so between now and July which suggests that you consider when you're at your bank or at your credit union, or you're talking to your financial advisor or working with a financial institution. Now's the time to start checking with them to find out are they going to be willing to accept your existing power of attorney if it is ever needed to be used there and if not, need to start looking at between now and July first, once we have decided our lawyers have determined what these new powers of attorney are going to look at to having updated powers of attorney in place for you. So I kind of went through things fairly quickly, but that's the summary of what I see are the most important legal updates that are facing us in twenty twenty four again, Federal estate tax, Federal gift tax, IRA contributions for one five twenty nine plans, and what you can now do to roll those funds over in under Michigan probate cord statutory allowances, and the spousal share under interstate succession. But probably the biggest one that's going to impact most of you is really going to be because of Michigan's adoption of the new Uniform Power of Attorney Act. As

19:33 always, if you have any questions about these changes, how they might be impacting your estate plan, or if you haven't put together in a state plan or you're looking at having to amend the plan that you already have. As always a man and I would be honored to have the opportunity to help you, either by putting together in a state plan that you don't have, or perhaps amending an existing plan, or assisting you and settling an estate. Again, simply go our website Doyle APC dot com. There you will find information on how you can schedule either virtual consultations those will be by zoom or telephone wherever you happen to be in this great state of Michigan, as well as in person consultations if that's what you would like to have at our East Lancing office. Again too, don't forget that we have the legal Store at the website doylel ATPC dot com. And through the legal Store you are able to order individual documents, perhaps just a new healthcare power of attorney. You can order that all online and have it prepared and delivered to you online as well.

21:02 Well. That I think is going to be it for today's show. And as always, ooh, if you have a comment about the program, a topic that you'd like to have me discuss. Questions that you'd like to have answered, Please send me an email Tom at Tuesday Withtim dot com. Follow us on Facebook, Invite your friends and family to follow us on Facebook. That's Tuesday with Tom as well as the office which is Doyle Law PC. Remember two. Tuesday with Tom is available on Apple Podcasts, Spotify, Google podcast, iHeartRadio Speaker, probably anywhere that you normally listen to podcasts, you will be able to listen to Tuesday with Tom as well as by using your smart speaker. Well, thanks again for spending some of your time with us today and as always, I hope that you have an awesome day and an awesome week in Michigan. Stay safe. Tuesday with Tom has been brought to you by the estate planning attorneys at Doyle Law PC. To learn how we can help you with your estate plan or with settling a loved one's estate, please call us today at five one seven three two three seven three sixty six. That's five one seven three two three seven three sixty six.