Important Estate Plan Updates
0:32 Well, good afternoon, Michiganders, and welcome back to Tuesday with Tom, Michigan's Only podcast where we talk about estate planning, a state, settlement, and everything in between. As always, I'm your host, Tom Doyle, estate planning attorney, lifelong Michigander and your guide to planning for your future. Just a brief recap of our last episode, Tuesday with Tom turned ten years old. Hard to believe we've been having this podcast starting in. Twenty twenty six. Didn't imagine that it was going to be around here all this time later, but we care heep. We keep hearing from people questions that they have, answers that they're looking for, and so as long as you've got those questions and we've got those answers, we will continue along with hopefully what is a helpful podcast to you as you are looking at planning your own estates or perhaps even settling an a state. Today's intro talking about updating your estate plan. I've had previous episodes where I talk about the importance update updating your state plan. It's not something that you simply prepare and stick in a closet and never look at again. Life changes, circumstances change things happen that are important and can have significant impacts on
2:03 your state plan. What we're going to talk about today is there are a couple important both legal and practical changes that have occurred that I at least want to spend some time highlighting for you today. In particular, we are encouraging our clients and anyone out there who might not be a client but has a state planning documents to consider too very what could be very important possible updates regarding your state plan. One of those has to do with trusts and retirement accounts.
2:56 Many of you folks out. There have a living trust and you've gotten IRA or four to one K, and you've considered in the past whether or not you should make that retirement account the beneficiary of your IRA or your four one K. It used to be a pretty easy decision in that we were basically recommending to clients that they would do that because the trust would qualify as what we call a look through trust, meaning that the benefits would be taxed to the beneficiary of the trust rather than be taxed to the trust, which is always going to pay a higher tax. Well, over the last couple years, we've had a couple federal statutes. We've had the enactment of the Secure Act and the enactment of SECURE two point zero, and finally we are in a stage where the IRS has had enough time to interpret those statutes and how those statutes impact perhaps your decision about whether or not you should make your trust the beneficiary of retirement accounts.
4:14 We start with this premise, we are not your tax advisor, so in actually answering the question from a tax standpoint as to whether or not you should or should not make your trust the beneficiary or whether you should include keep individuals as individuals, that always starts as a conversation with your tax advisor and with the custodian of your IRA account or your four one K, because they will be in the best position to advise you as to how they are currently interpreting the IRS decisions on whether or not trust can be used as look through trust, so very important. That's where your conversation needs to start.
5:09 And once you've had that conversation, if your trust advisor or your custodian says it's okay to go ahead and have the trust made is the beneficiary and those accounts, that it's certainly something that we can assist you with doing. But from our standpoint, we have since July twenty two, twenty twenty five, we no longer included language in our trust that were designed to make them look make them work as look through trust because we weren't satisfied with the interpretation being done by the IRS that they would qualify.
5:52 Well. Since then, now that we've looked at everything that's been going on, we are satisfied that with appropriate language added into your trust, that would be either changing the language that was being used before that date because we had normal language that we were using previous to that date, or adding language to any documents trust documents that we prepared after that date. We strongly recommend that you review having your trust updated so that appropriate language can be added into that trust so it will be considered as a look through trust. Again, why is that important? If money is paid from an IRA into or four to one K in your trust, and if the trust has to pay the income tax on it, essentially that's going to be what would be a forty two percent tax.
6:52 Why because you're going to have a thirty eight percent federal tax because it's the highest individual income tax rate that's how trusts get taxed, and you're going to have four percent from the State of Michigan. On the other hand, if it's going to be treated as a look through trust worthy proceeds come from the IRA flow through the trust under to distribute out to the beneficiaries. You do have some time limits on how long that can normally be done. For most people, that's going to be a ten year window. But at least when the benefits are distributed out to the beneficiaries, they are going to then be taxed at the beneficiaries income tax rate, which in most cases is always going to be less than the trust rate. So it's very important whether it's a trust that we prepared for you had somebody else prepare, that you review those trusts or have them reviewed to determine whether or not anything should be changed in that trust in order for it to qualify now as this very important look through trust. So that's number one big change, something to look at, something to be concerned about, something for you to view your documents. For the second big change that's occurred in the State of Michigan, and this is now a practical matter more than it is a legal matter, but we're going to talk about financial powers of attorney. That's the document that you probably have, or
8:24 most of you are going to have as part of your state plan that's designed to give somebody else authority to basically pay your bills, manage your finances for you, et cetera, in the event that you become incapacitated. Michigan unfortunately enacted a change in its law that became effective on July first, twenty twenty four, and that law now requires a certain section to be in a Michigan power of attorney, and that section is what's called an agent's acknowledgement. Basically, it's a section where the people that you named in your power of attorney are going to have to review it and they're going to have to sign it, and basically that is their acknowledgement of what they can and cannot do under your financial power of attorney. Fortunately, the statute doesn't say any power of attorney that was created before July first, twenty twenty four is no longer valid, so they are perfectly valid. So you've got a power of attorney out there that was prepared in twenty twenty or twenty eighteen or whatever it happens to be that power of attorney, according to the statute, is still valid. However, However,
10:01 and this is the important caveat financial institutions. That's going to be. Your bank, it's going to be your brokerage house, it's going to be whoever, somebody is trying to use that power of attorney to manage your finances. For may begin to refuse to accept that power of attorney if it doesn't have that current agent's acknowledgment. So basically gives the bank or gives the brokerage and out to say, hey, your power of attorney that's being brought to us does not have this agent's acknowledgment. Because of that, we are not going to accept it. And what we found in our practice, unfortunately, too many banks, too many brokerage firms are not excited about operating under powers of attorney because they always have a question about liability. Somebody really prepare this thing? Are we really going to be doing what this person who's not our client is telling us to do?
11:07 So they tend to hesitate when they're looking at accepting a power of attorney. And so what we are seeing from some of our clients is that the bank is saying, no, we will not accept this power of attorney because it doesn't have the current agent's acknowledgement. Now, there's going to be there's a period of time here before this statute where the statute was changed to require what was called an agent's acknowledgement and responsibilities, okay, or acknowledgement and responsibilities. That section is no longer good. It needs to now have the new agent's acknowledgement as part and part of your durable power of attorney. The good news is the good news is, oh that it's pretty easy to fix. You don't have to have a whole new power of attorney proof. You simply need to have the agen's acknowledgement section prepared, add it on to your existing power of attorney, and then arrange to have your agent's sign it. Keep in mind this too, if your agent that you named in your power of attorney doesn't have the appropriate agen's acknowledgment and they go to the bank and the bank says, I'm sorry, we can't accept that power of attorney because it doesn't have the agent's acknowledgment. Well, in all probability, you at that point
12:40 are incapacitated and if you're incapacitated, you don't have the legal ability to now change your power of attorney. And if you don't have the legal ability to change your power of attorney, then you don't have the legal ability to add the agent's acknowledgment. And therefore the whole point of your having the power of attorney to avoid forcing your agent to go to court to have themselves appointed as your conservator could end up being defeated. So it's very important. Even though your power of attorney is still legally valid, it is a practical application of the law that you may well run into. And if that happens to you, then that's going to be complicated. Now what some clients are doing, I know they're doing this. They're going to their bank and taking in the current power of attorney and say, hey, this is what we have now is this going to be used by you? But even if the manager today says yes, it will be, that doesn't mean the manager next week isn't going to say differently. Because here's what happens in the real world with banks. Banks have lawyers. Lawyers look at the changes of the law and then they're going to issue, if you will, directions to the bank, and one of those directions, quite freakly is, hey, when someone brings in a power of attorney, these are the things that it has to
14:13 have in it in order for us to accept it. And so you're basically dealing with a clerk or a manager who's kind of looking through this list, and generally that list is now going to say it needs to have an agen's acknowledgement and the agents have to have signed it. And the minute they look at your power of attorney and they don't see a section that's called agent's acknowledgement, they are most likely or very probably going to deny accepting that power of attorney by your agent. So very important to you that you look at making sure your financial powers attorney are in place, because obviously they can be very very important documents. I mean, hopefully.
15:00 It's interesting with the estate planning that we do. If we prepare an estate plan, let's say you've got a living trust. We know the living trust one day will be used for distributing your estate. We don't know if you're going to become. Incapacitated, but we have financial powers of attorney just in case you do. We don't know if you're ever going to be unable to make medical decisions for yourself, but we have powers of attorney just in case you do. Even when you have a trust, if you listen to previous episodes of the program, you're going to have a will because it might turn out that something fell through the cracks and end up having to go through probate, and then we want to make sure when probate's done that those assets are put into your trust as part of the distribution.
15:48 Hopefully you don't have an. Estate that goes through probate, but you have a poor overwilled just in case. So a lot of documents get prepared as part of a state plan, hoping that they will never get used, but they serve a very important purpose when they do, because they are again avoiding people having to go to the probate court to get themselves appointed as your conservator or to get themselves appointed as your guardian, and so they are very important documents as part of an overall estate plan. Now, if you happen to be a dolt PC client and you want to get your documents updated, you can simply head on over to the website DOILOTPC dot com. Go to the virtual office and select the update my Plan request form. There you can fill out a form basically submit that to us.
16:47 We'll get it, we'll communicate with you, tell you what it's going to cost, you make arrangements for all of that, and we can prepare the documents, or you can always schedule a consultation with us. You can call it set five one seven three two, three seven three sixty six are again simply go to the website. There you're going to find links to schedule appointments where you can schedule a consultation with us so we can walk you through decisions that you need to make, and. That obviously is available to you. Whether you're a client of doil OLPC or not, we would likely be able to help you in updating your estate plans appropriate, So just keep in mind that addressing these issues now can help avoid complications, delays, and unnecessary expense in the future. Of course, Aman and I, we'd be truly honored to help you protect the people you love, either updating the plans as we've just talked about to make sure that they're current. Maybe you've got other changes that you also want to make. Maybe people have come
18:18 and gone out of your lives, or you've got some other distribution plans or whatever it happens to be. We'd certainly love to have the opportunity to help you. We can create a new estate plan for you, we can look at updating an existing one, or certainly guiding you through a very difficult time if you are dealing with having to handle the state settlement process for. A loved ones. We try and make it easy to get started. We offer in person consultations. Those are available both in Grand Rapids and our Lancing Life location, so we have got two locations where we can have physical consolation consultations with you.
19:06 We also offer virtual consultations. Those would be by zoom by phone wherever you are in this great state of Michigan. We've got lots of clients throughout the entire state from the up all the way down to the southern border, so we provide virtual consultations to work with you. Maybe all you're looking for is a simple document. Maybe you say, hey, all I need is a new healthcare power of attorney or maybe a certificate of trust something like that. Well, take a look at our legal store that's available at our website. There you can order individual documents that can be pared for you and sent to you electronically for you to execute. All of that and more is available at our website that is Doyle LAWPC dot com. That's Doyle LAWPC dot com. There you're going to find more information of how you can schedule consultation or more information about the services that we can provide to you. Well, I think that's going to have to be a wrap for today's show. I don't know why, but my voice seems to be going out on me here today. But as always, if you have a comment, a questioning like he answered, or topic that you'd like me to cover in a future episode, head on over to Tuesday with
20:38 Tom dot com our website. You can leave me a voice message by clicking on the microphone or just send me an email at Tom at Tuesday with Tom dot com. And so you don't miss an episode, be. Sure to follow us on the podcast platform that you use to listen to Tuesday with Tom. You can also follow us on Facebook. We invite you to have your friend, of your friends and family follow us as well. That would be on Facebook Tuesday with Tom. And of course the law firm is Doyle LOPC. Again on Facebook as well, and don't forget subscribe to our monthly email newsletter. You can do that at Tuesday with Tom dot com ORDOILEOPC dot com and so we'll keep you up to date on what's going on with the state planning topics, topics that we think are important to you, and new episodes, upcoming episodes if you will of Tuesday with Tom. And remember you can listen to Tuesday with Tom probably wherever you already enjoy your podcast where many many streaming services Apple Podcasts, Spotify, Amazon Radio, Amazon Music, Google Podcast, iHeartRadio, Speaker that's a service that we actually publish our podcast through, or you can always just ask your smart speaker to
22:09 play Tuesday with Tom. Well, thanks again for spending part of your day with us today and as always, take care, stay safe, and have an awesome day here in Michigan. 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
