Michigan Estate Planning Blog

When Should You Update Your Estate Plan?

 

Almost everyone who completes an estate plan says they feel a great peace of mind knowing they have accomplished this. However, estate plans need to be periodically reviewed to reflect the changes and events of life. According to a recent article from Florida Today, “Life can change on a dime. Here’s how to tell if it’s time to change your estate plan,” certain major life events are the most common reasons to update an estate plan.

Known as “trigger events,” these include marriage, divorce, birth or adoption, death of a loved one, moving to a new state and retirement. If someone named in an estate plan to act as executor, trustee, or guardian dies, those roles must be filled promptly, and the documents must be updated accordingly.

Updating beneficiary designations is all too often overlooked. Beneficiary designations on life insurance policies, retirement accounts and Payable On Death (POD) accounts override any provisions in a will or trust. If you don’t update beneficiary designations, someone you love may end up with nothing, while someone you once loved could receive an unexpected and generous gift. Review these designations to be sure that they reflect your current wishes, not your past loves.

Laws change, both on a state and federal level. While you may be following the headlines to learn what changes are coming to the estate tax from Washington, your own state might make changes to how property is transferred. A change to the law could undo your estate plan’s intentions. Your estate planning attorney monitors local, state and federal changes to laws impacting tax and inheritance. Contact them with your concerns and understand that you may need to make adjustments to ensure that your wishes are followed.

Financial situations change, for good or bad. If you’ve bought real estate, invested in a business, or purchased cryptocurrency, all these need to be addressed by your estate plan. If you’ve declared bankruptcy or have been hit with large medical debts, your estate plan may need to be adjusted. The same goes for charitable giving goals. If you have a change of heart about a charity you used to support and want another charity to benefit from your generosity, you’ll need to put this change on paper.

Children grow up, even though it may not seem like this will ever happen when they are young. When they reach adulthood and the necessary level of maturity, you may want to name them as executors, trustees, or healthcare surrogates in place of other family members. This is also a good time to review trusts that contain provisions regarding specific milestones.

An estate plan includes protecting your health and well-being. It’s advisable to make sure that your estate planning documents are ready for any eventuality, especially if you haven’t reviewed them in a long time. This includes Power of Attorney, healthcare directives, living wills, HIPAA release forms and other relevant documents. Medicaid planning is something to discuss with your attorney as part of planning for long-term care.

If it’s been more than three years since your estate plan was reviewed, even if nothing in your life has changed, it’s a good idea to review your estate plan. Even minor discrepancies or changes can have significant impacts. Regular reviews help to identify any gaps, ensure that the estate plan works with current law and reflect changes to financial status and relationships.

Reference: Florida Today (May 31, 2025) “Life can change on a dime. Here’s how to tell if it’s time to change your estate plan”

Bankruptcy And The Inherited IRA Mid-Michigan

Is a retirement account that is “inherited” still a retirement account? This may sound like a rhetorical question, but it is currently one before the U.S. Supreme Court in the matter of Clark et ux. V. Rameker et al. The decision could have important ramifications for those who are looking to leave an IRA to their heirs – and NOT to the heirs and their creditors. This issue was explored by Reuters in a recent article titled “U.S. high court to chart fate of inherited IRAs in bankruptcy.” You see, the Clarks inherited a $300,000 IRA and then went into bankruptcy to the tune of some $700,000. Consequently, when the bankruptcy trustee became mighty interested in the IRA, the Clarks cried foul. As a general rule, IRAs are exempt from many bankruptcy proceedings of the account owner. Some courts have upheld this protection even when the account is inherited by one who is not yet a retiree and is not the account owner, but still complies with the strict distribution requirements for inherited IRAs. Other courts have been less favorable and now it is up to the highest court. It may seem strange to think about bankruptcy when planning for the eventual distribution of your IRA to heirs. After all, leaving your heirs behind is one thing, but ensuring that they are protected is a still greater step. How will the Supreme Court determination affect you?

Reference: Reuters (November 26, 2013) “U.S. high court to chart fate of inherited IRAs in bankruptcy”

For more information, see www.jerryreiflawyer.com

Bankruptcy And The Inherited IRA Saginaw, MI

Is a retirement account that is “inherited” still a retirement account? This may sound like a rhetorical question, but it is currently one before the U.S. Supreme Court in the matter of Clark et ux. V. Rameker et al. The decision could have important ramifications for those who are looking to leave an IRA to their heirs – and NOT to the heirs and their creditors. This issue was explored by Reuters in a recent article titled “U.S. high court to chart fate of inherited IRAs in bankruptcy.” You see, the Clarks inherited a $300,000 IRA and then went into bankruptcy to the tune of some $700,000. Consequently, when the bankruptcy trustee became mighty interested in the IRA, the Clarks cried foul. As a general rule, IRAs are exempt from many bankruptcy proceedings of the account owner. Some courts have upheld this protection even when the account is inherited by one who is not yet a retiree and is not the account owner, but still complies with the strict distribution requirements for inherited IRAs. Other courts have been less favorable and now it is up to the highest court. It may seem strange to think about bankruptcy when planning for the eventual distribution of your IRA to heirs. After all, leaving your heirs behind is one thing, but ensuring that they are protected is a still greater step. How will the Supreme Court determination affect you?

Reference: Reuters (November 26, 2013) “U.S. high court to chart fate of inherited IRAs in bankruptcy”

For more information, see www. jerryreiflawyer.com

 

Business Owner Bankruptcy Pointers Mid Michigan

Your business is your business and, likely, an important part of your life. That includes your personal financial life, too. When the liabilities of your business become your personal liabilities, then your business and personal lives can get pretty complicated. Small business owners know more than anyone about the realities of bankruptcy, either in the form or near-misses or through personal experience. Consequently, no one needs to protect their assets quite as thoroughly or understand bankruptcy like a small business owner. If you cannot imagine and bear the consequences of a personal bankruptcy then perhaps you should not start a business. Such was the advice in a recent Forbes article titled “How To Bounce Back From Bankruptcy & The Loss Of Your Home.” There original article offers some practical steps to help understand the mechanics of bankruptcy – such as who, what, where, why, when and how – but the most important things to understand are the exemptions. Certain aspects of your personal financial life are legally protected under state laws, even in the face of so many liabilities and debts. You should plan accordingly. For example, most states offer a homestead exemption from bankruptcy that will save your home from liquidation to creditors, unless of course you have mortgaged the home. There are other ways to lose the homestead protection that are less obvious, too. Knowing your protections can enable you to structure your business and operations to protect your interests, and indeed there is much that can be done. At the most basic level, even the choice of form for your business (Limited Liability Company, Corporation, etc.) can have important ramifications to understand. Regardless, the time to make plans to protect your personal assets from your business liabilities is now, rather than later.

Reference: Forbes (August 5, 2013) “How To Bounce Back From Bankruptcy & The Loss Of Your Home”

For more information, see www.jerryreiflawyer.com

The “Permanence” of Portability

There may be battles aplenty over the budget, and many more to come. At least we have a set of solid laws set in stone under the recently passed American Taxpayer Relief Act of 2012 (ATRA), right? While it appears safe to breathe a bit easier, many people still don’t trust any tax law claimed to be “permanent” by Congress and the White House. When it comes to making estate plans, certainty is an essential. Any uncertainty can wreak havoc on even the most carefully crafted plans. One popular “permanent” part of estate planning under ATRA is “portability.” Is it here to stay and can we trust it? “Portability,” as you may well know, is the new ability of a spouse to pass their unused unified gift tax lifetime exemption and/or estate tax exemption on to their surviving spouse. It grew out of budget deals and then was made “permanent” under ATRA, also known as the bridge over the Fiscal Cliff. As a questioner over in a recent Wall Street Journal Q&A (“Is Estate-Tax Portability Permanent?”) pointed out, estate tax “portability” is a great option but an act of Congress could just as easily undo it. What then? The general consensus is that portability is probably here to stay and for a multitude of reasons. Assuming that remains true, the key to portability is to separate myth from reality. The first myth: portability is not automatic? The first reality: it can be rather complex, especially in terms of unintended consequences. For example, what happens when the surviving spouse remarries? For the time being, perhaps you can breathe easier as to portability. The larger question, however, is what do you and your spouse hope to achieve through your estate plan from both tax and non-tax perspectives?

Reference: The Wall Street Journal (March 31, 2013) “Is Estate-Tax Portability Permanent?”

For more information, see www.jerryreiflawyer.com

 

IRA Asset Protection Increases

The more you have, the more you have to lose. That’s a cardinal rule of asset protection planning. If you have accumulated savings in an IRA, then you should be aware of the asset protection legally afforded your IRA. As recently reported by the Slott Report, the IRA bankruptcy exemption has just increased. The article is titled “IRA Bankruptcy Exemption Amount Increases.” Background: the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) cleared the way and exempted the first $1 million of IRA funds (including Roth IRAs) in the event of bankruptcy. Fortunately, this amount is subject to cost of living adjustments. Accordingly, the new number as of April 1, 2013, is $1,245,475. This is great news for most American savers, since the average IRA is less than $1 million. Still, it’s also a figure worth knowing for larger IRAs given the important function they serve in many retirement and/or estate plans. Caveat: what is just as important as the exemption are the limitations to the exemption. The safety of the exemption is only afforded in the case of filed bankruptcy, and might be voided in certain instances even then, but other events like divorce may easily trigger a levy on the IRA. The important lesson to remember is that there are existing IRA protections to be understood, but they need to be considered as part of a comprehensive asset protection strategy. Such a strategy will necessarily involve considerations of state law protections, asset titling and insurance coverage. Be sure to engage competent legal counsel, as proper asset protection planning is not a do-it-yourself project.

Reference: The Slott Report (April 9, 2013) “IRA Bankruptcy Exemption Amount Increases”

For more information, see www.jerryreiflawyer.com

 

IRA Asset Protection Increases Saginaw, Michigan

The more you have, the more you have to lose. That’s a cardinal rule of asset protection planning. If you have accumulated savings in an IRA, then you should be aware of the asset protection legally afforded your IRA. As recently reported by the Slott Report, the IRA bankruptcy exemption has just increased. The article is titled “IRA Bankruptcy Exemption Amount Increases.” Background: the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) cleared the way and exempted the first $1 million of IRA funds (including Roth IRAs) in the event of bankruptcy. Fortunately, this amount is subject to cost of living adjustments. Accordingly, the new number as of April 1, 2013, is $1,245,475. This is great news for most American savers, since the average IRA is less than $1 million. Still, it’s also a figure worth knowing for larger IRAs given the important function they serve in many retirement and/or estate plans. Caveat: what is just as important as the exemption are the limitations to the exemption. The safety of the exemption is only afforded in the case of filed bankruptcy, and might be voided in certain instances even then, but other events like divorce may easily trigger a levy on the IRA. The important lesson to remember is that there are existing IRA protections to be understood, but they need to be considered as part of a comprehensive asset protection strategy. Such a strategy will necessarily involve considerations of state law protections, asset titling and insurance coverage. Be sure to engage competent legal counsel, as proper asset protection planning is not a do-it-yourself project.

Reference: The Slott Report (April 9, 2013) “IRA Bankruptcy Exemption Amount Increases

”For more information see www.jerryreiflawyer.com

IRA Asset Protection Increases

The more you have, the more you have to lose. That’s a cardinal rule of asset protection planning. If you have accumulated savings in an IRA, then you should be aware of the asset protection legally afforded your IRA. As recently reported by the Slott Report, the IRA bankruptcy exemption has just increased. The article is titled “IRA Bankruptcy Exemption Amount Increases.” Background: the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) cleared the way and exempted the first $1 million of IRA funds (including Roth IRAs) in the event of bankruptcy. Fortunately, this amount is subject to cost of living adjustments. Accordingly, the new number as of April 1, 2013, is $1,245,475. This is great news for most American savers, since the average IRA is less than $1 million. Still, it’s also a figure worth knowing for larger IRAs given the important function they serve in many retirement and/or estate plans. Caveat: what is just as important as the exemption are the limitations to the exemption. The safety of the exemption is only afforded in the case of filed bankruptcy, and might be voided in certain instances even then, but other events like divorce may easily trigger a levy on the IRA. The important lesson to remember is that there are existing IRA protections to be understood, but they need to be considered as part of a comprehensive asset protection strategy. Such a strategy will necessarily involve considerations of state law protections, asset titling and insurance coverage. Be sure to engage competent legal counsel, as proper asset protection planning is not a do-it-yourself project.

Reference: The Slott Report (April 9, 2013) “IRA Bankruptcy Exemption Amount Increases”

For more information, see www.jerryreiflawyer.com

 

 

Debtor Misconduct Foils Asset Protection Planning

The law between creditors and debtors is not always kind when you are the debtor, especially when the debtor does not have “clean hands.” Generally, the law tries to protect a debtor from utter destruction by providing certain amounts of exempt property. Still, a particularly difficult debtor isn’t going to maintain such good graces from the court system if he or she fails to understand their role and do as told. Consider the case of In re Wilson, 2012 WL 1856587 (Bkrtcy.D.Dist.Col., Unpublished, May 21, 2012). The case is discussed in a recent Forbes article titled “Wilson: Surcharge Of Debtor's Exempt Property Based On Debtor's Contempt In Refusing To Assist Trustee In Sale Of Property.” It is a classic example of what happens when “exempt” property isn’t actually exempt if you don’t follow the rules. Essentially, Wilson co-owned property with another as joint tenants, but neither one of the owners listened to the court. Wilson failed to show up for an examination and, when the court tried to work around him by trying to discuss the necessary sale of the co-owned property with the other owner, the co-owner also ignored them. To make matters worse, both co-owners then ignored an order to compel coordination. Note: civil disobedience is not a successful strategy with a bankruptcy court. While Wilson and the co-owner’s disobedience initially saved the property from sale, it didn’t stop the U.S. Marshall from seizing the property and changing the locks. Thereafter, the realtor sold the property and the trustee moved for sanctions against both Wilson and the co-owner, assessing the debt against their otherwise exempt property (and the co-owner against the sale of the shared property). Teaching point: the purpose of “exempt property” is to keep it from the grips of creditors. Sanctions are particularly potent, so don’t antagonize the court. It is important to understand and appreciate your role and rights as a debtor, as well as the various powers of the court over you.

Reference: Forbes (May 26, 2012) “Wilson: Surcharge Of Debtor's Exempt Property Based On Debtor's Contempt In Refusing To Assist Trustee In Sale Of Property”

Discretionary Trusts Can Trump Bankruptcy Liquidation

Sometimes giving assets to a loved one in hopes of protecting those assets from future creditors may not be such a good idea. This is especially true when the loved one is a young one. No, if you want your asset protection planning to be successful, then that usually means a trust is necessary. Trusts are incredibly powerful tools for a number of reasons, foremost because they allow you to protect both the beneficiary and the assets. A powerful lesson on trusts recently came out and is featured in a recent Forbes article. It’s the case of re McCoy, 2011 WL 6748388 (Bkrtcy.W.D.Wis., Slip Copy, Dec. 21, 2011) and it’s worth a look. The case focuses on a trust containing a “spendthrift provision” against bankruptcy. A mother set up the trust for her daughter (and soon to be debtor) with her son as trustee. The trust has a spendthrift provision, meaning that the assets are controlled and kept from the beneficiary except in regular distributions. Further, the trust provided that the brother, as trustee, has discretionary control over the distributions, and can release them or hold them in the trust as deemed appropriate in his capacity as trustee. The daughter went bankrupt. Soon thereafter, her bankruptcy trustee soon turned a leering eye to those trust funds. You see, bankruptcy is about marshalling the available assets of a debtor to pay as many debts as possible. However, thanks to the spendthrift provision the trust funds are immediately disqualified from consideration. Why? Because the beneficiary doesn’t “own or exercise control” over them. Nevertheless, the bankruptcy trustee did try to grab an upcoming distribution, thinking it was leaving the trust and therefore fair game. This, too, was denied, because the trustee had discretionary control over its release and simply wouldn’t release it into the hungry jaws of creditors. If the trust had appointed the brother as trustee without granting discretionary powers and, instead, required mandatory distributions, then the distributions would have fallen into the hands of the creditors – but instead it was saved. In the end, there are a few good lessons for the wise in this case. Here are a succinct few advanced by the Forbes author: 1. A well-drafted Living Trust can provide, as here, very substantial asset protection for beneficiaries. Mark me as in the camp that says that children should never be given a significant gift outside of a trust, since children (particularly those with money, but without experience) are prone to develop creditors. 2. A well-drafted non-self-settled trust can provide, as here, very substantial asset protection for beneficiaries. Contrast this with self-settled spendthrift trusts (a/k/a “asset protection trusts” which despite their nickname provide at best highly dubious and almost entirely untested asset protection advantages). See Chart Regarding Effectiveness of Asset Protection Trusts 3. For asset protection purposes, trusts should be drafted as discretionary trusts. Remember: If a beneficiary has a right to the trust assets or payments, etc., so will creditors. To learn more and to successfully set up a trust for your loved ones, you will want competent counsel. This is not a Do-It-Yourself project.

Reference: Forbes (December 28, 2011) “The Real McCoy: Living Trust Provides Spendthrift Protection To Assets Of Beneficiary In Bankruptcy”

Bankruptcy Business Blues

Bankruptcy can be a tough issue, especially to the small business owner whose customer has fallen on hard times. Problem #1: You’ve likely lost a customer for your products or services. Problem #2: You’ve likely lost the ability to collect the money the customer still owes you. Problem #3: The future potential bankruptcy “preference” may pull even more money from your coffers, as a Smart Business article points out. The bankruptcy of another means their ability to pay you is severely compromised, unless you’re “secured.” However, what if you were paid and the payment is deemed to have been a “preference” by the bankruptcy trustee? If the bankrupt company made a payment to you on or before the 90 days prior to filing for bankruptcy, then such payment becomes recoverable as a means of squaring away obligations. Bottom line: The trustee can take the payment back from you. If this happens to you, then you aren’t without options. Nevertheless, it does demand your full attention and cannot be ignored. The original article goes into considerable depth, but here is my take-away for you: find competent legal counsel to plead your case and run through the numbers.

Reference: SmartBusiness (July 1, 2011) “What to do when faced with a bankruptcy preference demand”