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Smith Bovill News

Estate Planning


Sharon A. Burgess

A recent law in Michigan allows people to appoint a “Funeral Representative.” This person will be able to make all the arrangements for your funeral after you die. Before this law was passed, your “next of kin” was the person in charge of making your funeral and burial arrangements. The problem with this, was that the term “next of kin” was not easily defined. Additionally, with second and third marriages, funeral directors were requiring spouses or children to sign off on funeral arrangements, which did not always occur timely.

While the law is clear that a person can be designated to make these decisions for you, it is unclear as to whether the Funeral Representative is bound to follow the wishes of the deceased. The Michigan Funeral Director Association has indicated that this new law is not an “advanced directive,” as other states have done, requiring the Representative to follow the wishes of the deceased individual. Others interpret the law indicating they do believe the Representative must follow the wishes. This is likely something that will be clarified in Michigan courts.

Regardless of whether the courts may later have to clarify this law, it is believed that most clients will still benefit from having a Funeral Representative designation in place. A funeral Representative can be appointed in a Will or other document.

If you have not had your estate plan updated recently, being able to nominate a Funeral Representative may be a good reason to contact your estate planning attorney to do so.


Andy Richards

January 1, 2013 marked the most significant change in Estate Planning in the more than 30 years I have practiced law. These changes should motivate action by clients to update their current estate plans.

2013 Law Changes Should Motivate Clients to Update their Current Estate Plans

Prior Law

The last major overhaul of the federal estate tax laws occurred in 1980, and we labored along with that model until very recently. Under old law, clients whose accumulated wealth reached a certain point needed to do some relatively complex planning in order to preserve the “credits” against the tax. This planning typically included separate “his and her” trusts (for married couples), and assigning assets (or asset values) to each trust in order to effectively use the tax credits. The credit (referred to as the Federal Estate Tax Exemption Equivalent) was per individual and ranged from $600,000 in 1986 to $3.5 million in 2010.

Over the prior 30 year period there were numerous “tweaks” to the numbers. Often, these changes and adjustments were driven more by political considerations or budget balancing, than by good policy. The last round of changes had a “sunset” provision built in which was schedule to end on December 31, 2010; was extended, and then pushed Congress to the brink on December 31, 2012.

Important Developments Since 2013

The 2013 change resulted in 2 major developments that essentially eliminate the need for separate “his and her” trusts in most cases. First, the exemption equivalent is now permanently (as permanent as anything gets in Washington, anyway) set at $5 million per person. Even better, this number has been indexed for inflation (currently $5.4 million). This means in most cases, clients’ estates are not large enough anymore to need tax planning. This is especially true with married couples, whose combined estates must now exceed $10.8 million in order to be impacted by estate taxes.

The 2013 Changes Have Essentially Eliminated the Need for Separate Trusts

The second development is not always appreciated or understood by clients (and sometimes by their advisors). With the 2013 changes, comes a new concept called “portability.” I have no idea who dreamed up the term, but I do like the way works. Portability means (in most cases) that we no longer have a need for separate trusts (“his and hers”), no matter the size of the estate. There may still be some instances where separate trusts are warranted, such as second marriages, non-resident spouse issues, and in certain limited cases where we would use the trust of the first to die to shield significant post-death asset growth from taxation. In most cases, we will find other, more palatable ways to reduce or eliminate estate and gift taxes for high net worth estates.

Recommended Client Action
Amend your Trusts. Since January, 2013, I have been urging our married clients to review their existing plans and see us about a much simpler, single “Joint Trust Agreement.” The new language is simpler and this new approach allows us to focus on your goals more directly. And, those with the old two-trust system will find that now that they are unnecessary, they cause an incredible hassle and substantial expense and inflexibility when a death occurs, that can be avoided with the joint trust.

Review and Update Durable Powers of Attorney. These important Estate Planning tools have quickly replaced the Trust Agreements as perhaps the most important of our Estate Planning documents. Because of quirkiness in our American Legal System, it is necessary these documents to be very detailed and specific. Because of new developments in the business world (notably digital technology) and legal developments stemming from the fallout on Wall Street, we have made many incremental changes over the years and these documents really must be updated in order to be effective.

Review and Update Asset Ownership and Beneficiary Designations. One thing we have observed as a constant over the past years, is the fact that things change. This is true with client assets. Banks have changed. Clients have moved from one bank to another. They may have changed employers and have different retirement plans. They may have new or changed Life Insurance. They may have acquired a second (or multiple) residences. All of these assets must be address to ensure that they mesh properly with the estate plan.

Qualified Plans and Annuities. These are a special class of assets that, if not properly integrated with the estate plan, can result in very costly Federal and State Income taxes to the recipient. In most cases they do not “play well” with Trusts or Estates and it is important to have a thorough discussion and understanding of how they work on death and the best way to position them.

We would be glad to meet with, and discuss all of these issues with you.




Dear Colleague:

Sometimes there is a child or beneficiary with a disability who is unable to receive an outright distribution, either due to their inability to manage the inheritance, or due to the government benefits they are receiving. A Special Needs Trust is designed to supplement, but not replace, any government benefits that a disabled person is receiving. A Special Needs Trust can provide money for the extras that the person may need, or that may have been provided during a person‘s lifetime.

Prior to the use of Special Needs Trusts, many parents and grandparents would leave a child out of their estate planning as they did not want to affect their government benefits. They would leave assets to another family member for the benefit of the disabled child; however, this was not always effective. The assets were not always spent for the benefit of the person in need. Through the use of a Special Needs Trust, a person no longer needs to rely on another family member to shelter these funds. They can be assured that the monies are in trust for the benefit of the disabled person.

A Third Party Special Needs Trust allows a parent, grandparent or third party to leave an inheritance to a special needs person. Some clients, however, may receive an inheritance or a settlement, and need to shelter these funds so their government benefits are not jeopardized. As a result of the Omnibus Budget and Reconciliation Act, an individual can place his or her own assets in their own Special Needs Trust. Two types of trusts are recognized and used in Michigan to shelter a beneficiary‘s own assets. An Exception A – Pay Back Trust and Exception C – Charity Trust.

Both trusts are created with the individual‘s own funds, and there is no penalty for this transfer. The beneficiary can use the funds during their lifetime to provide extras above and beyond what is provided by Medicaid or SSI. With the Exception A Trust, at the beneficiary’s death, any remaining funds must reimburse the State of Michigan, up to the amount of Medicaid benefits received by the beneficiary. The Exception C Trust allows for any remaining funds in the Trust, at the death of the beneficiary, to be retained by a non-profit organization to assist other individuals with disabilities.




Dear Colleague:

With the many changes in the laws with respect to Medicaid and Veteran’s Benefits, it is important that your clients seek the assistance of an attorney specializing in Elder law to determine what benefits are available to assist in the care of their loved ones. This area of practice includes not only the preparation of the traditional estate planning documents, but many other issues that affect our seniors, such as Medicare, Medicaid, Veteran‘s Benefits, and long term care. Caring for our loved ones as they age is difficult for many families and the best decision can be made after exploring all available options.

It is important to understand what is covered by Medicare Part B and the need for supplemental health insurance. In addition to Medicare Part B, a person may be required to obtain Medicare Part D, and they need to understand the enrollment process. While Medicare may help in paying some of the expenses if a person needs long term care in a nursing home, the rules and requirements may limit the coverage that is available. An understanding of their limitations will help in making long term care decisions.

If a person transitions to an assisted living facility, and they meet the Veteran‘s requirements, they may be eligible for assistance from the Veteran‘s Aid and Attendance program to help pay for their care in the facility. This benefit will allow a Veteran, or a spouse of a Veteran, to continue to reside in the community with assistance with their medical costs. The eligibility requirements should be discussed with an elder law attorney to determine whether this benefit will provide the care that is needed.

Medicaid, a government benefit, may provide assistance with the costs of nursing home care. This benefit, however, has eligibility requirements and the family of a loved one in a nursing home should discuss these requirements with an attorney knowledgeable of the Medicaid laws.

Other long term care options, such as long term care insurance, hospice, and the Michigan Mi-Choice Waiver program, are additional options for caring for a loved one. A person wishing to stay in their home will want to discuss all of these options with not only their medical care provider, but also an elder law attorney, to determine if they would qualify for any of these benefits.




Dear Colleague:

Michigan passed an estate recovery act that became effective September 30, 2007. The Michigan Department of Community Health is attempting to recover for long-term care benefits that Medicaid paid on behalf of a Medicaid beneficiary, who is 55 or older, from their “estate.”

“Estate” is defined under the Estate Recovery Act to include all property and assets that are included in the beneficiary’s Probate Estate. While bills have been introduced by our legislature to broaden the definition of “estate” to allow recovery from more than probate assets, this has not occurred. Recovery is still limited to assets that are subject to Probate. If there are no assets in the probate estate, there is nothing to attach a lien.

Estate recovery claim notices go out to Michigan families after the beneficiary has passed away. Some of the people who receive them are exempt from the claim, or there may be a hardship waiver that can be requested. If there is a surviving spouse or a minor child, collection of the Medicaid claim must be deferred while the spouse or minor child survives. If Medicaid is enforcing its claim as a known creditor, then it will be entitled to what is left after estate administration expenses, funeral costs, and an exempt property allowance.

If a personal representative disposes of estate property without paying the State of Michigan, he (she) could be liable to the State of Michigan. It is important that family members of loved ones receiving long term care in a nursing home meet with an Elder Law Attorney to understand Estate Recovery. It is also important that clients meet with an Elder Law attorney to discuss estate recovery if a claim notice is received by a family member




Dear Colleague:

In assisting our senior clients, care givers, and families, many are concerned with obtaining the needed care and services to remain in their home. The many senior-care related services, however, usually exceed the income that our clients are receiving. The United States Department of Veterans Affairs has many programs available to Veterans and their surviving spouses to help with these costs.

The Veterans Aid and Attendance benefit is an overlooked benefit available to clients who are paying for long term care in their home, assisted living facilities, or adult foster care homes. Many clients are unaware of this program. The purpose of this benefit is to keep our elderly in the community. Benefits are also available for house-bound individuals that require assistance with their daily living activities.

While there are qualifications for receiving this benefit, it is important for clients to discuss the Veteran benefits with an accredited VA attorney or Veterans Service Organization to evaluate their potential eligibility.

Smith Bovill, P.C. counsels clients on elder law, Medicaid planning issues, and Veterans Benefits regularly as part of its estate planning, probate, and trust administration practice. As a result of the constantly changing laws in the Medicaid and VA area, the information provided may change. We would be pleased to discuss this, or any other Medicaid or elder law issues, in more detail.


Legal Checklist



During Lifetime:

  • Your Trust is a Revocable Living Trust . This means you may transfer assets into your Trust during your lifetime in order to avoid probate of those assets on your death. Assets are transferred into trust by titling them in your name as Trustee. Revocable means you may change the trust terms in any way at any time, and use the trust assets any way you want, any time you want.
  • You are the Trustee , or have the power to retain, or discharge a third-party trustee. Trust assets are administered and distributed by you, or as you request.
  • If you become incapacitated , assets are administered and distributed for your benefit.
  • Gift programs may be continued.
  • The trust does not protect you from your creditors, nor does it protect, or shield assets for Medicaid eligibility purposes.
  • The Trust does not have a separate taxpayer identification number until you die or discontinue acting as Trustee. You use your (or your spouse’s) social security number and report items of income and expense on your personal tax return.
  • If you are a married couple and your trust is a “joint trust”, in most cases, all of the above will continue to apply until the second death.

After Your Death

  • Debts and Taxes are generally paid from the estate assets (unless you have specifically directed otherwise).
  • If your Trust contains credit-shelter/marital deduction provisions, the trust is divided into a marital share and a residuary trust . The marital share is commonly paid out to the surviving spouse. The residuary share provides lifetime annual income and discretionary distributions from principal to the surviving spouse . Each plan is different and these specific provisions may vary significantly from plan to plan. This will have been discussed with the client(s) prior to execution of the plan documents.
  • Otherwise (or after the death of the second spouse), the trust provides for payment of final expenses and distribution to designated trust beneficiaries.
  • If trust beneficiaries are minors , the trust provides that their share is to be held, invested, and administered for the benefit of the minor(s) for their education and support , until a stated age.


  • The Will has limited function, and is only effective in probate court.
  • If all of your assets are titled in your name as Trustee during your lifetime, no probate will be necessary . This underscores the importance of “ funding” your trust .
  • The Will nominates guardians for your minor (and possibly disabled) children.
  • If any asset is not titled in your name as Trustee and does not have a joint owner or beneficiary, probate will be necessary for that asset(s). The Will provides that any assets which inadvertently end up in probate “pour over” to your Trust. This ensures appropriate distribution and use of the trust’s tax planning features.
  • Assets such as life insurance, retirement plans, IRA’s and annuities pass without probate to the designated beneficiary, regardless of what your Will or Trust provides . These assets can (and often should) be directed to pass through the trust.
  • The Personal Representative named in your Will is responsible to handle probate and is most often the same person (or entity) as your successor Trustee.


General Durable Power Of Attorney:

  • The Durable Power Of Attorney avoids probate proceedings (Conservatorship and/or Guardianship) by naming an agent who may act for you without Probate Court supervision if you become incapacitated.
  • The Agent’s powers under a Durable Power Of Attorney are only good until your death.
  • The Durable Power Of Attorney is generally not conditioned on your disability (in order to avoid the Agent having to prove your incapacity). However, it can be drafted to require proof of incapacity before becoming effective (known as a “ Springing ” Durable Power of Attorney).

Healthcare Durable Power of Attorney (“ Designation Of Patient Advocate ”):

  • Names an Agent to make medical/healthcare decisions. This may be a different agent than the agent under your General Durable Power of Attorney.
  • Under Michigan Law, this power is only effective on a showing of incapacity (“springing”). The statute requires that incapacity be certified, in writing, by two or more physicians (or similarly qualified health professionals).
  • Your document contains provisions which authorize your patient advocate to withhold or withdraw extraordinary treatment in certain instances. This provision is similar to what is known as a Living Will . You should review these provisions carefully and discuss your wishes with your Patient Advocate.


  • “Funding” is the process of titling assets in your name as Trustee.
  • Deeds: Generally, we have prepared “quitclaim deeds” transferring your real property into your name as trustee(s). Often, we will instruct you to hold them without recording them. Because you are the transferor and transferee, the deeds have been delivered and may be held unrecorded, until a later time, at the convenience of the trustee (usually after a death has occurred). This will avoid having to record the Trust and take other administrative steps each time there is a new mortgage, sale, etc. of the property.
  • General Assignment: Personal property has no title documentation, and the purpose of the General Assignment is to convey such items to the trust. If you have left a written memorandum of personal property distribution, the Trustee will be bound by it.
  • Joint Declaration Of Trust Ownership: In very limited instances you may have executed one of these. This document is a complex, “agency” document which is intended, mainly as a “stop-gap” measure until funding is completed.
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