Congress was not the only busy legislative body in December. Our state legislature also passed, and the Governor signed, several important bills which affect estate planning for Michigan residents. We found the following to be of most interest to our estate planning clients:
- New Property Tax Uncapping Exemption for Transfers to Children: This Bill, signed into law on December 27, 2012, amends the General Property Tax Act to allow parents to transfer residential real estate to a child (or certain other close family members of the first degree) without triggering an uncapping of the property taxes. It should be noted that this bill is only effective for transfers after December 31, 2013 and the use of the property must not change following the transfer. For more information on issues related estate planning for a cottage or vacation home, please visit our blog at www.varnumlaw.com/blogs/cottage-law/.
- 529 Plans Now Protected from Creditors: This bill, effective January 2, 2013, exempts educational trusts and savings accounts, such as Michigan Education Savings Program accounts and 529 Plans, from being seized or garnished under a court judgment (i.e., a bankruptcy proceeding or when a creditor sues for repayment of a debt).
- Decanting: No Longer Just for Wine. Do you have an irrevocable trust which contains provisions which you'd like to update? The Michigan legislature may have provided a new solution. In late 2012, Michigan became the most recent state to permit trust "decanting." Decanting is the process of "pouring" assets from one irrevocable trust into a different irrevocable trust, as long as the beneficial interests do not change materially.
- New Power of Attorney Formalities. Michigan's newly enacted law regarding durable powers of attorney for financial transactions now requires that, before exercising authority under a durable power of attorney, an agent (or attorney-in-fact) must execute an acknowledgment of his or her responsibilities. Also, prior law contained no formal requirements for execution of a durable power of attorney, only that it be in writing. The new law requires that it be signed either in the presence of two witnesses or before a notary public. As a practical matter, our clients have always signed in the presence of a two witness and a notary, except in exigent circumstances. These requirements do not apply to durable powers of attorney executed before October 1, 2012, but it may be prudent to verify your agent has signed the required acknowledgment to ensure financial institutions will honor your durable power of attorney when it is needed.
What of significance did not pass in 2012? A package of legislation which purported to enhance Michigan’s Medicaid Estate Recovery program. Michigan's existing Estate Recovery program, which was implemented on July 1, 2011, allows the State to recover amounts paid to medical assistance recipients through the Medicaid program following the recipient's death, but it is limited in scope to probate assets. The failed legislation would have dramatically increased the reach of Estate Recovery and allowed State liens to be placed against a recipient's property.© 2013 Varnum LLP