Missives

Individuals often use a revocable trust to avoid probate on their death. Surprisingly, having a successor trustee is not enough if there is litigation in the Tax Court.

In limited situations, a merger of two trusts might be more effective than a decanting of one trust to another trust, or a trust modification under the Michigan Trust Code which involves the probate court’s approval.

The OB3 ‘tinkered’ with the IRC 199A qualified business income tax deduction, essentially expanding the number of pass-through business owners who can qualify to claim some, or all, of the income tax deduction. Sadly, OB3 did not simplify the cumbersome phase-in rules or make the deduction available to all service providers as was hoped.

Achieving Better Life Experience Accounts (ABLE Accounts ) were introduced in 2014 to enable disabled individuals who rely on public benefit programs for support to work, earn and save for their own future. The One Big Beautiful Bill, along with the recent ABLE Age Adjustment Act, both expand eligibility and increase contribution opportunities to ABLE accounts, which will hopefully provide more savings incentives for disabled individuals.

Usually not a lot of thought goes into a choice of law provision in a trust. However, as more and more states update their trust laws with the goal to attract trust ‘business,’ the temptation to ‘shop’ for a more favorable state to govern the trust’s interpretation and administration will occur. It is in these situations where the choice of law provision of a trust will run up against another state’s contrary strong public policy which will override the settlor’s choice of law provision.

The One Big Beautiful Bill Act (OB3) makes three significant changes to the gain avoidance rules associated with Qualified Small Business stock, adding to the incredible benefits associated with such stock.

A confidential relationship is treated as a fiduciary relationship when it comes to the presumption of undue influence in Michigan legal proceedings. Unlike formal titles or roles of a customary fiduciary, a confidential relationship can arise from informal relationships, e.g., caregiver-elderly person, or unique facts and circumstances where there is reliance in a trusted relationship which results in control by another.

For wealthy individuals, and non-grantor trusts and estates, we are going to have to learn how to deal with the new 2/37th limitation on claiming itemized deductions under the One Big Beautiful Bill.

The IRS has now provided the Final Regulations on when catch-up contributions must be made to a 401(k) account as a Roth (after-tax) contribution. Fortunately, there are several examples in these Final Regulations that help to explain when and how a plan participant must make Roth catch-up contributions to his/her 401(k) account and when and how changes in compensation are handled, either falling under this Roth contribution rule, or when a participant is no longer covered under the mandatory Roth contribution rule due to a decrease in compensation.

The One Big Beautiful Bill Act provides a new set of favorable rules for Qualified Opportunity Zone Investments, starting in 2027. However,  that also means that current Qualified Opportunity Zone investments will face a critical liquidity event at the end of 2026 when the gain deferral for those investments ends.