I was recently asked to summarize the high points in my December’s Briefing with regard to the impact of increasing interest rates on estate planning strategies. In other words, the person who asked for the summary did not want to read the 22 page handout that I prepared, which is a reasonable request considering how busy people are at the end of a calendar year (and how tedious reading that outline not doubt will be.) Accordingly, what follows are some broad generalizations that reflect how an increasing interest rate environment can impact basic estate planning that is discussed with individuals who are planning their estates.

The SECURE Act 2.0 is to become the law before the end of 2022. The focal point of this legislation is to enable more individuals to save for their retirement, while encouraging more to save through Roth retirement accounts. Not lost, though, is the reality that the more individuals save for their retirement using Roth accounts, the more tax revenues Congress currently generates.

While a qualified charitable distribution (QCD) from an IRA seems pretty straightforward, there can be a lot of confusion that leads to mistakes, and thus taxable income when a QCD goes awry.

Michigan’s adoption of some form of silent trust legislation as an amendment to the Michigan Trust Code continues to creep along towards adoption. There are pros and cons to the silent trust concept that need to be considered by any settlor and trustee.

Take-Away: The tax consequences with regard to transfers to charitable remainder trusts are very tricky and detailed. If those rules are not carefully followed by the donor, the penalty can be very high income taxes, interest and penalties.

Take-Away: An IRA might name a charitable remainder unitrust (CRUT) as its beneficiary to delay the recognition of the IRA’s ordinary income longer than the SECURE Act’s normal 10-year distribution rule, while also creating a charitable estate tax deduction for the CRUT’s remainder interest, which may become more important if the IRA owner dies after 2025.

Take-Away: A donor who makes a contribution to a donor advised fund (DAF) does not possess legal standing to sue the fund for breaching its fiduciary duties. The sponsoring charity possesses ‘exclusive ownership and rights of control’ over DAF assets.

If passed, the SECURE Act 2.0 may contain a more liberal qualified longevity annuity contract (QLAC) option for plan participants. Qualified retirement plan sponsors need to proceed with caution if they offer an annuity option within a 401(k) or defined contribution pension plan in light of their ERISA-imposed fiduciary duties.

Take-Away: As has been periodically reported throughout 2022, there has been some hope that we would see Congress pass what has been called SECURE Act 2.0 before the end of 2022 liberalizing some of the rules that pertain to retirement plan distributions. Currently we hold our breath to see if this legislation gets passed before the end of 2022.

While we may grouse about many of the distribution changes under the SECURE Act, the automatic waiver of the 50% excise tax for the failure to take a year-of-death required minimum distribution (RMD) is a welcome change under the Act.