Take-Away: In a recent Private Letter Ruling the IRS clarified that an irrevocable trust can hold an annuity and not run afoul of IRC 72(u)(1). Background: There is a lot of confusion surrounding if an irrevocable trust can hold a tax-sheltered annuity. That confusion stems from the provisions of the Tax Code that suggest that […]

Take-Away: If an individual is given a limited power of appointment over trust assets, the settlor of the trust should be expressly alerted to the fact that the exercise of that limited power of appointment could effectively disinherit the settlor’s heirs who are the trust’s remainder beneficiaries. Background: Adding limited powers of appointment to a […]

Take-Away: The IRS recently announced that it will be targeting solo 401(k) plans for audit, suggesting that the IRS believes that such qualified plans are being abused. Background: A solo 401(k) plan, or also called a one-participant plan, are growing in popularity as an alternative to a SEP or SIMPLE IRA for self-employed individuals. While […]

Take-Away: The IRS earlier this year provided some relief to the highly technical qualification rules for an Opportunity Fund investment, or business, which is intended to encourage more investments in Opportunity Zones to fulfill Congress’ objectives to support distressed economic areas. Background: Opportunity Zones and Qualified Opportunity Funds were created in the 2017 Tax Act. […]

  Take-Away: The key element in a lifetime gift is the donor’s intent to make the gift. Background: These days there is considerable discussion about making lifetime gifts to use the donor’s large applicable exemption amount to shelter the gift from gift taxation and generation skipping transfer tax (GST) taxation. Gifts to spousal lifetime access […]

Take-Away: The IRS treats a Roth IRA conversion as a distribution from the traditional IRA. As such, that means the pro-rata rule applies to distributions from the traditional IRA for purposes of determining how much of that year’s distribution(s) are taxable. Background: Many advisors now encourage their clients to convert their traditional IRA to a […]

Take-Away: The Michigan Trust Code frequently refers to a trust’s purpose, or material purpose, to guide trustees and probate courts to carry out the settlor’s intent. Trust settlors should consider the use of a more detailed material purpose clause in their trust instrument to provide better direction to the trustee and a probate judge when […]

Take-Away: The IRS issued a Revised 2020 Publication 590-B  that clarifies that the beneficiary of an inherited traditional IRA has the option to withhold taking distributions from that IRA until December 31 of the 10th anniversary of the IRA owner’s death. Background: When the initial 2020 Publication was issued earlier this year it created a […]

Take-Away: There are 5 different situations in which an irrevocable trust is exempt from the 40% generation skipping transfer tax. The efficient use of that $11.7 million GST exemption is critically important. Background: With many individuals presently exploring the use of gifts to use their applicable exemption amounts (while they still exist at such high […]

Take-Away: A trust can be decanted pursuant to Michigan’s two decanting statutes. However a trust instrument can have its own built-in decanting provision. Background: As we have covered in the past, in 2012 Michigan adopted two separate trust decanting statutes that give to the trustee the authority to decant trust assets to a new trust. […]