Take-Away: A distribution from a retirement account is deemed to carry out proportionate amounts of the pre- and after-tax contributions in all of the participant’s accounts in the qualified plan, or all of the owner’s traditional IRAs. Calculating that proportion of the distribution that is not taxable can make your head spin when all of […]

Take-Away: Another risk associated with using a family limited partnership (FLP) if the FLP’s assets are included in the transferor’s taxable estate due to IRC 2036 is a potential mismatch between the IRC 2036 inclusion amount and the decedent’s reliance upon the marital deduction. Background: As previously covered, the IRS often successfully challenges estate planning […]

Take-Away: A deemed distribution from a retirement account can create a serious tax trap since the distribution will be subject to immediate income taxation, and possibly the 10% penalty for early distributions if the IRA owner or plan participant is under the age 59 ½. The primary traps are when a retirement account is pledged […]

Take-Away: As the pandemic is on the front-page of every newspaper and the lead story on each evening television newscast, we all understand its risk to our health, and the reality that we may become victims of the virus and find ourselves hospitalized. Durable powers of attorney for health care, or advance directives, should be […]

Take-Away: If an individual owns an interest in a cannabis-related business, special consideration needs to be given to holding that interest in a trust, and transfer of that interest by the trustee from the trust, so long as cannabis is treated as an illegal substance under federal law and such business is highly regulated and […]

Take-Away:  While charitable deductions that cannot be used in one year can be carried over for another 5 years, there is one ‘trap’ where that will not be the case. Background: The Tax Code permits a carryover of the income tax deduction with regard to excess charitable gifts. That carryover is up to the next […]

Take-Away: The IRS published today the applicable federal rates (AFRs) and the IRC 7520 rate for  transactions occurring in December, 2020. Short-term Rate (less than 3 years):                         0.15% Mid-term Rate (between 3 and 9 years):                 0.48% Long-term Rate (longer than 8 years, 11 months) 1.31% (up from this month’s 1.17%)  The IRC 7520 rate used […]

Take-Away: A no-contest, forfeiture, or in terrorem, clause in a Will or Trust will be enforced in Michigan, unless the challenger possesses probable cause to challenge the validity of the Will or Trust. As a broad generalization, courts are reluctant to enforce a no-contest clause. Background: A no-contest clause provides that any beneficiary who contests […]

Take-Away: While Michigan has two separate statutes that enable a trustee to decant trust assets to a second trust created by the trustee, not to be lost is that a trust instrument can include its own decanting authorization given to the trustee, without having to contend with some of the hurdles imposed by Michigan’s two […]

Take-Away: With many individuals losing their jobs due to COVID-19, adding to their personal problems is the impact of that loss of employment on any outstanding loans that they may have taken from their qualified retirement plan account . Their failure to repay the loan will result in a taxable deemed distribution. Background: As we […]