CRUMMEY NOTICE

"Crummey Notices" are named after the case of (IRS) Commissioner vs. Crummey. These notices establish that a trust beneficiary received notice of withdrawal rights. The IRS takes the position that they are required. It has not been extensively litigated and the courts have not imposed it as a requirement. On the notion that you cannot (or perhas shouldn't) "fight city hall" good practice suggests they be done.

They should generally only establish that proper notice has been given. The should not contain a waiver, and need not state amount contributed to the trust, etc.

Read more...

AB Trust

"AB," "By-Pass," "Credit-Shelter," and "Marital Deduction" trusts are all basically synonymous terms for separate trusts for each spouse with a married couple. Each individual citizen under U.S. federal estate tax law may pass a "threshold" value of assets to their heirs without federal estate taxation. This amount is referred to as the Exemption Equivalent.

This technique works only with married couples. Current Federal Estate and Gift tax laws provide that transfers at any time of any amount between spouses who are U.S. Citizens are not subject to the Estate (or Gift) Tax. However, this is a trap for the unwary. Such outright transfers may "waste" the Exemption Equivalent of the first such spouse to die in an Estate Tax Situation.

Read more...

Personal Representative

There are actually 2 different uses for the legal term "Personal Representative" in Michigan. The Michigan Estates and Protected Individuals Code defines "Personal Repressentative" as the person "in charge" of the Probate Estate (traditionally known as the "Executor").

In a perhaps unfortunate usage (many states use the term Personal Representative instead of Executor and Congress and the Executive Branch certainly had every reason to know this), the U.S. Congress (perhaps more accurately, the HHS in their regulations) has defined the term "Personal Representative" in the HIPAA Law as an individual designated to obtain protected health information under that law.

Read more...

ILIT (Irrevocable Life Insurance Trust)

An Irrevocable Life Insurance Trust (ILIT) is a trust agreement in which a client may set up a Life Insurance Policy for beneficiaries without owning at and therefore without having the proceeds taxed it their estate.

Life Insurance Proceeds are normally not subject to federal income taxation. However, to the surprise of many, they are taxable under the federal estate tax, in the estate of one who has any "incident of ownership" (control) over the policy.

Often, a parent (or other client) wants to have some degree of "control" over the policy (who gets the proceeds and when they may be entitled to them). The ILIT allows a person to structure that.

Great care must be taken when setting these policies up, because they are irrevocable and therefore potentially inflexible. Careful drafting can help with the flexibility issues. There are are also some adminstrative requirements which make ILITs more onerous to maintain than often thought by clients and the professionals recommending them.

Read more...

Advanced Directive

Advanced Directives are written instructions you make about your health care and treatment, usually in the event that you are incapacitated such that you cannot meaningfully participate in those decisions yourself. Advanced Directives come in different forms.

"Living Will Declarations" are a form of Advanced Directive which is self-executing. In other words, the writing, itself, directs the caregivers and presumably, they look only to that writing.

"Health Care Durable Powers of Attorney" are an agency document which appoints and authorizes another person to make decisions on your behalf--again, usually in the event of incapacity.

In Michigan, the latter Durable Power of Attorney is recognized by our legislature. Denominated "Health Care Designation of Patient Advocate," this Michigan statutory document requires specific language. Additionally, Michigan requires a determination by 2 licensed medical professionals that you are unable to participate in your own decision making -- and a written "Acceptance of Designation" by your designated representative.

At this time Michigan does not recognize a Living Will Declaration either statutorily or by court ruling (though this does not mean that a court would not use it as evidence of your intent).

Read more...

LIMITED LIABILITY COMPANY

Limited Liability Companies (LLC) are a "hybrid" between traditional corporations and partnerships. The are thought to combine the best and most flexible attributes of each. The hallmark of corporate business form is its ability to shield the shareholders from liabilities of the business venture (limiting their liability to their investment in the stock). Partnerships are generally thought to be more flexible and less administratively complex.

The LLC gives the owners the liability limitations afforded by the corporation and the so-called simplicity and ease of operation of a partnership form of business.

The LLC is not a historically traditional business form (sole proprietor, partnership and corporations date back 100's of years). The Michigan LLC Statute was first enacted in 1993, making the LLC a "new" entity in Michigan.

Business persons should seek experienced and knowledgeable counsel and tax advice before setting their business entity up. See, Michigan Single Member Limited Liability Companies.

Read more...

Health Care "Designation of Patient Advocate"

The Michigan Durable Power of Attorney Statute provides for the creation of a Durable Power of Attorney for Health Care or Medical Decision Making. This is essentially a specialized Durable Power of Attorney (see Durable Power of Attorney) which is generally limited to issues of Medical Care and Treatment. The statute designates these powers as "Health Care Designations of Patient Advocate."

These may be alternatively known as Medical Power of Attorney, or Health Care Power of Attorney.

Unlike other powers of attorney, by Michigan Statute, the Designation of Patient Advocate is only effective upon a finding by two physicians (or other qualified medical professional), in writing that the patient is unable to meaningfully participate in their own care and treatment decisions.

By Michigan Statute, a Patient Advocate must sign a written "Acceptance of Designation" which includes certain statutory provision.

The Designation of Patient Advocate, in addition to providing for general care and treatment decision making, may also provide for end-of-life decision making and can authorize the Patient Advocate to sign a Michigan "Do-Not-Rescuscitate" order (DNR) on behalf of the patient.

These documents should not be confused with "Living Will Declarations" which are not currently recognized in Michigan, but may contain similar language with similar end results. The primary difference is that the Patient Advocate Designation gives an agent the decision-making power, while the Living Will is a direct instruction to the medical community.

Read more...