July, 2015 | Fraser Blog

Estate Strategies Summer Newsletter

Fraser Trebilcock’s Summer 2015 Estate Strategies newsletter contains valuable information on a variety of Trusts and Estates topics, including:

A look at how the Supreme Court ruling in Obergefell v. Hodges impacts Michigan trust & estate laws.
Important information on how to name your own patient advocate, 10 years after the death of Terri Schiavo made national headlines.
Major revisions to federal estate tax laws will result in more joint trusts. So what is a joint trust, and when is it used?

Inside, you will also find an invitation to join our team for the Walk to End Alzheimer’s in Lansing, as well as a brief chance to get to know our Trusts & Estates Attorneys. To view the newsletter, click here: Fraser Trebilcock Trusts and Estates Summer Newsletter 2015

If you have questions, please contact Marlaine C. Teahan, Chair of the Trusts and Estates Department, at mteahan@fraserlawfirm.com or 517-377-0869.

If you’d like to receive these newsletters automatically, please let us know by filling out the contact us form on our website, and checking the box that reads: “Please send me the Fraser Trebilcock Newsletter”. Click here for a direct link.

Michigan Court of Appeals Decisions Regarding Estate Recovery

If you know anyone who receives long-term care services covered by Medicaid, it is highly likely that their estate will be subject to estate recovery unless specific actions are taken to prevent estate recovery. Estate recovery is the program through which the State of Michigan is paid back for Medicaid benefits provided to certain recipients upon the recipient’s death by allowing the state to recover property from the recipient’s probate estate. If the Medicaid recipient is still living, there are steps that can be taken to ensure their assets pass outside of a probate estate, allowing their heirs to entirely escape estate recovery.

In an ideal world, estate recovery wouldn’t be an issue for anyone because they would have taken the appropriate steps prior to death to ensure they wouldn’t have a probate estate. But in reality, many individuals die as long-term care Medicaid recipients and, for any number of reasons, own a homestead that must pass through probate. If you are the heir of an estate of someone who received long-term care Medicaid benefits prior to death, it will be helpful to know the following information.

The Michigan Court of Appeals recently held that all individuals who sign a Medicaid Application, DHS Form 4574, bearing a date on the bottom of the application of 10-11 (representing October 2011) or later, have sufficient notice that their estate may be subject to estate recovery upon death. In a separate case, the Michigan Court of Appeals also recently held that in order to receive a hardship waiver exempting you from estate recovery, one must file a Hardship Waiver Application within 60 days of the date on the “Notice of Intent to File a Claim and Request for Information” that is mailed to the family of the deceased Medicaid recipient by the Department of Health and Human Services. Often this Notice of Intent is mailed to the last known contact person (often the attorney or agent who filed the Medicaid Applications on behalf of the deceased). One of the most common hardship exemptions often sought is commonly referred to as the “home of modest value hardship exemption,” which refers to the situation where the value of the Medicaid recipient’s homestead is equal to or less than 50% of the average price of a home in the county in which the homestead is located. Besides these two Michigan Court of Appeals cases, there are currently several other cases on estate recovery pending before the Michigan Court of Appeals, several of which were recently consolidated. Until the dust settles, this area of the law is subject to both change and controversy.

Take Away 1: Living long-term care Medicaid recipients or their agents should take appropriate steps to ensure the Medicaid recipient’s assets pass outside of probate upon death.

Take Away 2: If you are the heir of a recently deceased long-term care Medicaid recipient, do not delay in determining whether you are eligible for a hardship waiver from estate recovery, and be certain to file a Hardship Waiver Application within the timeframe specified on the Notice of Intent to File a Claim and Request for Information sent by the Department of Health and Human Services to preserve the waiver.

For more information, please contact Melisa Mysliwiec at mmysliwiec@fraserlawfirm.com or 616.301.0800.

This article is an update to a previous article published by Legal News & ICBA Briefs in April 2015.

Client Alert: PCORI Payment Due July 31st

Reminder: Plan Sponsors of Certain Applicable Self-Funded Health Plans Must Make PCORI Fee Payment By July 31, 2015

Please let this serve as a reminder that the Patient-Centered Outcomes Research Institute (PCORI) fee is due by July 31^st and must be reported on Form 720. The fee will be used to partially fund the PCORI which was implemented as part of the Patient Protection and Affordable Care Act.

Instructions are found HERE (see Part II).

The Form 720 itself is found HERE (see Part II).

Form 720, as well as the attached Form 720-V to submit payment, must be used to report and pay the requisite PCORI fee to the IRS. While Form 720 is used for other purposes to report excise taxes on a quarterly basis, for purposes of this PCORI fee, it is only used annually and is due by July 31^st of each relevant year.

As previously advised, plan sponsors of applicable self-funded health plans are liable for this fee imposed by Code section 4376. For plan years ending on or after October 1, 2013 and before October 1, 2014, the fee is $2.00 per covered life. For plan years ending on or after October 1, 2014 and before October 1, 2015, the fee is $2.08 per covered life. The fee increases per year and concludes with plan years ending on or after October 1, 2018 and before October 1, 2019. [For calendar year plans, the fee runs from 2012 through 2018 plan years.]

The fee is due no later than July 31 of the year following the last day of the plan year.

There are specific calculation methods to be used to configure the number of covered lives and special rules may apply depending on the type of plan being reported. For example, HRAs and health FSAs that are not excepted from reporting only must count the covered participant and not the spouses and dependents. The Form 720 instructions do not outline all of these rules.

For more information regarding this fee payment and how to report it appropriately, please contact Elizabeth H. Latchana at 517.377.0826 or elatchana@fraserlawfirm.com.

This correspondence is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

Tax Issues Following the Supreme Court Decision in Obergefell v. Hodges

In a legal landmark decision, the U.S. Supreme Court recently ruled that the Constitution guarantees a right to same-sex marriage (Obergefell v. Hodges). Previously, we blogged about changes to employee benefit plans, and trust and estate documents. Now, here’s a breakdown on some key state and federal tax implications. Continue reading Tax Issues Following the Supreme Court Decision in Obergefell v. Hodges

How Are Michigan Trusts & Estates Laws Impacted by Obergefell v. Hodges?

The Supreme Court’s ruling in Obergefell v. Hodges will have wide-ranging implications across the country. The impact on estate planning and the administration of trusts and estates in Michigan is staggering. The Obergefell ruling dictates that same-sex couples may exercise the fundamental right to marry. This is a constitutionally protected right from which other rights of same-sex married couples flow. To assert these fundamental rights, individuals need not await legislative action; however, it is expected that all States, including Michigan, will update their statutes to comport with the Obergefell ruling. Once non-conforming laws are updated, exercising these rights will be easier. A summary of rights impacting trusts and estates, that flow from a same-sex couple’s fundamental right to marry, are outlined below.

Estate Planning and Tax Issues

Before Obergefell, with proper planning, same-sex couples could provide for each other and designate each other as a fiduciary, just as heterosexual married couples. Even so, married same-sex couples, even those living in non-recognition states such as Michigan, did not have equal federal estate and gift tax advantages as heterosexual married couples until after the United States v. Windsor case in 2013. After Obergefell, married same-sex couples, living in any state, will be given equal tax treatment in their state of residence. For example, same-sex married couples will no longer have to file separate state and federal tax returns but will need to prepare only one federal tax return on which to base their income tax filings. Same-sex married couples should discuss with their tax preparer if it would be worthwhile seeking refunds for prior years. In states other than Michigan, that have inheritance and state estate taxes, same-sex married couples will now be able to inherit from each other without having to pay these taxes.

Probate

Same-sex married couples will now have priority in the probate court to serve as personal representative, conservator, guardian, and, under Michigan Court Rules, will be identified as an interested person (heir or spouse) and have the right to receive notice of a variety of probate proceedings. In addition, all surviving spouses have the right to inherit under the intestacy laws, to elect against their spouse’s will, receive statutory spousal allowances, and petition for proceeds from wrongful death actions.

Medical Issues

Michigan has next-of-kin laws that allow spouses, in certain circumstances, to make medical decisions, anatomical gifts, and determine funeral and burial rights of their spouse. Before Obergefell, same-sex married couples did not qualify as their spouse’s next-of-kin because Michigan did not recognize the marriage of the couple. These rights will now be recognized for all married couples in Michigan.

Family Law

Same-sex couples may now marry in Michigan and same-sex marriages solemnized in other states must now be recognized by Michigan. All married couples in Michigan will be able to get a divorce and adopt their spouse’s child or adopt children together. Visitation, child support and custody decisions will also be impacted by Obergefell. Family law issues were specifically addressed by the Obergefell Court; having children and raising a family is a protected constitutional right of same-sex couples.

Governmental Benefits and Creditor Issues

Governmental benefits, such as Social Security, Veterans benefits, and Workers’ Compensation, in many cases depend on state law and, until now, such benefits were not available to spouses of married same-sex couples. Spousal rights, in life and as a surviving spouse, are aspects of one’s marital status that are constitutionally protected.

Creditor protection will be greater for married same-sex couples as they will be able to benefit from owning real property as tenants by the entireties and will be able to own certain other financial assets as tenants by the entireties, including membership interests in an LLC. Insurance on the life of a spouse, that names a spouse as a beneficiary, enjoys certain creditor protection that should be available to all married couples.

Real Property

There are numerous real property issues that will be affected by Obergefell; however, only a few are discussed here. Obergefell may well be the end of the archaic law of dower in Michigan. Tenancy by the entireties protection was previously enjoyed by only a “husband and wife.” Going forward, such protection will be enjoyed by any married couple. The uncapping of real property taxes will also be impacted as conveyances to spouses are generally exempt from uncapping laws.

General laws

There are numerous Michigan laws that will have to be updated given the Obergefell v. Hodges case. A cursory check on the uses of both “husband” and “wife” in all of Michigan’s Compiled Laws reveals over 300 statutes that use these terms. Perhaps each instance of “husband” or “wife” will be changed to “spouse” but, in any event, it will be a long process as all such laws will have to be carefully reviewed, bills drafted, and legislation enacted.

It may be difficult for a same-sex couple to assert the rights discussed above prior to the updating of Michigan law. This is simply because many of the laws specifically use the words “husband” and “wife” instead of “spouse.” A key passage in Obergefell addresses this issue and provides a path of action until our laws are changed [Slip Op., at 24]:

The dynamic of our constitutional system is that individuals need not await legislative action before asserting a fundamental right. The Nation’s courts are open to injured individuals who come to them to vindicate their own direct, personal stake in our basic charter. An individual can invoke a right to constitutional protection when he or she is harmed, even if the broader public disagrees and even if the legislature refuses to act.

It will be many years before Michigan’s statutes fully comport with the recent Supreme Court ruling in Obergefell. This process is already underway by the Michigan Law Revision Commission. Click HERE to see more information on this project.

This blog serves as a general summary of the Obergefell decision and does not constitute legal advice. Our lawyers at Fraser Trebilcock will continue to monitor changes in order to assist with your trust & estate planning needs. If you have questions or would like more information, contact attorney Marlaine C. Teahan. Marlaine chairs the Trusts and Estates practice at Fraser Trebilcock and handles a wide variety of matters including: drafting wills, trusts and durable powers of attorney; trust and estate administration; guardianship and conservatorship matters; and probate litigation. To learn more about how to put together your own estate plan, contact Marlaine at 517.377.0869 or mteahan@fraserlawfirm.com.

SCOTUS Same-Sex Marriage Decision May Impact Employee Benefits Plans

On Friday, June 26, 2015, the U.S. Supreme Court issued the 5-4 landmark decision in Obergefell v Hodges striking down same-sex marriage bans across the country as unconstitutional under the Fourteenth Amendment. Continue reading SCOTUS Same-Sex Marriage Decision May Impact Employee Benefits Plans