Five Stories That Matter in Michigan This Week – November 22, 2024

  1. Detroit City Council Mulls New Regulations on Cannabis Advertising

The Detroit Free Press recently reported that the Detroit City Council is considering adopting new regulations that would restrict cannabis advertisements. Proposed restrictions include banning ads within 1,000 feet of schools, libraries, and parks, and other “sensitive” areas.

Why it Matters: The proposed ordinance is meant to shield children from such advertising. An ordinance already restricts tobacco companies from advertising 1,000 feet from schools.

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  1. Fraser Trebilcock Named a Tier 1 Law Firm in Lansing in Six Practice Areas for 2025

Fraser Trebilcock has received a First Tier ranking in Lansing in six practice areas by U.S. News – Best Lawyers® “Best Law Firms” in 2025. Those practice areas are: Administrative/Regulatory Law, Bankruptcy and Creditor Debtor Rights/Insolvency and Reorganization Law, Commercial Litigation, Environmental Law, Litigation – Labor and Employment, and Utilities Law. In addition to the First Tier ranking in six legal practice areas, Fraser Trebilcock has been named a Tier Two firm in Lansing for four practice areas, and has also been named a Tier Three firm in Lansing for four practice areas. The Tier Two areas are: Closely Held Companies and Family Businesses Law, Litigation – Insurance, Real Estate Law, and Trusts & Estates. The Tier Three areas are: Bet-the-Company Litigation, Corporate Law, Litigation – Construction, and Litigation – Environmental.

Why it Matters: Firms included in the 2025 “Best Law Firms” list are recognized for professional excellence with persistently impressive ratings from clients and peers. Achieving a tiered ranking signals a unique combination of quality law practice and breadth of legal expertise. The 2025 rankings are based on the highest number of participating firms and the highest number of client ballots on record. Receiving a tier designation reflects the highest level of respect a firm has earned among other leading lawyers and clients in the same communities and in the same practice areas for their abilities, their professionalism and their integrity.

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  1. Business Education Series: Referral Generation: Avoid Peaks & Valleys in Your Sales Funnel

Every business owner prefers a referral to a cold lead. Referrals have a basis of trust and understanding that makes the sales process simpler to execute and winning easier to achieve. Referrals can’t be generated intentionally however, right? On Tuesday, December 17, Ian Richardson, BBA, CSAP, MCSA, Principal Consultant, Fox & Crow Group LLC & Managing Partner, Richardson & Richardson Consulting, LLC, will discuss how this is incorrect.

Why it Matters: Learn how to structure an intentional referral generation pipeline from existing clients while minimizing the risk of client churn. Three takeaways include preparing conversations with clients, retention efforts for clients who are not ready to refer, and review of how to prepare a referral list for clients. Full information and to register.

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  1. Michigan CRA Publishes October ’24 Data: Average Price Decreases

Per data released by the Cannabis Regulatory Agency (CRA), the average retail price for adult-use sale of an ounce of cannabis in October was $73.99, a decrease from $78.68 in September. This is a decrease from October 2023, where the average price was $97.62.

Why it Matters: While the prices of cannabis and cannabis-related products continue to decrease and make consumers happy, growers on the other hand are seeing profits decrease resulting in them seeking ways to halt new licenses to be granted in an effort to steady prices.

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  1. Michigan Court of Appeals Confirms Commercial Roof Replacement Qualifies as “New Construction” for Property Tax Purposes

In a recent decision that clarifies the scope an “addition” for property tax purposes, the Court of Appeals held that installing a new roof on a commercial building constitutes “new construction” that triggers an increase in the property’s taxable value beyond the standard legislative cap.

Why it Matters: By confirming that even basic building improvements like roof replacements constitute “additions” that can trigger increased tax assessments, the ruling clarifies a power that local tax assessors have long possessed but may not have consistently exercised. Read more.

Related Practice Groups and Professionals 

Cannabis Law | Sean Gallagher
Business & Tax | Paul McCord

Five Stories That Matter in Michigan This Week – November 15, 2024

  1. 2025 IRS Benefit Plan Limits: Key Changes Announced

The IRS has released updated benefit plan limits for 2025, including increases to retirement plan contributions. For example, the Section 415 limit will rise from $69,000 to $70,000, while the annual 401(k), 403(b), and 457(b) deferral limit will increase to $23,500.

Why it Matters: Employers must understand and implement these and other new limits to ensure their benefit plans remain compliant and competitive for the upcoming year.

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  1. Michigan Court of Appeals Confirms Commercial Roof Replacement Qualifies as “New Construction” for Property Tax Purposes

In a recent decision that clarifies the scope an “addition” for property tax purposes, the Court of Appeals held that installing a new roof on a commercial building constitutes “new construction” that triggers an increase in the property’s taxable value beyond the standard legislative cap.

Why it Matters: By confirming that even basic building improvements like roof replacements constitute “additions” that can trigger increased tax assessments, the ruling clarifies a power that local tax assessors have long possessed but may not have consistently exercised. Read more.

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  1. Legislation Introduced Requiring License to Sell Tobacco and Vape Products

Legislation introduced this week would require businesses to purchase a three-year license for $1,500 to sell tobacco and vape products, with supporters of the bills citing the continued use of vape products by teens.

Why it Matters: Currently, Michigan is one of ten states that does not have a tobacco retail license. A licensing system would be created and monitored by LARA, which would regularly conduct inspections to ensure no underage sales are taking place. Violations range from misdemeanors, suspended licenses, to forfeiture of license.

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  1. Michigan Legislature Passes Data Center Tax Break Bill

This week, the Michigan House passed a bill that would exempt large data centers from Michigan use tax on equipment.

Why it Matters: With the massive computing needs of artificial intelligence, data center development has exploded across the country. While this bill would likely make Michigan more attractive to data center developers, opponents argue that having more data centers—which consume massive amounts of energy—would undermine Michigan’s clean energy goals.

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  1. Business Education Series: Referral Generation: Avoid Peaks & Valleys in Your Sales Funnel

Every business owner prefers a referral to a cold lead. Referrals have a basis of trust and understanding that makes the sales process simpler to execute and winning easier to achieve. Referrals can’t be generated intentionally however, right? On Tuesday, December 17, Ian Richardson, BBA, CSAP, MCSA, Principal Consultant, Fox & Crow Group LLC & Managing Partner, Richardson & Richardson Consulting, LLC, will discuss how this is incorrect.

Why it Matters: Learn how to structure an intentional referral generation pipeline from existing clients while minimizing the risk of client churn. Three takeaways include preparing conversations with clients, retention efforts for clients who are not ready to refer, and review of how to prepare a referral list for clients. Full information and to register.

Related Practice Groups and Professionals

Employee Benefits
Business & Tax | Paul McCord
Energy, Utilities & Telecommunication | Sean Gallagher

Michigan Court of Appeals Confirms Commercial Roof Replacement is “New Construction” for Property Tax Purposes

In a recent decision that clarifies the scope an “addition” for property tax purposes, the Court of Appeals held that installing a new roof on a commercial building constitutes “new construction” that triggers an increase in the property’s taxable value beyond the standard legislative cap. The case, Knier, Powers, Martin, & Smith, LLC v. City of Bay City, addressed both statutory and constitutional challenges to this interpretation, ultimately affirming the Michigan Tax Tribunal’s ruling that such improvements fall within the meaning of “additions” under both Michigan tax law and the state constitution.

Case Background

In 2021, Knier, Powers, Martin, & Smith, LLC (KPMS) undertook a $70,053 roof replacement project on their commercial office building in Bay City, Michigan. The project involved installing new shingles, a “60 MIL-EPDM” membrane, and replacing the underlying plywood.

Following this improvement, Bay City assessed an increase in the property’s taxable value for the 2022 tax year:

    • 2021 taxable value: $161,262
    • 2022 taxable value: $181,283
    • Increase: $20,021 (12.4152%)
    • Fair market value increase: from $382,400 to $444,600

Under Michigan law, increases in taxable value are generally limited to the lesser of 5% or the inflation rate during an owner’s period of ownership. However, Bay City determined that this “cap” didn’t apply because the increased value resulted from an “addition” to the property.

KPMS contested this assessment before the Bay City Board of Review, which affirmed the city’s position. KPMS then appealed to the Michigan Tax Tribunal, arguing two main points:

    1. The city had increased the taxable value beyond the cap in violation of both state law (MCL 211.27a(2)(a)) and the Michigan Constitution (Const 1963, art 9, § 3).
    2. The city had overstated the property’s cash value.

Before the Tribunal, KPMS moved for summary disposition, while Bay City requested summary disposition in its favor. The Tribunal granted partial summary disposition to Bay City, holding that the roof replacement qualified as “new construction” and therefore constituted an “addition” under Michigan law. While the Tribunal’s order left open the issue of the roof’s true cash value, KPMS appealed the legal determination about whether the improvement qualified as an “addition.”

The Court’s Analysis

The Court of Appeals addressed both statutory and constitutional arguments raised by KPMS, focusing primarily on whether a roof replacement qualifies as “new construction” under the relevant legal framework.

First, the court first addressed KPMS’s argument that the roof replacement did not constitute “new construction” under MCL 211.34d(1)(b)(iii). KPMS presented two main contentions:

  1. The term “property” in the statute refers only to real property, narrowly defined as land and buildings, not components like roofs.
  2. The roof replacement could not be “new construction” because a roof existed both before and after the project.

The court rejected both arguments. On the first point, it found that KPMS’s narrow interpretation conflicted with the General Property Tax Act’s (GPTA) definition of real property, which includes “all buildings and fixtures on the land, and all appurtenances to the land” (MCL 211.2(1)(a)). Moreover, the court noted that throughout the GPTA, the Legislature uses “real property” or “personal property” when intending to single out those categories, but uses the broader term “property” when incorporating both types.

On the second point, the court found that the Legislature intended to broadly define “new construction” for taxation purposes. This conclusion was supported by:

    • The statute’s narrow definition of “replacement construction” (limited to property replaced due to accident or act of God).
    • The specific carve-out for residential property repairs in MCL 211.27(2).
    • The fact that this residential carve-out would be meaningless if such repairs weren’t otherwise considered “new construction.”

KPMS also argued that even if the statute permitted the increased assessment, such an interpretation would conflict with the term “additions” in Article 9, § 3 of the Michigan Constitution. The court rejected this argument as well, relying heavily on the Michigan Supreme Court’s decision in WPW Acquisition Co v City of Troy.

The court explained that when Proposal A was ratified, “additions” was already a technical legal term with a specific meaning in property tax law. At that time, the term included “all increases in value caused by new construction or a physical addition of equipment or furnishings.” Because the current statutory definition of “new construction” tracks this historical meaning, the court found no constitutional conflict.

Importantly, the court distinguished this case from situations where the Legislature had impermissibly expanded the constitutional meaning of “additions.” For example, in WPW Acquisition Co, the Supreme Court had struck down a provision that treated increased occupancy rates as “additions” because such changes fell outside the technical meaning of the term when Proposal A was adopted.

Conclusion

By confirming that even basic building improvements like roof replacements constitute “additions” that can trigger increased tax assessments, the ruling clarifies a power that local tax assessors have long possessed but may not have consistently exercised. While the underlying legal framework isn’t new, the court’s explicit confirmation that such improvements qualify as “new construction” may embolden local authorities to more aggressively reassess commercial properties following renovations. Commercial property owners should therefore carefully consider the potential tax implications of planned improvements, recognizing that even necessary maintenance could trigger assessment increases beyond the standard caps imposed by Proposal A. If you have any questions, please contact Paul McCord or your Fraser Trebilcock attorney.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.


Headshot of Fraser Trebilcock attorney Paul V. McCordFraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

Five Stories That Matter in Michigan This Week – November 8, 2024

  1. New Approval Procedures for Large-Scale Renewable Energy Projects to Take Effect on November 29, 2024

The Michigan Public Service Commission and other state regulators have recently finalized procedures for approval processes for large-scale solar and wind projects to implement a 2023 law that transfers decision-making authority, in some cases, from local governments to the state. The new procedures will take effect on November 29, 2024.

Why it Matters: Renewable energy project approval processes will, in most instances, still need to begin at the local level. However, the law allows developers to seek state approval from the Public Service Commission if a project is denied by a local government.

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  1. Business Education Series: Referral Generation: Avoid Peaks & Valleys in Your Sales Funnel

Every business owner prefers a referral to a cold lead. Referrals have a basis of trust and understanding that makes the sales process simpler to execute and winning easier to achieve. Referrals can’t be generated intentionally however, right? On Tuesday, December 17, Ian Richardson, BBA, CSAP, MCSA, Principal Consultant, Fox & Crow Group LLC & Managing Partner, Richardson & Richardson Consulting, LLC, will discuss how this is incorrect.

Why it Matters: Learn how to structure an intentional referral generation pipeline from existing clients while minimizing the risk of client churn. Three takeaways include preparing conversations with clients, retention efforts for clients who are not ready to refer, and review of how to prepare a referral list for clients. Full information and to register.

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  1. Two House Bills Introduced Aimed at Amending Minimum Wage, Earned Sick Time Leave Act

House Bills 6056 and 6057 were introduced into the Michigan House this week, seeking to amend the Earned Sick Time Leave Act, and keep the tipped wage at the current 38%.

Why it Matters: The bipartisan legislation aims to keep the tipped wage at 38%, while slightly accelerating the minimum wage increase, as well as providing a clearer definition of an employee, and how employers can manage benefits. This legislation comes as the state is preparing for the February 21, 2025 deadline, where the minimum wage and paid sick time leave laws will be altered.

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  1. Michigan Court of Appeals Confirms Commercial Roof Replacement Qualifies as “New Construction” for Property Tax Purposes

In a recent decision that clarifies the scope of property tax “additions” under Michigan law, the Court of Appeals held that installing a new roof on a commercial building constitutes “new construction” that can trigger increases in taxable value beyond the standard legislative cap.

Why it Matters: By confirming that even basic building improvements like roof replacements constitute “additions” that can trigger increased tax assessments, the ruling clarifies a power that local tax assessors have long possessed but may not have consistently exercised.

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  1. FTC Overhaul of Hart-Scott-Rodino Act Pre-Merger Notification Rules

On October 10, 2024, the Federal Trade Commission (FTC) unveiled extensive modifications to the Hart-Scott-Rodino Act (HSR) pre-merger notification regulations. These changes, set to take effect in January 2025, significantly expand disclosure requirements for mergers and acquisitions.

Why it Matters: The Act applies to transactions that meet specific size thresholds, which are adjusted annually. Generally, in 2024, transactions where one party has a size of at least $239 million; the other party has a size of at least $23.9 million; and the size of the transaction is at least $119.5 million, must be reported. The Act aims to give regulators the opportunity to review potentially anticompetitive deals before they are consummated.

Related Practice Groups and Professionals 

Energy, Utilities & Telecommunication | Sean Gallagher
Business & Tax
Labor, Employment & Civil Rights | David Houston

Filing of Property Transfer Affidavits

Michigan law requires that a Property Transfer Tax Affidavit (“PTA”) be filed with the local assessor (city or township) upon the transfer of ownership of real property. As used in the statute “transfer of ownership” means the conveyance of title to or a present interest in real property or some personal property.  The PTA must be filed within 45 days of the date of transfer.

The penalties for failure to file can be severe. Generally, (i) if the sale price of the property transferred is $100,000,000.00 or less, the penalty is $20.00 per day for each separate failure beginning after the 45 days have elapsed, up to a maximum of $1,000.00 or (ii) if the sale price of the property transferred is more than $100,000,000.00, the penalty is $20,000.00 after the 45 days have elapsed. Note, the statute is complex and each situation needs to be carefully reviewed with your real estate attorney.

Additionally, if the assessor discovers the transfer in a later tax year, the assessor can go back and reassess the property for the three prior years and bill for the difference in the taxes actually paid plus interest and penalties.

In order to protect yourself, you must make sure that you have timely filed the PTA. When filing you should also have a copy time-stamped by the local assessor, so you can prove the PTA was properly and timely filed. The safest way to accomplish this is to hand-file the PTA and ask at that time for the copy to be time-stamped. However, in these days of COVID-19 shutdowns, many assessors’ offices are closed. If this is the case in the applicable jurisdiction, I suggest you utilize either (i) an overnight delivery service or (ii) certified mail, return receipt requested. You should send the original along with a copy to be time-stamped together with a self-addressed, postage-paid envelope and request in your cover letter that time-stamped copy be returned to you. Utilizing either an overnight delivery service or certified mail, return receipt requested will provide evidence that you did timely file the PTA.


We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.


Fraser Trebilcock Attorney Norbert T. Madison, Jr.Norbert T. Madison, Jr. is a highly regarded corporate and real estate attorney with more than three decades of experience. Primarily focused on real estate matters, Norb represents clients in all facets of the practice, including the purchase, sale, leasing, and financing of various types of real estate, as well as the development of industrial, office, retail, condominium and residential real estate. Contact Norb at 313.965.9026 or nmadison@fraserlawfirm.com.

Tax Sales Proceeds In Excess Of The Tax Owed Must Be Returned To The Taxpayer

On July 17 2020, the Michigan Supreme Court ruled in Rafaeli, LLC v Oakland County (the “County”) that the proceeds for a tax sale in excess of the tax owed must be returned to the taxpayer. The ruling stems from a lawsuit filed in Oakland County Circuit Court (the “Circuit Court”), that challenged one part of Michigan’s tax foreclosure law contained in the Michigan General Property Tax Act (the “GPTA”). That provision, which dates back to 1999, allows county treasurers – who collect delinquent taxes on behalf of communities – to pocket all of the proceeds of auctioned properties, regardless of the amount of the delinquent tax debt. But the Supreme Court unanimously ruled that this aspect of the GPTA was an unconstitutional taking under the Michigan Constitution.

The case originated back in 2011 when Uri Rafaeli’s business — Rafaeli, LLC (“Rafaeli”) purchased a modest rental property in Southfield. Rafaeli inadvertently underpaid its property taxes by $8.41, that over time due to interest and penalties grew to $285.81 in unpaid property taxes. In a companion case, Andre Ohanessian (“Ohanessian”) owed approximately $6,000 in unpaid property taxes, interest, and penalties from 2011. The County, foreclosed on both properties and sold the properties at public auction, Rafaeli’s for $24,500 and Ohanessian’s for $82,000. The properties were sold in accordance with the requirements of the GPTA. The County retained the surplus proceeds and distributed them to various governmental entities.

Rafaeli and Ohanessian sued the County alleging the actions of the County violated the due-process and equal protection clauses of the US and Michigan Constitution, as well as an unconstitutional taking. The Circuit Court ruled in favor of the County reasoning that the property was properly forfeited and did not constitute a “taking” in violation of the US or Michigan Constitution. The Michigan Court of Appeals affirmed, relying on precedent from the US Supreme Court in regard to civil-asset taking resulting from criminal activity. The Michigan Supreme Court (the “Court”), reversed holding “defendants’ [Oakland County] retention of those surplus proceeds is an unconstitutional taking without just compensation..”

The Court noted that upon sale, the foreclosing governmental unit deposited all of the sales proceeds from all foreclosure sales into a unified tax sales proceeds account. The proceeds are used to cover the costs for all foreclosure proceedings for the year of tax delinquency with the excess distributed to appropriate governmental units. Michigan is one of nine states that requires the foreclosing governmental unit to disburse the excess proceeds to someone other than the former owner. The Court distinguished the civil-asset forfeiture of criminal statutes in that the purpose of such statutes was, in part, to punish the owner of the property. Conversely, the purpose of the GPTA is to encourage the timely payment of taxes, not to punish the former property owner.

The Court took an exhaustive review of common law and prior cases revealing that a Taking Clause violation will occur when the surplus is retained by the taxing authority and not returned to the former property owner. Further “(T)he GPTA does not recognize a former property owner’s statutory right to collect the surplus proceeds.” The Court conclude that the common law of the State of Michigan recognized that right. The purpose of the GPTA is not to seize property and retain proceeds in excess of the taxes owed,

Accordingly, when property is taken to satisfy an unpaid tax debt, just compensation requires the foreclosing governmental unit to return any proceeds from the tax-foreclosure sale in excess of delinquent taxes, interest, penalties and fees reasonably related to the foreclosure and sale of the property – no more, no less.

The case is now headed back to the Circuit Court to determine a remedy. However, an appropriate remedy may involve changing the GPTA. Complicating matters further is the possibility that former foreclosed property owners may come back looking for any surplus proceeds that were collected and distributed to the various government units. Some counties make a considerable sum in auction profits that they use to boost their delinquent tax revolving funds, which some counties then use to fill their budget holes.


We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.


Fraser Trebilcock Attorney Norbert T. Madison, Jr.Norbert T. Madison, Jr. is a highly regarded corporate and real estate attorney with more than three decades of experience. Primarily focused on real estate matters, Norb represents clients in all facets of the practice, including the purchase, sale, leasing, and financing of various types of real estate, as well as the development of industrial, office, retail, condominium and residential real estate. Contact Norb at 313.965.9026 or nmadison@fraserlawfirm.com.


Fraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

Michigan Supreme Court Clarifies Eligibility for Charitable Property Tax Exemption

This week the Michigan Supreme Court in Baruch SLS Inc v Township of Tittabawassee (MSC Docket No 152047) clarified how the factors are to be considered in determining whether real property is exempt from taxation. Continue reading Michigan Supreme Court Clarifies Eligibility for Charitable Property Tax Exemption

If It Doesn’t Say So, it Aint So: Michigan Supreme Court Holds For-Profit Schools Entitled to Property Tax Exemption

A unanimous Michigan Supreme Court decision this week will have big implications for for-profit schools and colleges – and even for-profit laboratories, research and development facilities, and test centers. Continue reading If It Doesn’t Say So, it Aint So: Michigan Supreme Court Holds For-Profit Schools Entitled to Property Tax Exemption

Estate Strategies Summer Newsletter

Summer ESFraser 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.

 

 

 

Estate Strategies Spring Newsletter

Hands-with-Paper-Doll-FamilyFraser Trebilcock’s Spring 2015 Estate Strategies newsletter contains valuable information on a variety of Trusts and Estates topics, including:

  • Ten tips for Estate planning.
  • Protection planning techniques to protect your assets.
  • An overview on the new property tax uncapping exemption and the possible benefits.

Continue reading Estate Strategies Spring Newsletter