At the State Bar of Michigan's Upper Michigan Legal Institute 2014, attorney Marlaine Teahan spoke on various Probate and Estate Planning updates, including durable powers of attorney and the importance of including digital assets in estate planning.

1. UPPER MICHIGAN LEGAL INSTITUTE
PROBATE & ESTATE PLANNING UPDATE
MARLAINE C. TEAHAN
FRASER TREBILCOCK
THESE MATERIALS ARE NOT INTENDED AS LEGAL ADVICE AND ARE FOR EDUCATIONAL PURPOSES ONLY.
© 2014 Fraser Trebilcock Davis & Dunlap, P.C.

2. Topics to be Discussed
Durable Powers of Attorney
Trust Drafting Tips
Probate Court
Developments
Digital Assets & Estate
Planning

3. 1. Durable Powers of Attorney
 Focus is financial DPOAs
 Highlights of the new DPOA law
New execution formalities
Acknowledgement Form by
Agent
Default rules –
Duties/Prohibitions

4. Durable Power of Attorney – Financial
 In a power of attorney, a principal designates an
agent (trusted spouse, child, parent, friend, or
entity) to make financial decisions.
 In a DPOA, the principal’s subsequent disability or
incapacity does not end the agent’s authority to act.
 Different types:
 General
 Limited
 Effective:
 Immediately (much more common)
 Upon disability (somewhat problematic)
 Usually avoids need for Conservatorship.

5. What can an Agent do?
 Conduct banking
 Buy/sell property
 Conduct/manage a business
 Prepare Tax returns
 Apply for governmental benefits
 Change beneficiary designations
 Make gifts
 Transfer property to a Trust
 Plan for Medicaid
 Anything principal could do personally (unless
DPOA is limited in scope)

6. New DPOA Legislation
 MCL 700.5501, Public Act 141 of 2012
 Effective May 22, 2012 -- misleading as
the new law impacts DPOAs that are
executed on or after October 1, 2012
 Purpose – reduce financial exploitation of
the elderly; not an effort to codify all of
agency law
 Financial institutions take different
approaches but seem to be aware of the
new law.

7. New Execution Formalities – MCL
700.5501(2)
A DPOA executed under this section shall
be:
 Dated;
 Signed voluntarily and by the principal or a
notary public on the principal’s behalf
(MCL 55.293); and
 Executed in one or both of the following
ways:
 2 witnesses, neither of whom is the agent
 Acknowledged by the principal before a notary
public

8. Responsibilities – MCL
700.5501(3)
An agent designated and acting under a DPOA has the
authority, rights, responsibilities, and limitations as provided
by law including, but not limited to the following actions which
an Agent shall do:
 Act as fiduciary, except as provided in DPOA
 Follow principal’s instructions
 Keep principal informed of actions, on request
 Upon request, provide accounting to principal,
conservator or guardian, or pursuant to judicial
order.
 Maintain records of actions

9. Limitations – MCL 700.5501(3)
The Agent shall not do the following unless
provided for in the DPOA or as provided by
court order:
 Gift all or any part of the principal's assets.
 Create joint tenancies between the
principal and the agent (while acting as
agent).
 Receive reasonable compensation for the
agent’s services.

10. Acknowledgement by Agent – MCL
700.5501(4-6)
 Before acting as agent under a DPOA, agent
must execute an Acknowledgement. Section
5501(4).
 Acknowledgements to substantially follow
format in Section 5501(4)
 Consider having it notarized
 Agent’s authority, responsibilities and potential
liability to principal remain unaffected even if
agent refuses to execute an
acknowledgement. Section 5501(6)

11. Agent Liability and Exoneration
 Agent may be liable for any damage/loss to principal;
other remedies also available. Section 5501(3)(g)
 Principal may exonerate agent of liability for breach of
fiduciary duty EXCEPT [Section 5501(3)(g)]:
 for actions committed in bad faith
 for actions committed reckless indifference, or
 if clause is inserted by an abuse by the agent of a
fiduciary or confidential relationship to the principal.
 Exoneration of an agent may be appropriate between
spouses serving as each other’s agent.

12. Third Parties and Agent Acknowledgements
 Third party – no liability to principal for
requiring an acknowledgement before
accepting agent’s authority under the
DPOA.
 Third party – no liability for complying in
good faith with instructions from an agent
even if the agent has not previously
executed an acknowledgement. Section
5501(5).

13. The new law DOES NOT affect DPOAs that
are:
 Executed before October 1, 2012
 Parental Delegations - EPIC Section 5103;
 Patient advocate designations
 Coupled with an interest in the subject matter of the power.
 In or part of a loan agreement, security agreement, pledge agreement,
escrow agreement, or other similar transaction.
 In connection with a transaction with a joint venture, limited liability
company, partnership, limited partnership, limited liability partnership,
corporation, condominium, condominium association, condominium trust, or
similar entity, including, without limitation, a voting agreement, voting trust,
joint venture agreement, royalty agreement, license agreement, proxy,
shareholder's agreement, operating agreement, partnership agreement,
management agreement, subscription agreement, certification of
incorporation, bylaws, or other agreement that primarily relates to such an
entity.
 Given primarily for a business or a commercial purpose.
 Created on a form prescribed by a government or a governmental
subdivision, agency, or instrumentality for a governmental purpose.

14. MTC agent provisions - no impact by new
law
DPOA law does not change agent sections in the
MTC:
 MCL 700.7303 (representation rules-agents)
 MCL 700.7405 (enforcement of charitable trust by
agent if in DPOA)
 MCL 700.7411 (receipt by agent of notice of
modification or termination of noncharitable trust if
settlor is an incapacitated individual)
 MCL 700.7602 (to extent expressly authorized by
trust or DPOA, an agent may exercise settlor’s
powers to revoke, amend or distribute trust
property)

15. Issues with financial institutions
 Are there problems with banks requiring
acknowledgement pre-Oct. 1, 2012?
 DPOAs often don’t include acknowledgement
 Banks providing blank forms to agent
 Banks may require notarization
 Banks not happy when agent brings in DPOA!
(Advise the principal to bring DPOA to bank)
 Title companies may require notarization of
acknowledgement for use in sale of real property
 Education needed – be patient

16. Recommendations
 Update your DPOA Form. See Exhibit.
 Take care with DPOAs in a Medicaid-
planning setting. See Exhibit.
 Advise clients (principals) when to vary
from default rules and to bring DPOAs to
banks.
 Attach Agent Acknowledgements and use
“Prepared for the Principal by:”
 Educate agents how to act properly.
 Consider exoneration clauses (esp. for
spouse) and provisions related to trusts

17. Other resources
 Drafting for Changes in the Durable
Power of Attorney Statute, Marguerite
Munson Lentz, ICLE 22nd Annual
Drafting Estate Planning Documents,
January 2013
 The Top Ten “Super Powers” in Your
Durable Power of Attorney, Michele
C. Marquardt, ICLE 53rd Annual
Probate & Estate Planning Institute

18. 2. Trust Drafting Tips
 Comply with the requirements for creating
a trust. MCL 700.7402
 Is your client's mental capacity sufficient?
 The capacity required to create, amend,
revoke, or add property to a revocable trust,
or to direct the actions of the trustee of a
revocable trust, is the same as that required
to make a will. MCL 700.7601 and MCL
700.2501.

19. Trust Drafting Tips – Learn
7105(2)
 Learn the non-modifiable
provisions of the MTC
 16 provisions in EPIC Section
7105(2) cannot be modified by
the terms of a trust
 Other than these 16 provisions,
terms of a trust prevail over any
provision of MTC

20. MTC 7105(2) - highlights
 Follow requirements of 7401 for creating trust
 Trustee must follow 7801, acting in good faith
and for benefit of trust beneficiaries
 Court has many powers that cannot be
changed by terms of trust (to terminate,
modify, make trustee account or provide
information, take action and exercise
jurisdiction.
 Periods of limitations regarding commencing
judicial action
 No contest clause ineffective if probable cause

21. Adopt execution formalities
 Drafters should be consistent in execution
formalities
 Client, witnesses and attorneys present at signing
 Eliminate children and others
 Identify each document and its purpose
 Read aloud the self-proving language prior to
signing
 Provide trust funding letter
 Send follow up letter on funding
 Memo to file after signing
 Letter terminating client relationship

22. Federal Estate, Gift & GST
Taxes
YEAR ESTATE & GIFT
TAX
EXEMPTION
TOP ESTATE,
GIFT & GST
TAX RATE
LIFETIME GIFT
TAX
EXEMPTION*
BASIS OF
INHERITED
ASSETS
2011
(begin
portability)
$5 million 35% $5 million Fair market
value
2012
(begin COLA)
$5.12 million 35% $5.12 million Fair market
value
2013** $5.25 million 40% $5.25 million Fair market
value
2014** $5.34 million 40% $5.34 million Fair market
value
2015 and
beyond
Increases each
year by a COLA
40%
Increases each
year by a COLA
Fair market
value
*Annual gift tax exemption for 2014 is $14,000 (COLA adjusted since 1997)
**American Taxpayer Relief of Act of 2012 made permanent the 40% rate and the $5 million as

23. Income tax planning
 May be more important than estate tax planning
 Consider how the estate plan results in a step-up
in basis after death of BOTH spouses
 Review old plans – marketing issue, malpractice
issue?
 Funding formulas – may not work as intended; and at
2nd death, no step up in assets in credit shelter of 1st
to die
 Collapse old trusts of 1st to die? (Using trust terms or
MTC 7416 -- go to court)
 Review joint trusts – will all assets receive step up at
2nd death? (See John Martin, Lou Harrison materials)

24. Portability
• Portability – What is it?
 An irrevocable election to preserve the deceased spousal
unused exemption of the 1st spouse to die that makes it
“portable” to the estate of the 2nd spouse to die.
 Began in 2011 and was extended indefinitely by the
American Taxpayer Relief Act of 2012.
• How do you elect portability?
 On a timely filed Form 706 return for the 1st spouse
(w/extensions).
 Who elects it? – Personal Representative of 1st spouse.
 Form 706 is streamlined – estimates can be used for some
assets. Forms & Instructions for 706 and 709 were
significantly modified.
 New temporary treasury regulations for portability issued.

25. Pros & Cons of Portability of
DSUE
 What are some of the benefits?
 Increase exemption for 2nd spouse to die – save on estate taxes!
 2d spouse can make gifts in life using unused exemption of 1st spouse
 Extensive estate planning not needed for some clients
 Easy to get step up in basis if all assets owned by 2nd spouse at death
 Allows for post-mortem planning
 What are a few of the problems or pitfalls?
 Second marriage – fight over who pays for tax return or if should even be
done
 Remarriage is an issue – only available to claim for last deceased spouse
 Estate and gift tax is portable; GST tax is not portable

26. Draft with flexibility in mind
 Provide terms allowing trustee to
terminate non-economic trust
 Provide terms allowing trustee to
terminate trust to accomplish tax-
related goals
 In trust administration where terms not
flexible, consider invoking court’s
jurisdiction

27. Include statement of intent
 What is the purpose of trust? Spell it
out.
 Language of intent will help:
Trustee in administration
Court determine intent when
exercising jurisdiction re:
terminating, reforming or modifying
trust

28. Learn about decanting
 Trustee’s ability to “pour” trust assets from one
trust to another.
 Helpful to fix administrative terms of trust
 Helpful for special needs trusts
 Possible under MCL 556.112(c) and MTC
7820a
 Materials – Jim Spica’s Chapter 7 of Trust
Administration Under the MTC (ICLE); Jennifer
Remondino – ICLE 54th Probate Annual
Institute

29. New legislation- IN THE
WORKS
 MI Domestic Asset Protection
Trusts
 Directed Trusts
 Tenancy by the Entireties
property in joint trusts
 Uniform Ladybird Deed
Legislation

30. More new legislative projects
 Amendment to MCL 211.27a(7)(s)
 Currently provides no uncapping if conveyance to
1st degree of consanguinity – blood or affinity on
or after December 31, 2013
 Possible technical amendment (Probate Council)
 HB 5552 – passed House June 5, 2014 with ~80
sponsors
 Goes beyond technical changes
 Grandchildren, Grandparents (and steps) included
 Parts are effective December 31, 2014 and after

31. Trust Tips – Fund the Trust
 Avoid deeds in the drawer
 Provide instructions on funding to
clients
List
Letter
 Assist with funding as needed
 Follow up on funding
 Review funding when updating EP

32. 3. Probate Court
Developments
 Inventory Fee Calculation
 Project in the works – increased filing
fee, no inventory fee
 Estate Recovery Litigation
Grosskopf (2013)
Salemka-Shire (2012)
 Foreign Guardianships –new
forms/rules
 New Probate Court Forms –
petition/order for approval and sale of
real estate

33. Probate Court Developments
 DNR changes – EPIC and DNR Act amended
(eff. 2-5-14) – guardian can consent to DNR
for ward under certain circumstances
 Foreign Language Interpreters in court beefed
up. See MCR 1.111
 Peace of Mind Registry – central online
registry for health care directives. MCL
333.10301
 Probate Appeals Project

34. Inventory Fee Calculation
 Public Act 596 of 2012 amended MCL 600.871
(Fees in decedent’s estates); effective March 28,
2013.
 Overturns Wolfe-Haddad v Oakland County, 272
Mich App 323, 725 NW2d 80 (2006).
 For deaths on 3-28-13 and after, the inventory
value of an estate's real property encumbered
by/used as security for indebtedness, until 12-31-
17, is the date of death value less the amount of
the indebtedness.
 Negative values are not permitted on Inventory;
lowest value is $0.00.
 Calculate each piece of real estate separately.
 No deductions for liens on personal property.

36. 4. What are digital assets?
 3 Main types:
 Online accounts (Facebook, LinkedIn, Twitter,
PayPal, eBay, Pinterest, iTunes, Email accounts,
blogs)
 Files stored on client’s computer, phone, DVDs,
CDs, in the Cloud, IMs, saved emails
 Intellectual property rights client may have in any
digital assets
 Includes client created digital assets and
purchased assets
 In future – digital estate planning documents?

37. Prevalence of Social Media
 World's largest
professional network on
the internet: 277 million
members (up from 200
million last year) in more
than 200 countries and
territories
 Professionals are signing
up at a rate of
approximately two new
members per second
(LinkedIn, as of Dec 31,
2012)
 #3 Most searched
platform on the Internet
(comScore, 2011)
 4 billion views a day
vs. last year’s 600+
Million mobile views a
day
 6 billion hours of video
watched per month!
 100 hours of video
uploaded per minute!
LinkedIn YouTube

38. Prevalence of Social Media
 #1 Most visited website
in the world (Alexa, Jan
2013)
 1.28 Billion users (up
from 1 Billion last
year)
 Average time spent per
visit on Facebook: 28
minutes
 Average time spent on
websites: 58 seconds
 Twitter is now
processing half a
billion tweets a day!
 • 32% of all Internet
users use Twitter
(Marketing Land, Dec
2012)
 • 65% of Fortune Global
100 companies actively
use Twitter (Twitter
CEO, Dick Costolo, Oct
2011)
Facebook Twitter

39. Importance to estate planning
 Prevalence of social media and digital assets
 Almost all clients own this type of asset
 Some clients may prefer they are never
accessed
 Do you address it in your documents?
 If not, what will happen to your client’s digital
assets?
 Advance planning may be helpful
 Importance will only increase in the future

40. Are there laws on digital
assets?
 Yes in increasing number of states
 Michigan pending legislation –
 SB 293, amends PR powers, MCL 700.3715:
 HB 5366, 5367, 5368, 5369, 5370 (tie barred;
introduced 2-26-14)
 Probate and Estate Planning Council committee
 Following Uniform Law model
 May substitute for HB 5366-5370
 Uniform Law Commission, drafting stages –
Fiduciary Access to Digital Assets – final reading
July, 2014

41. Problems with Digital Assets
 Permanent nature? Future – no delete
button.
 What type of asset is it? License to use
or personal property?
The answer to this question varies from
asset to asset and sometimes even
within assets.
 Terms of service (TOS) control; contracts
with users

42. Powers and duties of fiduciary
 Current Michigan law inadequate;
see powers of PR (MCL 700.3715)
and Trustee (MCL 700.7817);
 Terms of governing instruments will
control; however, Terms of service
contracts may still limit access and
control.

43. Estate Planning Update Idea
Digital Assets. My _____[type of fiduciary] shall have the power to
access, use and control my digital devices, including but not limited to,
desktops, laptops, tablets, peripherals, storage devices, mobile
telephones, smartphones, and any similar digital device which
currently exists or may exist as technology develops or such
comparable items, as technology develops, for the purpose of
accessing, modifying, deleting, controlling or transferring my digital
assets, and the power to access, modify, delete, control and transfer
my digital assets, including but not limited to my emails received, email
accounts, digital music, digital photographs, digital videos, software
licenses, social network accounts, file sharing accounts, financial
accounts, domain registrations, DNS service accounts, web-hosting
accounts, tax preparation service accounts, financial accounts,
retirement accounts, online stores, affiliate programs, other online
accounts and similar digital assets which currently exist or may exist
as technology develops or such comparable assets as technology
develops. My _____[type of fiduciary] is also entitled to acquire and
use my logins and passwords for all digital assets; my password list is
located at ____________.
Modified slightly from a format proposed by attorney Sue E. Fabian and submitted to the Elder Law

44. Recommendations with client
 Discuss digital assets with clients
 What are they?
 What does client want done with them?
 Who should have control at disability/at death?
 Have clients create a password-protected
inventory of digital assets and a list of Site
name/URLs/user name/password/security
questions that family or trusted fiduciary can
access
 Have clients update estate planning documents to name
digital asset fiduciaries (agent, conservator, PR, trustee)
 For PR/Trustee Client - Review Mining a Decedent’s
Computer for Digital Assets, exhibit Michele C.
Marquardt.

45. Recommendations in your
practice
 Develop language for various estate planning
documents
 Watch for new laws in this area
 Keep up to date on how various providers are
dealing with access to digital assets at death;
modify forms accordingly

46. QUESTIONS?
© 2014, Fraser Trebilcock
Davis & Dunlap, P.C.
Fraser Trebilcock Davis & Dunlap, P.C.
124 W. Allegan Street, Suite 1000
Lansing, Michigan 48933
www.fraserlawfirm.com
Phone: (517) 377-0869
Fax: (517) 482-0887
Marlaine C. Teahan, Chair
Trusts and Estates Department
mteahan@fraserlawfirm.com
517-377-0869
Additional offices located in:
Detroit and Grand Rapids