Recent federal tax law changes have made “permanent” the favorable provisions around step-up in basis, higher estate, gift, and generation-skipping transfer (GST) tax exemptions. The exemption is scheduled to be $15 million per person in 2026 (indexed for inflation), and the top estate and gift tax rate remains 40%.

Certain income tax laws for trusts and estates were also made “permanent”. Trusts and estates are still not able to deduct in most cases investment advisory fees. And, the maximum trust and estate income tax rate is still capped at 37%, with the maximum capital gains rates at 20%. The tax brackets are very compressed for an estate or nongrantor trust, making the tax impact more onerous when compared with an individual.

No tax policy sunsets are on the horizon—for now. While future legislation could still alter the landscape, these updates provide a welcome sense of stability for wealth transfer and estate planning. Some may feel relief that their prior planning aligns well with current law, while others may wish they had waited for greater certainty before taking major steps. Either way, now is the time to review your plan and adjust course for the future.

Recent Michigan Law Updates (2024-2025)

Pet Trusts can now last for the life of a pet (versus a term of years).

Silent Trusts

• Non-disclosure period: The trustee can withhold information about a trust’s existence from a beneficiary for a period not exceeding 25 years.
• Withheld information: The trust instrument specifies what information, such as the trust’s existence or property value, is not to be disclosed.
• “Protection powerholder”: The trust can appoint a separate individual to receive information and direct the trustee on behalf of the beneficiary. This person has a fiduciary duty to the beneficiaries.

Simplified Probate procedures were enacted for Estates Under $50,000 (as indexed)

Powers of Attorney (POA)

• Uniform Power of Attorney Act (UPOAA): Effective July 1, 2024, Michigan adopted the UPOAA, standardizing the creation and use of POAs and ensuring they are more readily accepted by financial institutions across states.
• Automatic Durability: POAs executed after July 1, 2024, are automatically considered “durable” (meaning they remain valid if the principal becomes incapacitated) unless the document expressly states otherwise.
• POA must be Notarized in order to gain maximum protection under the new law. If only two witnesses, and no notary, the POA is effective but is not deemed to be authentic.
• Agent Authority: Agents cannot make gifts, change beneficiaries, or modify trusts unless the document grants that authority.

Estate and Trust Planning Ideas for 2025–2026

With changes in state law, and increased exemptions and favorable tax rates now in place, this is an excellent time to coordinate with your advisory team and ensure your estate plan remains efficient, intentional, and up to date.

Here are practical steps and ideas to consider:

1. Review Your Trust Tax Returns with Your Estate Planning Attorney
   Ensure that income is being properly reported and distributed. For instance, a non-grantor trust paying capital gains to beneficiaries may face higher overall tax costs than if the trust retained those gains.
2. Share Estate Planning Documents with Your Tax Preparer
   Coordinate your estate planning documents and tax filings to ensure consistent treatment and capture all available deductions and elections.
3. Evaluate Trusts Created in Recent Years
   If you created trusts when exemption amounts were uncertain, revisit their structure. Consider using the increased exemption for additional gifts or explore decanting or amending older trusts for more flexibility.
4. Meet with Your Advisory Team
   Coordinate with your attorney, CPA, and financial advisor to model your current estate and income tax exposure under the new law.
5. Understand How Your Trusts Work
   Summarize or flowchart each trust to visualize fiduciary roles, beneficiaries, and how assets and income flow. This helps identify planning opportunities and prevents administrative errors.
6. Update Your Estate Planning Records
   Keep copies of all estate planning documents and prepare an updated balance sheet listing each asset, ownership title, and approximate value.
7. Review Fiduciary Lineups
   Confirm that trustees, executors, and agents remain appropriate choices given their age, health, and relationship to the beneficiaries.
8. Consider Beneficiaries’ Individual Tax and Nontax Situations
   Review how financial needs and the income tax law changes impact each beneficiary. You may want to direct certain assets (e.g., Roth IRAs or highly appreciated stock) to specific individuals based on their tax brackets and financial needs.
9. Maximize Lifetime Gifting
   Use the annual exclusion ($19,000 per recipient in 2025) and consider larger gifts under the $15 million lifetime exemption (2026, as indexed) to transfer appreciating assets out of your taxable estate.
10. Leverage the GST Exemption
    Use your GST exemption to fund long-term trusts that can benefit multiple generations free of estate and GST tax. Confirm that older trusts are properly exempt and consider allocating unused GST exemption strategically.
11. Revisit Charitable Planning
    Explore charitable remainder trusts (CRTs), donor-advised funds (DAFs), or foundations to balance family giving and philanthropy while managing income taxes.
12. Consider Amendments or Decanting
    If a trust no longer fits your family’s needs or current tax law, explore updating or decanting it for greater flexibility and efficiency.
13. Review Tax Apportionment Clauses
    Check how estate taxes are allocated among beneficiaries. Strategic revisions can help minimize tax burdens and better leverage exemptions.
14. Project the Tax and Fnancial Impact on Each Beneficiary
    Model how your assets will be taxed upon transfer to identify whether income should be retained in trusts or distributed.
15. Review Your Balance Sheet for Probate Exposure
16. Review Trust Provisions for Special Needs Beneficiaries to avoid losing government benefits
17. Review Life Insurance Ownership to avoid unnecessary estate tax exposure
18. Review Your Powers of Attorney to see if they are notarized and give enumerated powers required under the new Michigan law, if applicable.
19. Exercise Trust Powers of Appointment Wisely
    If you have the authority to redirect assets held in trust, consider exercising those powers to rebalance distributions or improve tax results under current law.

2025–2026 Estate and Gift Tax Rules at a Glance

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Beginning with 2025, more individual taxpayers will be able to itemize deductions, rather than relying solely on the standard deduction.  Thanks, in large part, to the increased SALT deduction.

You may recall, individual taxpayers may deduct the greater of the standard deduction or the total of all itemized deductions. Itemized deductions include medical, property tax, state and local income tax, mortgage interest, charitable donations, gambling losses, and casualty or theft losses.

What should you be thinking about now in light of these changes to 2025 and 2026 tax deduction laws? 

Accelerate charitable giving: Ultra-high-income taxpayers may benefit from making larger donations in 2025 vs. 2026 to maximize tax savings.

Bunch deductions: Consider timing deductible expenses (e.g., medical, property taxes, charitable gifts) every other year to exceed the standard deduction threshold.

Review mortgage and charitable strategies: If you can now itemize, evaluate the tax benefits of maintaining or increasing mortgage interest payments and charitable contributions.

Manage adjusted gross income (AGI): Use tax-loss harvesting, retirement contributions, deferred compensation, or business asset purchases to keep AGI in ranges that avoid deduction phase-outs (e.g. senior, charitable, SALT deductions).

Charitable donations from IRAs: Evaluate the tax impact of giving directly from IRA accounts, which may satisfy RMDs while reducing taxable income.

Business versus personal deductions: If limited by the SALT cap, consider whether certain state income taxes can be paid by a business and deducted there instead of personally.

Do a tax projection: Run a year-end projection to see which strategies will maximize deductions and minimize tax liability.

         Because of the likelihood that more individual taxpayers will benefit from itemizing deductions, we are providing this chart below summarizing some of the law changes to individual income tax deductions, and how they may impact your total tax.

2025–2026 Standard and Itemized Deduction Changes

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Initially drafted by legislators for tax-advantaged use in paying for education, first-time home purchases, and small business startups, the final version of the OBBB wound up scrapping the income tax benefits of Trump Accounts’ for these specific purposes.

Trump Accounts as enacted and coming to families in 2026 are taxed like regular IRAs.

Before age 59 ½ funds withdrawn from an IRA (and now Trump Accounts) are generally subject to ordinary income tax and, with certain exceptions, a 10% IRS penalty.

My interest in the Trump Accounts features caused me to remind myself exactly what are those exceptions that avoid paying the IRS a 10% penalty for an early withdrawal from an IRA (and now also Trump Accounts)?

Penalty-Free IRA (and Trump Accounts) Withdrawal Exceptions (Before Age 59½)

1. Post-Secondary Education Expenses

You can withdraw funds penalty-free to pay for certain qualified education expenses (tuition, books, room and board (if eligible) and computers) for yourself, your spouse, children, or grandchildren.

2. First-Time Home Purchase

You may be able to withdraw up to $10,000 lifetime from your IRA to buy, build, or rebuild a first home.

3. Unreimbursed Medical Expenses

If your unreimbursed medical costs for the year exceed 7.5% of your adjusted gross income (AGI), you may be able to withdraw that amount without penalty.

4. Health Insurance Premiums While Unemployed

If you’ve been unemployed for at least 12 consecutive weeks and received unemployment compensation, you may be able to use IRA funds to pay health insurance premiums for immediate family.

5. Permanent Disability

If you become permanently and totally disabled, under physician’s orders, you may be able to take distributions at any age without the 10% penalty.

6. IRS Levy

If the IRS levies your IRA to collect back taxes, you may not owe the 10% penalty on the levied amount.

7. Qualified Military Reservists

If you’re called to active duty for 180 days or more (or indefinitely), you may be able to take penalty-free withdrawals for a period of time.

8. Qualified Disaster Relief

Up to $22,000 (as adjusted from time to time) for federally declared disasters.

9. Substantially Equal Periodic Payments (SEPP)

You may be able to set up a series of fixed, regular withdrawals based on IRS life expectancy tables under certain limited circumstances.

In Conclusion

While IRAs (and now Trump Accounts) are designed for retirement, there are legitimate and penalty-free reasons to access your retirement funds early.

This article is intended to be a short summary of available categories of penalty-free withdrawals, and a closer-look at the “fine print” of the qualifications is warranted before taking any action!

Educational purposes, not tax or legal advice. Consult your personal advisors before taking any action. Not updated for law changes.

By: Elyse W. Germack, Attorney and CPA

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What It Means

• Most assets receive a new tax cost basis equal to their fair market value at death.
• This wipes out prior capital gains and resets the holding period as “long-term,” so heirs can often sell with little or no tax.
• Example: Stock bought for $100,000 and worth $400,000 at death → heirs’ cost basis is $400,000. Selling for $410,000 means tax on just $10,000.

Assets That Don’t Get a Step-Up: Income in Respect of a Decedent (IRD)

• Retirement accounts (IRAs, 401(k)s)
• Unpaid income, interest, or bonuses
• Installment sale payments

Real Estate & Business Assets

• A step-up erases prior depreciation recapture.
• Heirs start fresh with new depreciation deductions.
• This is especially powerful for rental property and business equipment.

Partnerships & LLCs

• Heirs receive a step-up in their ownership interest.
• If the partnership makes a Section 754 election, the partnership’s underlying assets can also be stepped up, creating extra tax savings through new depreciation and reduced gain on future sales.

Key Takeaways

✔ In community property states, both halves of marital property usually get a step-up at the first spouse’s death.

✔ Determining fair market value at death is important to ensure heirs benefit from the step-up. Estates that exceed the federal exclusion amount may also have IRS cost basis reporting requirements.

✔ Gifting assets during life usually shifts your existing cost basis to heirs, while inherited assets typically get a step-up.

✔ Selling assets shortly before death may waste the step-up opportunity and trigger unnecessary income tax. You do not have to incur estate tax to benefit from the step-up!

✔ For assets held a long time, determining cost basis can be difficult. Passing these assets at death avoids the burden of reconstructing old records.

The Analysis

The step-up in basis can save families significant taxes, but not all assets qualify. Before selling or gifting property, consult with your professional advisors to see whether holding onto it is the smarter choice.

A complete tax analysis should consider your income tax brackets, any loss carryforwards, and overall estate planning goals. I have seen many families sell assets to simplify an aging parent’s affairs, only to face steep income taxes because cost basis records were missing. With good planning, this burden can often be avoided.

By Elyse W. Germack, Attorney & CPA

Not legal or tax advice. Not updated for change in tax laws. Consult your personal advisors before taking any action.

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When I look around at what financial service institutions are doing right now, services like bill pay are being added under the umbrella of Family Office Services.

For me, a family office offering is an optimized client service delivery process and mindset, and not a laundry list of services.

Family Office Framework

In my view, a family office framework is best organized using a process where relationship managers or quarterbacks coordinate services for a small group of families.

• These quarterbacks need to have the capacity to provide services at a high level. Someone with their hair on fire running around for many dozens of different clients at the same time, trying to be a jack-of-all trades, with no ability to delegate, or be accessible or responsive is a not a suitable quarterback!
• Ideally, each family would have a professional quarterback for investment advisory services (to include insurance, private equity, traditional investments, retirement assets, financial planning, and comprehensive reporting) and a professional quarterback for tax and estate planning services (to include legal, tax, family business records, trust administration, and accounting services).
• An optional quarterback to be a lifestyle coordinator or a family business advisor are also possibilities.

No More One-Stop-Shops

Some families still want the convenience of a one-stop shop for professional services.

• The problem with a one-stop-shop is that it is not possible for the best and brightest minds to all reside in one firm.
• And, putting all your eggs in one basket means you are now stuck with whatever is in that one basket at whatever the cost, expertise, and service level that may be.

Hoarders

Professional advisors hoard work to protect client access and fees. I see this every day. Divorce lawyers doing Estate Planning. Estate planners doing Litigation. Bookkeepers doing Tax Preparation. Clients for some reason allow it perhaps to avoid hurt feelings or having to deal with finding someone else. It can be so damaging to a client’s affairs. If your advisors are trying to be a one-stop-shop, it is your family who will ultimately suffer.

Selecting a Quarterback

Instead of looking for a one-stop shop, a better practice is to identify and use independent / open source quarterbacks and let those quarterbacks coordinate products and services, giving them permission to source the best of the best from the landscape of specialists and products as needs arise.

In the investment advisory role, that means finding a firm that will bring in best-in-class third party products. In the estate planning role that means finding an attorney or CPA that can access subject matter experts for a project from any number of different firms.

• Advisors who are unwilling to let anyone else in or play nice in the sand box are not suited to be quarterbacks!
• Families unwilling to let their quarterbacks know the whole story or the full picture will not be able to benefit from having a quarterback. For example, that investment advisor quarterbacking needs to know your entire balance sheet.

Process

Some families do not know how to work with advisors. They may try to coordinate the advisors themselves creating silos. They may not properly interview or vet their advisors creating skills gaps. And, they may spend time either DIYing or neglecting stuff that requires an expert causing disasters. Embracing the process of entrusting a set of skilled quarterbacks who can take ownership of projects, coordinate specialists, and shop service and product offerings is life altering.

Family Office Mindset

Delivering services with a family office mindset means that the family is priority, quarterbacks are taking ownership of information and projects, information is organized and shared, projects are managed, communication flows, advisors are coordinated, and the staffing allows for a higher level of day-today services with more subject matter expertise.

A family office mindset ensures a family will have access to:

• A Coordinator of a Set of Services
• An Advisor Doing More for Fewer Clients
• A Professional Organizer
• Proactive Advice & Issue Spotting
• Sophisticated Planning With Subject Matter Expertise
• Professionals in Alignment With Family Goals
• Day-to-Day Assistance and Responsiveness
• A Communication Leader
• A Project Manager
• Regular Monitoring to Avoid Mistakes

Each family’s service type needs are different. Some will in fact need BILL PAY, and some will not. The service offerings are not what’s important, the process and the advisor network is.

Complexity Not Net Worth

I see so much information about who is wealthy enough to gain access to a family office platform. While some investment advisory firms are marketing a “democratized” family office platform and others have raised their minimums, I do not see net worth as the measuring stick, but complexity. If things are getting out of control and people are not communicating, it’s time to bring in those quarterbacks!

Pricing

A family office has traditionally been part of a family’s business office. So, these professionals are often paid like employees. Now investment firms, accounting firms, and law firms are getting into this arena. Fees for family office services are all over the map. Each family is different in terms of their needs. Finding that sweet spot where value is perceived for excellent products and services regardless of the pricing model is the goal!

By: Elyse W. Germack
Attorney & CPA
Tax | Estate Planning | Family Office Advisor
Law Offices of Elyse W. Germack, PLLC
Located in Birmingham, MI

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Background

Michigan state statutes (“Michigan law”) establish certain “default trust provisions” and dictate which trust provisions may or may not be overridden by the terms of a trust agreement.

Under Michigan law, trustees of irrevocable trusts (including revocable trusts that have become irrevocable post-death) are generally required to inform and report certain trust details to “qualified trust beneficiaries”. In Michigan, a qualified trust beneficiary is defined as a person the settlor intends to benefit, who is either a current or potential recipient of trust distributions, or who would be entitled to a distribution if the current beneficiaries’ interests terminated without terminating the trust.

Example: Parent establishes an irrevocable trust for the current benefit of spouse and after the spouse’s death, his children. The qualified trust beneficiaries entitled to certain information and reporting are the spouse and the children. Reporting to minors may be sent to a legal guardian.

Information and Reporting

Michigan law provides that a trustee shall inform these beneficiaries of:

• the existence of the trust and
• the identity of the trustee.

The trustee shall also keep them “reasonably informed about the administration of the trust and of the material facts necessary to protect their interests”.

At the reasonable request of one of these beneficiaries, the trustee shall furnish:

• a copy of the terms of the trust and
• “relevant information” about trust property.

A trustee shall also notify all qualified trust beneficiaries in advance of trustee compensation.

A trustee shall also furnish an annual accounting of trust financial activity.

• If the trust agreement provides that less than all qualified trust beneficiaries are entitled to an accounting, the probate court can force the trustee to nevertheless furnish the accounting.

[See MCL 700.7814 Duty to inform and report for the complete statute.]

Law Change

In 2024, Michigan law was updated, making it possible for individuals to create certain irrevocable trusts in Michigan that remain “undisclosed” to trust beneficiaries for a period of time up to 25 years. Here is an excerpt of the statute.

700.7409a Trusts with nondisclosure period.

Sec. 7409a.

(1) If the terms of a trust other than a charitable trust are embodied in a trust instrument that clearly express the settlor’s intent that 1 or more items of prime disclosure information should be withheld, generally or in specified circumstances, from 1 or more of the trust beneficiaries, both of the following apply:

(a) During the nondisclosure period all of the following apply:

(i) To the extent necessary to effectuate the settlor’s expressed intent, the trustee does not have the duty under section 7814(2)(a) to (c) to provide beneficiaries with the terms of the trust and information about the trust’s property and to notify qualified trust beneficiaries of the existence of the trust and the identity of the trustee.

(ii) The trustee may administer the trust in accordance with the settlor’s expressed intent regarding nondisclosure of primary disclosure information to the extent made practicable by the terms of the trust given the circumstances of the beneficiaries and any reporting obligations imposed on the trustee by law other than this act.

(iii) If the trust instrument grants a nondisclosure correlative right, the trustee has a duty to administer the trust in accordance with the settlor’s expressed intent regarding nondisclosure of primary disclosure information, but only to the extent made practicable by the terms of the trust given the circumstances of the beneficiaries and any reporting obligations imposed on the trustee by law other than this act.

(iv) Any purported appointment or distribution of assets of the instant trust to another undisclosed trust is ineffective to the extent it could cause the appointed or distributed assets to be administered continuously under the authority of this section for a period ending after the date on which the instant trust’s maximum nondisclosure period ends.

[omitted sections]

(5) As used in this section:

(a) “Maximum nondisclosure period” means a period of 25 years from the later of the first date on which property becomes subject to the terms of the trust or the date on which the trust ceases to be revocable by the settlor.

Information and Reporting During a Nondisclosure Period

A nondisclosure provision can include directions to the trustee to not provide the following information to beneficiaries during the nondisclosure period:

• not disclose information about a trust or its existence,
• not disclose the trustee’s identity,
• not disclose the trust trust property, and/or
• not render accountings.

Uses for Undisclosed Trusts

Trust makers with concerns about “affluenza”, with young children, or children with health challenges, creditor issues, or in bad marriages, or trust makers treating children disproportionately under the trust terms, may find an undisclosed trust useful.

Who Receives Information About an Undisclosed Trust?

This new Michigan law provides this option for undisclosed trusts:

• While a trustee is not required to provide information on the trust’s existence, the trustee’s identity, the trust property, or accountings during a nondisclosure period, the trust provisions can establish a “protection powerholder” to receive trust information, such as accountings, in place of the beneficiary. This person functions as a trust director and is subject to Michigan’s rules that apply to trust directors. A protection powerholder has a fiduciary duty to act in the best interests of the beneficiaries, like a trustee or trust director.

Pitfalls

Despite the trustee’s best efforts, information may get out. The trust agreement provisions can establish the right to remove a trustee for failing to honor the trust’s direction not to provide certain information to the beneficiaries.

As appealing as undisclosed trusts sound, I see some practical challenges with trying to administer a trust of this type when it comes to inadvertent disclosure, making decisions on discretionary trust distributions, maintaining compliance with taxation law, and fulfilling fiduciary duties.

A Viable Option

It is an exciting time to be a trust attorney in Michigan, as I do love the enhanced creativity and flexibility now permitted in creating wealth transfer vehicles! For those people facing estate and gift tax exposure but afraid of spoiling their kids and grandkids, there is now a viable option to procrastinating on doing wealth transfer planning.

By: Elyse W. Germack, Attorney & CPA

Educational use only. Not professional advice. Consult your personal professional advisors before taking any action.

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Consider this simplistic example:

You would like to make a gift to a trust for the benefit of your children, and do not want to pay any gift tax or report any taxable gift.

You decide to loan the trust $1,000,000 for nine years, with interest paid at the IRS required interest rate for May 2025, which is 4.1%. Over the nine year period, the trust invests the $1,000,000 in an investment portfolio netting (after tax) 8% appreciation, paying you interest each year $41,000.

After the nine year period, the $1,000,000 loan is repaid by the trust to you.

The trust is left with $487,000 (representing the 8% growth rate, less the 4.1% interest rate). The $487,000 is effectively transferred to the trust with no required gift tax reporting, and no taxable gift.

Details to keep in mind:

• Doing a cashflow and investment analysis is important to ensure the success of the transaction.
• The risk associated with this strategy is that the trust’s investment vehicle underperforms the interest payment requirement. Regular monitoring and proactive planning is important.
• Properly papering the transaction is important to ensure the intended tax treatment.
• Making the required interest payments on time, is important to ensure the intended tax treatment.
• If you would like to loan non-cash assets, consult your tax advisor to avoid triggering income tax on the execution of the loan.
• Using a trust that is treated as a “grantor trust” to you for income tax purposes is likely preferrable for income (and gift) tax purposes.

This strategy can “freeze” the growth of assets includable in your taxable estate for estate tax purposes to 4.1%, reducing future estate tax exposure. If you are expecting to be subject to estate tax – even far into the future, this strategy can help minimize estate tax while giving you access to your assets.

If you have yet to do any gift or estate tax planning, and are interested in well-established yet simple strategies, this technique is a good place to start.

By: Elyse W. Germack, Attorney and CPA

This information is not professional advice and is for educational purposes and should not be relied upon without consultation with your personal wealth advisors.

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It most likely will be:

• In your attorney’s office;
• In your safe deposit box;
• In your home; or,
• At your resident county probate court for safekeeping.

Elyse W. Germack, Attorney and CPA

Law Offices of Elyse W. Germack, PLLC Birmingham MI

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What is Gift Splitting?

A gift-splitting election permits spouses to share 50/50 in gifts made to third parties.

Example: Dad gifts $30,000 of his cash to Child. During 2024, but for the gift splitting election, this gift would result in a $12,000 taxable gift (the excess over $18,000). If Mom agrees (or consents) to gift-splitting, the gift will be treated as coming 50% from her, thereby eliminating the $12,000 taxable gift.

For as far back as I can remember, the consenting spouse was required to sign page 1 of the donor spouse’s gift tax return to consent to the gifts. And, likewise, if the consenting spouse was required to file his or her own gift tax return, the donor spouse signed the consent on that gift tax return. This process has been replaced, and now the consenting spouse no longer signs the gift tax return, however, a signed and dated Notice of Consent to split gifts is required to be attached to the donor spouse’s gift tax return (and vice versa). The gift-splitting election has now been given its own separate Part III, found on page 2 of the Form.

Per the instructions, “The Notice of Consent must be signed and dated by the consenting spouse and must include a statement that the consenting spouse is electing to treat all gifts made to third parties as having been made one-half by each spouse.”

Per the instructions, “The Notice of Consent may generally be signed at any time after the end of the calendar year. However, there are two exceptions.

1. The consent may not be obtained after April 15 following the end of the year in which the gift was made. But if neither you nor your spouse has filed a gift tax return for the year on or before that date, the consent must be made on the first gift tax return for the year filed by either of you.
2. The consent may not be obtained after a notice of deficiency for the gift tax for the year has been sent to either you or your spouse.”

The instructions appear to need some additional clarification!

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