Patricia Paruch, Kemp Klein Law Firm
Unintended Consequences of Estate Planning
By Corey J. Wiggins, Zirnhelt, Bowron & Wiggins PLC
All too often estate plans are drafted not realizing that implementation may constitute a transfer of ownership of real property which uncaps the taxable value. The facts in Lamonte Durbrow III Trust v. Township of Leelanau, Mich Ct App No. 312818, November 21, 2013, (unpublished) demonstrate this unintended consequence.
After Mr. Durbrow's death in 2013, his property transferred to a trust of which his wife, children, and grandchildren were beneficiaries. Subject to certain restrictions, the trust authorized the trustee, in its discretion, to pay part or all of the income to Mrs. Durbrow, the children, and/or grandchildren. Prior to making payment to the children or grandchildren, the trustee was to consult with Mrs. Durbrow and give consideration to her opinion and to ensure that Mrs. Durbrow was comfortably taken care of for her lifetime. However, the final decision lay with the trustee.
The township retroactively uncapped the taxable value arguing that there was a present interest transfer to the children and grandchildren. MCL 211.27a(6) defines a transfer of ownership as "the conveyance of title to or a present interest in property, including the beneficial use of the property, the value of which is substantially equal to the value of the fee interest." The statute does provide an exception when the settlor and spouse are the sole present beneficiaries. The trust argued that Mrs. Durbrow was the sole present beneficiary and the others were contingent. Both Tribunal and the Court of Appeals found no clear language that the children and grandchildren were contingent beneficiaries and upheld the uncapping.
The moral of the story: practitioners should review case law, statutes, and Tax Commission "Revenue Notices" and "Bulletins" regarding real estate transfers and uncapping, and make sure that the client understands the consequences of their estate plan.
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February 6, 2014
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Repeal of Loan Modification Meeting Requirement
By Brian P. Yoho, Trott & Trott PC
In 2009, the Michigan Legislature amended the statute governing foreclosures by advertisement, MCL 600.3201, et seq., to add certain requirements to be met before publication of the foreclosure notice. A designated agent of the mortgage servicer had to inform the borrowers in writing of their right to request a meeting to attempt to modify the loan. The borrowers' meeting request and submission of required financial documents delayed publication of the foreclosure notice until the meeting was held and to at least 90 days after mailing of the initial notice. This process only applied to foreclosures of homestead properties under MCL 211.7cc.PA 103-106 of 2013 eliminated this requirement for foreclosure notices published on or after January 10, 2014. For most servicers, the foreclosure by advertisement process set forth in state law will be essentially the same as existed before 2009, without a mandated modification review process. On the other hand, if the servicer is a party that entered into the consent judgment in United States of America v. Bank of America Corp, DC Cir No.12-0361, (GMAC Mortgage LLC, Bank of America NA, Citibank NA and Citimortgage Inc, J.P. Morgan Chase Bank NA, Wells Fargo Bank NA) the servicer must provide the borrowers with an opportunity to request a meeting before commencing publication of the foreclosure notice. These servicers, and their successors in interest, must inform the borrowers of their right to request a meeting in a writing enclosed with, or included in, the letter recently required by 12 CFR 1024.39(b) to be sent by the 45th day of the borrower's delinquency. If the borrower requests a meeting and cooperates in its scheduling, the meeting must take place before publication of the notice of foreclosure. This new procedure, described in MCL 600.3206, only applies to foreclosures of homestead properties.
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The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice.