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George F. Bearup, J.D. Senior Legal Trust Advisor

17-Sep-18

Ante-Mortem Statute Coming to Michigan?

Take-Away: The Probate and Estate Planning Council of the State Bar of Michigan is currently studying a proposed recommendation for an ante-mortem statute that would be used to validate the terms of a Will while the testator is still alive. The Council took a serious look as such a proposed statute back in 2015, but it decided to take no action at that time. Apparently the Council decided to revisit the prospect of sponsoring an ante-mortem statute in Michigan once again. There are some existing avenues under EPIC that can be used to validate a Will or trust, but they may not accomplished what the proposed legislation would achieve, which is ‘finality.’

 

Background: Eight states, including our neighbor Ohio, have statutes that permit the admission of a Will to probate while the testator is still alive. Those states include: Ohio, North Dakota, North Carolina, New Hampshire, Nevada, Alabama, Alaska, and Delaware. A couple of examples follow:

  • Delaware: Delaware actually has two separate statutes with regard to ante-mortem validation proceedings, one that establishes the validity of a Will [ Section 1311 of West’s Del. Code Anno.] and one that establishes the validity of a trust [Section 3546 West’s Del. Code Anno.] Each of these Delaware statutes impose a 120 day statute of repose  after giving notice to interested persons of the validation proceeding, which results in no claims or challenges to the Will (or trust) after the 120 days have passed. With respect to an ante-mortem validation proceeding with regard to a trust in Delaware, the effect of an ante-mortem validation proceeding  is to bar all claims against the trust, and which also has the collateral effect to validate prior distributions that were made from that trust.
  • Alaska: This state has, by far, the most comprehensive ante-mortem validation statutory scheme that addresses in detail the conduct of an ante-mortem proceeding to determine the validity of a Will, including such provisions as venue, notice to interested persons, and the impact of a future amendment to a statutorily validated Will. Possibly Alaska’s statutory scheme could provide a working model if the Probate and Estate Planning Council decides to propose model ante-mortem validation Bill to Michigan’s Legislature.

Why an Ante-Mortem Validation Statute?: Several reasons are often advanced why  an ante-mortem statute would be useful to estate planning clients. However,  there are considerable drawbacks to  ante-mortem validation proceedings as well that need to be equally weighed.

Advantages: Some of the articulated reasons for an ante-mortem validation statute include:

  • It provides a proactive alternative when future probate litigation and challenges are to be expected, either because some heirs are just by nature litigious, or the intended  distribution of the testator’s estate will undoubtedly disappoint an heir.
  • It provides to the testator some peace of mind to know that their Last Will and Testament has been formally admitted to probate, and thus their testamentary wishes will be carried out following their Will as they intend.
  • It will avoid evidentiary challenges to the Will, by preventing ‘bad actors’ from laying in the weeds and bringing their challenges only after the testator has died and can no longer provide testimony of their intent.
  • The testator can participate in the Will validation proceeding, attesting to his/her own mental capacity, intent,  and free will. The testator can even be examined medically or by a psychiatrist to remove potential claims of undue influence.
  • With an ante-mortem validation proceeding, there will be less of an opportunity for the beneficiaries to be extorted into a compromise settlement with the disgruntled heir, just to avoid the horrific expense associated with protracted probate litigation.
  • Arguably the presence and use of the ante-mortem validation statue will reduce the number of Will contests, and as a result, also reduce the administrative and litigation expenses incurred by the decedent’s estate defending the Will.
  • An ante-mortem Will that is validated will reduce the ‘lost Will’ concerns, as the validated Will will be on file at the courthouse.
  • If a Will is invalidated in such an ante-mortem proceeding, the testator can promptly cure the source of the invalidity, e.g. the Will was neither signed nor attested in the presence of two disinterested witnesses, it can be ratified with the correct number of witnesses in the testator’s presence.

Disadvantages: Some of the following disadvantages tend to off-set some of the perceived advantages to an ante-mortem validated Will.

  • While the belief is that an ante-mortem validation proceeding will give the testator peace of mind, that ‘peace of mind’ will need to be balanced against the heartache caused by watching the spectacle of the testator’s heirs and family fight over money and property.
  • Instituting an ante-mortem validation proceeding in essence forces children or grandchildren to speak up against the testator, thus possibly creating more disharmony among family members while the testator is still alive.
  • Initiating an ante-mortem validation proceeding with regard to the testator’s Will may in turn precipitate a ‘retaliatory’ proceeding initiated by heirs to have a guardian or conservator appointed for the testator, thus escalating the probate court litigation even more.
  • An ante-mortem validation proceeding often creates a ‘no-win’ situation for heirs who sincerely believe that the testator’s Will is invalid, but who are reluctant to challenge the testator while he/she is alive for fear of being punished.
  • Sometimes a Will is, in fact, invalid for a variety of technical  reasons. The short statutory ante-mortem Will validation process puts at risk integrity and truth solely for the sake of finality.
  • The testator’s desire for confidentiality, both as to the size of the testator’s estate and the testator wishes on how that estate will be distributed on his/her death, is lost as the Will becomes a matter of public record.
  • The intended ‘finality’ of a validated ante-mortem Will can be easily circumvented through lifetime transactions by the testator, including joint ownership, TOD, POD, and other beneficiary designation changes, a ‘ladybird’ deed, or through completed lifetime gifts, all of which transactions can still be challenged after the testator’s death despite the fact that his/her Will was statutorily validated.
  • Not all states have, or will recognize an ante-mortem Will validity proceeding, so that if the testator’s Will must be still admitted to probate in an ancillary probate proceeding in another state where it may still be subject to challenge in that other state.

Do We Even Need Such a Statute?  One novel approach that some lawyers have taken, in the absence of an ante-mortem statute in Michigan, is to use the authorized protective order proceedings set-forth in the Estates and Protected Individuals Code. [MCL 700.5408.] If an individual recognizes their own age-related decline to the point of disability, thus becoming vulnerable, or there exist questions with regard to their ability to conduct their financial affairs, and they are concerned that their children or heirs will fight over their estate, a settlor can petition the probate court for a protective order that confirms the validity of the settlor’s trust. There are a few anecdotal examples of where lawyers have obtained protective orders from a probate judge that confirms the validity of the settlor’s trust, which in turn provides some equitable estoppel arguments after the settlor’s death to resist post-death litigation over the validity of that trust. However, the settlor has to fit within the category described in the statute in order to obtain a protective order from a probate court, which may prove to be difficult in the absence of the settlor’s deteriorating health condition.

Statute of Repose- Challenges to a Trust: The Michigan Trust Code provides two separate time limits in which a person can challenge a settlor’s trust,  but they are available only after the settlor’s death so they cannot be used prior to the settlor’s death. The repose statute provides that a person may commence a judicial proceeding to contest the validity of a trust that was revocable at the settlor’s death within the earlier of the following two periods: (i) either two years after the settlor’s death; or (ii) six months after the trustee has sent the person a notice that informs the person of all of the following:

  • The trust’s existence;
  • The date of the trust instrument;
  • The date of any amendments known to the trustee;
  • A copy of the relevant portions of the terms of the trust that affect that person’s interest in the trust, if any;
  • The settlor’s name;
  • The trustee’s name and address; and
  • The time allowed to commending a proceeding (to challenge the trust.) [MCL 700.7604(1)(a)(b).]

Relevant Portions of the Terms of the Trust: Obviously, what would be helpful is a clearer definition in EPIC of what constitutes relevant portions of the trust, a concept also used in MCL 700.7814(2)(a) which describes the duty of a trustee to inform and report to a trust beneficiary, using similar terminology when a beneficiary requests information, that the trustee provide a copy of the terms of the trust that describe or affect the trust beneficiary’s interest and relevant information about the trust property. The Trust Code Reporter’s Comment notes with regard to MCL 700.7814(2):

“Many trust instruments will provide for the creation of multiple trusts, such as, for example, a credit shelter trust, marital trust, and dynasty trusts after the surviving spouse’s death. Trustees may be tempted to deliver only the provisions of the trust instrument that contain distribution provisions. However, many other provisions of a trust will ‘affect’ the beneficiary. As a result, the safest and best means of complying with paragraph (2)(a) will be to provide either the entire trust agreement or a copy of the trust with selected, irrelevant provisions redacted. In addition, a beneficiary has the right to request ‘relevant information about trust property.’

A rhetorical question is what happens if a trustee intends to give notice to a person who might challenge a trust in order to activate the repose statute, but that person is given no interest in that trust. What would be the relevant provisions of the trust that should be sent to activate the statute of repose? Send the entire trust, which is the Reporter’s suggestion ‘just to be sure’ or no part of the trust instrument, since the person is not even named as a beneficiary and thus has no interest in the trust whatsoever. Or, don’t send any part of the trust instrument to the suspected ‘bad actor’ who has no business learning anything about the trust, but who is someone the trustee worries will file litigation that challenges the validity of the trust?

Conclusion: No one knows if Michigan will ever get around to adopting an ante-mortem validation statute like some of the other states have adopted. But no one can deny that there exists an increase in probate litigation in this state, and an ante-mortem validation statute might help to stem the increase in that litigation. It should be something to watch for in the months ahead.