A few updates in probate and estate laws of interest follow:

  1. Portability is an Asset: The Oklahoma Supreme Court affirmed a probate court’s order that compelled a personal representative (the decedent’s son) to file a federal estate tax return and elect portability for the benefit of the decedent’s surviving husband (son’s step-father.) The Court observed that the failure to elect portability ‘wasted estate assets’. This decision is a bit of a surprise because of the inference that a portability election is an ‘asset’ that a fiduciary must preserve, and that the decision was made despite the fact that the decedent and her second husband had signed a prenuptial agreement in which each waived any and all rights in the other’s estate. Matter of the Estate of Vose, P3d 238.
  2. Sole Benefit Trusts are Dead: The Michigan Court of Appeals published a couple of decisions that pretty much eliminate the use of sole-benefit irrevocable trusts created as an estate planning device when one spouse goes into assisted living and intends to become eligible to receive Medicaid benefits.  Usually the irrevocable sole-benefit trust was established for the benefit of the spouse who would not be applying for Medicaid benefits. The Michigan Department of Health and Human Services had held that the assets held in these sole-benefit trusts would nontheless be ‘counted’ as an available resource when one spouse applied for Medicaid benefits. The  Court affirmed the DHHS’s conclusion. Hegadorn v. Department of Human Services, 2017 Mich App LEXIS 1232 (June 1, 2017).
  3. Estate Recovery is Alive: The Michigan Supreme Court recently held that Michigan’s version of estate recovery laws, required by Congress as a condition to receive federal Medicaid dollars, to recover from the decedent’s estate Medicaid benefits that were paid to the decedent while alive, is a valid exercise of legislative power. MCL 400.112g(7). Accordingly, if a Medicaid recipient received Medicaid benefits after July 1, 2010, those paid Medicaid benefits can be recovered from the decedent’s probate estate. Department of Health & Human Services v. Rasmer (In re Estate of Rasmer ) 2017 LEXIS 1556 (July 31, 2017). Note that estate recovery is limited to the decedent’s probate estate, which means that jointly owned assets and assets passing via non-probate devices, e.g. beneficiary designations, would not be at risk to estate recovery.
  4. Dower is Repealed: Effective on June 15, 2017, Michigan finally left the feudal ages when it repealed dower. Dower, a legal right created in England centuries ago when the husband went off to fight wars in the Middle East Crusades. The wife was left behind in England but needed to be financially protected if her husband never returned. Consequently, a wife  was a right given  in land owned by her husband and surviving widows were allowed to claim a portion of land owned by her deceased husband in spite of his Will, i.e. a statutory right to elect against a deceased husband’s estate and claim a dower interest in his property. Dower became part of Michigan’s original Constitution 150+ years ago. The practical implication of dower was that any time a husband wanted to transfer land, or obtain a mortgage against land owned by him, he was required to have his wife sign the instrument (deed; mortgage; land contract) releasing her dower interest in his land. A release of a wife’s right of dower was also included in any judgment of divorce between spouses. Due to this right of dower for many decades whenever a man signed a deed, or mortgage, there had to be a recitation if he was then married or single. Well, dower is gone, and after April 6, 2017, there is no need in a deed or mortgage to recite if the man is ‘married or single.’ 2017 Public Act 54.
  5. Funeral Representatives- Not if You are Divorcing: You will recall that last year Michigan adopted a Funeral Representative Act, where a person names another to make binding funeral decisions, and it establishes a priority of who makes those ‘final arrangements’ and incurs those costs if no Representative is named. That statute was recently amended to clarify that a ‘surviving spouse’ for purposes of who possesses priority to make funeral decisions, does not include an individual who is a party to a divorce or annulment proceeding with the decedent at the time of the decedent’s death. MCL 700.2801(3)(b). This amendment is consistent with other Michigan laws that recognize when spouses are in the middle of a divorce, prior appointments as an Agent, Conservator, et seq. are automatically suspended in keeping with the principal/ward’s probable intention to not have a soon-to-be-former spouse make health and financial decisions on their behalf.
  6. Stand-by Guardian Legislation: The Probate and Estate Planning Council is actively looking at potential legislation that would permit a probate court to appoint, as part of a conventional guardianship proceeding, a contingent ‘stand-by’ guardian who could step in and serve if the original guardian for some reason cannot act on behalf of the ward. Rather than have to go back to the probate court to seek a short-term appointment because the initial guardian may be unable to act for a limited period of time, e.g. illness; hospitalization; travel, the intent of the legislation is that the stand-by guardian will be able to immediately step-in to cover for the initial guardian without any court involvement. The concerns primarily are how that condition is ‘triggered’ and the court notified, and how and whether third parties will recognize and respect the stand-by guardian’s assertion of authority on behalf of the ward.
  7. Michigan Community Foundation Act: Michigan adopted a new Act, effective August 21, 2017, to regulate the acquisition and disposal of property to  a qualified community foundation by various public entities, e.g. municipalities, schools, school boards, school districts, and libraries. Public Act 39 of 2017.
  8. Lawyer Discrimination: The American Bar Association this summer adopted an amendment to its model rules of professional conduct to make it an ethics violation [subject to suspension or revocation of license to practice law] to discriminate against an individual [opposing attorneys, parties, witnesses, court personnel, etc.] on the basis of race, gender, color, disability or sexual preference.
  9. Divided and Directed Trustee Legislation: The Probate and Estate Planning Council is only now starting a study of the proposed Uniform Directed Trustee Act, adopted by the Uniform Law Commission this past summer. In addition, the Council is also looking at  proposed legislation drafted by Jim Spica which would go one step further than the Uniform Directed Trustee Act, which would permit the appointment of several trustees of a single trust, each with discrete responsibilities and duties [effectively working in ‘silos’] where the actions or inaction of one trustee would not expose another trustee [working in a different silo] to liability, or any responsibility to monitor the actions of the other trustee(s.) This proposed legislation would be a departure from the Michigan Trust Code and the Restatement (Third) of Trusts [the recitation of what is believed to be the common law of trusts as summarized by law professors, who by coincidence seldom practiced law in the real world)] which place some residual liability on one trustee to regularly monitor and report or challenge, or stop,  the actions of a co-trustee. Hence, ‘divided’ trustees would not have residual liability for the actions taken or the breaches of fiduciary duties by other trustees.
  10. Attorney-Fact Creating Trust: The Probate and Estate Planning Council is looking at the power of an attorney-in-fact, aka an Agent acting under a Durable Power of Attorney, to create a trust on behalf of the Agent’s principal. The concept of ‘settlor’ under the Michigan Trust Code was recently expanded to include a trustee who creates a trust, e.g. an exercise of the trustee’s decanting power. The concern is if the definition of ‘settlor’ under EPIC should be expanded to include an agent who acts under a power of attorney to exercise the power to create a trust on the principal’s behalf.
  11. Exempt Property Allowance: You will recall last year that there was a Court of Appeals decision, Jajuga, which held that a child could not be deprived of the child’s right under EPIC for an exempt property allowance, even though the parent expressly tried to disinherit the child. There is now a pending Bill in the state Legislature to ‘fix’ that situation, to permit a parent to disinherit a child even from exempt property allowances otherwise provided by EPIC. While this position may seem harsh, often there are good reasons to disinherit a child, e.g. the child is receiving governmental benefits that could be jeopardized with a distribution from a deceased parent’s estate.
  12. EPIC Inflation Adjustments: The Probate Council is still working on proposed increases to many of the dollar amounts spelled out in various EPIC sections, e.g. increasing the ‘small probate estate’ proceeding from a maximum of $22,000, to $100,000 and automatically adjusting those dollar amounts to reflect annual inflation. Nothing definitive yet on how much opposition there will be when a proposed Bill comes forth.