Michigan Probate and Estate Planning Journal Summer 2008

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					 MICHIGAN
 PROBATE & ESTATE PLANNING

 JOURNAL
     TABLE OF CONTENTS                                      Vol. 27   M   Summer 2008   M   No. 3


Feature Articles:

Rule Against Perpetuities in Michigan
James P. Spica ........................................ 3
Michigan’s Estate Recovery Law
Michelyn E. Pasteur and
Melisa M.W. Mysliwiec. ...................... 15
A Primer on Antilapse Statutes
Mark S. Frankel ................................... 18
Doctrine of Equitable Deviation
Alan A. May ......................................... 25
Settling Claims for Decedents
and Minors
Kristen D. Arnett .................................. 31




   STATE BAR OF MICHIGAN PROBATE AND ESTATE PLANNING SECTION
                                                                     Michigan Probate and Estate Planning Journal
Subscription Information
The Michigan Probate and Estate Planning Journal is
                                                                       Vol. 27 M Summer 2008 M No. 3
published three times a year by the Probate and Estate
Planning Section of the State Bar of Michigan, with the
cooperation of the Institute of Continuing Legal Education,                                   TABLE OF CONTENTS
and is sent to all members of the Section. Lawyers newly
admitted to the State Bar automatically become members of
the Section for two years following their date of admission.
Members of the State Bar, as well as law school students, may
become members of the Section by paying annual dues of $30.         From the Desk of the Chairperson
Institutions and individuals not eligible to become members
of the State Bar may subscribe to the Journal by paying an          Lauren M. Underwood .................................................................. 1
annual $25 subscription. The subscription year begins on
October 1 and is not prorated for partial years. Subscription       Feature Articles
information is available from the State Bar of Michigan,
                                                                    Rule Against Perpetuities Repeal in Michigan
Journal Subscription Service, 306 Townsend Street, Lansing,
MI 48933-2012, (517) 372-9030. A limited number of copies           James P. Spica ............................................................................................ 3
of prior issues of the Journal are available beginning with Fall    Michigan’s Estate Recovery Law
1988, Volume 8, Number 1, for $6 each, plus $2 for postage
                                                                    Michelyn E. Pasteur and Melisa M.W. Mysliwiec. ................................... 15
and handling. Copies of articles from back issues cost $7 per
article. Prior issues and copies of articles from back issues       A Primer on Antilapse Statutes
may be obtained by contacting the Institute of Continuing           Mark S. Frankel ....................................................................................... 18
Legal Education, 1020 Greene Street, Ann Arbor, MI, (734)
764-0533.                                                           Doctrine of Equitable Deviation
Editorial Policy                                                    Alan A. May ............................................................................................. 25
The Michigan Probate and Estate Planning Journal is aimed           Settling Claims for Decedents and Minors
primarily at lawyers who devote at least a portion of their         Kristen D. Arnett ...................................................................................... 31
practice to matters dealing with wills, trusts, and estates. The
Journal endeavors to address current developments believed
to be of professional interest to members and other readers.
                                                                    Departments
The goal of the editorial board is to print relevant articles and   Tax Nugget
columns that are written in a readable and informative style
that will aid lawyers in giving their clients accurate, prompt,
                                                                    Lorraine F. New ....................................................................................... 42
and efficient counsel.                                               Legislative Report
The editorial board of the Journal reserves the right to accept     Harold G. Schuitmaker ............................................................................ 44
or reject manuscripts and to condition acceptance on the
revision of material to conform to its editorial policies and       Probate and Estate Planning Council Q & A
criteria. Manuscripts and letters should be sent to Nancy L.        Shaheen I. Imami and Patricia Gormely Prince ...................................... 46
Little, Managing Editor, Michigan Probate and Estate
Planning Journal, 2125 University Park Drive #250, Okemos,          Ethics and Unauthorized Practice of Law
MI 48864, (517) 706-5790, fax (517) 706-0500, e-mail                Ramon F. Rolf, Jr. and W. Josh Ard .......................................................... 48
nancy.little@fosterzack.com.
Opinions expressed in the Journal are those of the authors and
                                                                    Miscellaneous
do not necessarily reflect the views of the editorial board or of    ICLE Resources ....................................................................................... 51
the Probate and Estate Planning Council. It is the responsibility   Section Council ........................................................................................ 52
of the individual lawyer to determine if advice or comments in
an article are appropriate or relevant in a given situation. The
editorial board, the Probate and Estate Planning Council, and
the State Bar of Michigan disclaim all liability resulting from
comments and opinions in the Journal.
                                                                           Editorial Board
Citation Form
Issues through Volume 4, Number 3 may be cited [Vol.] Mich                 Nancy L. Little, Managing Editor
Prob & Tr LJ [Page] [Year]. Subsequent issues may be cited
Michigan Prob & Est Plan J, [Issue], at [Page].
                                                                           Foster Zack Little Pasteur & Manning, PC, Okemos
Section Web Site                                                           Amy Nehs Morrissey
                                                                           Westerman & Associates, Ann Arbor
http://www.michbar.org/probate/
                                                                           Wendy M. Parr
                                                                           Miller, Johnson, Snell & Cummiskey, PLC, Grand Rapids
Michigan Probate and Estate Planning Journal                               Christine Mathews, Copy and Production Editor
Nancy L. Little, Managing Editor                                           The Institute of Continuing Legal Education, Ann Arbor
2125 University Park Dr., Ste. 250, Okemos, MI 48864
(517) 706-0000, fax (517) 706-0500
E-mail nancy.little@fosterzack.com
Summer 2008                                                      MICHIGAN PROBATE & ESTATE PLANNING


                              From the Desk of the Chairperson
                                       By Lauren M. Underwood

                      Mentoring is one of the most         bounce ideas around. Find out what you
                      important aspects of our prac-       can learn from other lawyers, whether
                      tice. In the press of daily ob-      that relates to a particular case or just
                      ligations it is one of the most      the practice in general.
                      difficult to accomplish. Many      3. Attend a seminar. Some of the members
                      associates have complained           of our section are participating in the
                      that their training as lawyers       Probate Certificate program through
                      consisted of being shown their       ICLE. Perhaps you can work toward
                      desk and told to start billing       your certificate. If that is daunting, then
hours. Once a lawyer has settled into his or her           consider a seminar or two. Attendance
practice area, it is easy to think that the lawyer         at our Annual Institute is high, so you
no longer needs mentoring.                                 are likely to see colleagues and you can
   Hand in hand with mentoring is continuing               squeeze in some “mentoring” with your
education. Every lawyer I know remembers law               continuing education.
school as if we walked out of the classroom door        4. Set aside time to read the articles in this
yesterday. The details of the bar exam are seared          Journal or other scholarly articles. Then
in all of our memories. Why on earth would any of          talk about them with your colleagues.
us want to suffer through any more education?           5. When you are having difficulty with an-
   Civility is a topic often discussed in columns          other lawyer, pick up the telephone and
like this one. Lawyers complain regularly about            call him or her. Go to lunch. See if you
the lack of civility and professionalism in the prac-      can build some bridges that will help
tice. The longer the lawyer has been in practice,          resolve issues. Remember that the writ-
the more likely you will hear these complaints.            ten work does not always come across
   My work on the Probate Council has helped               to the reader as you intended when you
me address all three of these issues. I have had           wrote it.
the chance to work with lawyers with incredible         6. Don’t be afraid to say “I don’t know” or “I
expertise and learn from them. Council meetings            apologize.” If a conversation gets heat-
themselves are an education in group dynamics,             ed, don’t be afraid to call back and ask
politics, and the law. We work hand-in-hand with           if you can resume the discussion, but
ICLE, so the educational opportunities are easy            set aside your emotional differences.
to access and we have regular reminders of new             There will be issues that lawyers can-
and interesting topics. Despite considerable di-           not resolve; that is why we have courts
versity in every aspect, we work hard to respect           and frankly, why we have jobs. But dis-
our differences and work together.                         agreements do not have to be disagree-
   The challenge is to instill these three things in       able. A client recently complimented a
our practices. It is easy for me to give you a list        colleague who successfully resolved a
of “to do” items:                                          case for her. She told me that when she
   1. Take your associate(s) out for a working             met my colleague, she thought he was
       lunch. Talk in depth about the philoso-             too nice to handle the case. But she
       phy of a particular case and how that               was pleasantly surprised when that nice
       relates to your philosophy of practice.             man turned out to have a disciplined
   2. Meet with a colleague or a partner and               commitment to reaching the right result.

                                                                                                     1
MICHIGAN PROBATE & ESTATE PLANNING                        Summer 2008


    I could add to this list, but I will not do so. In-
stead, I am going to ask for your help. Over the
past several years, the Council has devoted time
and energy to long-range planning. In the com-
ing year, the Long Range Planning Committee
will be focusing its efforts on a variety of prac-
tice management and educational issues. Men-
toring, education, and civility will be the keys to
our future as a Section and as a practice area. I
have been asked to co-chair this Committee with
Doug Chalgian, and as I prepare to step down
as Chair, I look forward to a role in building our
future.
    You can help by calling me, stopping by, writ-
ing, or e-mailing me with your thoughts on these
areas and how we incorporate them into our fu-
ture. How can we work to make the practice eas-
ier, and the management of our case loads more
efficient and more devoted to the needs of our cli-
ents? What have you done that makes your day
run more smoothly? How have you incorporat-
ed education into your practice and what would
make that easier or more effective? How can we,
as individual lawyers, law firms, and the Section,
mentor our young lawyers so that they become
practitioners with integrity and expertise?
    I look forward to many interesting discus-
sions.




 2
Summer 2008                                                         MICHIGAN PROBATE & ESTATE PLANNING


                      Rule Against Perpetuities Repeal in Michigan
                                          By James P. Spica

                  Introduction                         ing of a future interest in personal property held
                                                       in trust, the satisfaction of a condition precedent
    On May 28, Governor Granholm signed into
                                                       to the exercise of a general power of appoint-
law the Personal Property Trust Perpetuities Act
                                                       ment over such property, the exercise of a non-
of 2008. On June 3, the Act (enrolled House Bill
                                                       general or testamentary power of appointment
5909 (2008)) and an ancillary set of amendments
                                                       over such property, the absolute ownership of
to Michigan’s uniform statutory rule against per-
                                                       such property, the power of alienation over such
petuities (enrolled House Bill 4602 (2007)) were
                                                       property and accumulations of income from such
assigned 2008 Public Acts Numbers 148 and
149, respectively, with immediate effect. The con-     property generally may all be suspended, post-
fluence of these Acts generally makes the rule          poned or allowed to go on indefinitely.2
against perpetuities (“RAP”) and similar rules af-        The new Acts provide a narrow exception to
fecting the duration of trusts inapplicable with re-   this broad exemption, an exception (discussed
spect to personal property held in trusts that are     below), aimed at the so called “Delaware tax
revocable on, or created after, May 28, 2008.1         trap,” pertaining to interests created by certain
    Taken together, the new Acts—which were            nonfiduciary powers of appointment.3 But apart
initially proposed by Greenleaf Trust and subse-       from that narrow exception, the new Acts make
quently endorsed by the Michigan Bankers As-           the USRAP and all similar rules irrelevant to the
sociation and the Council of the Probate and Es-       validity of interests in personal property held in
tate Planning Section of the State Bar of Michi-       trust.4
gan—comprise (1) a general exemption for per-                           Illustration A1
                                                          Personal property in trust without nonfidu-
sonal property held in trust from the RAP and all
                                                           ciary, nongeneral powers of appointment
similar rules, (2) an anti-Delaware-tax-trap ex-
ception and (3) a technical correction to Michi-               By transfer of personal property, Settlor S
gan’s uniform statutory rule against perpetuities        creates a trust after May 28, 2008. The trust in-
(“USRAP”) for “grandfathered” generation skip-           strument provides that trust assets are divided
ping trusts. (Each of these elements is examined         at each generation into separate trusts for S’s
in turn below.) The Acts will be of greatest inter-      living descendants. At the death of each benefi-
est to trusts and estates attorneys who represent        ciary of a separate trust, that separate trust’s as-
Michigan residents interested in “dynasty trusts,”       sets are divided into separate trusts for the de-
but the Acts’ broad effects will have to be under-       ceased beneficiary’s descendants or, if none, for
stood by every attorney who drafts a “perpetuit-         the descendants of S. Income distributions are
ies saving” clause into her trust documents.             mandatory for beneficiaries who have reached
                                                         a certain age and discretionary for beneficiaries
                    Analysis                             who are under that age or “disabled.” Invasion
                                                         of principal is entirely within the trustee’s discre-
General Exemption from the RAP and                       tion. No beneficiary has any nongeneral power
Similar Rules                                            to appoint trust assets, and the trustee never ex-
                                                         ercises its discretionary power to make distribu-
   Personal Property Held in Trust                       tions in such a way as to create a nonfiduciary,
   The new Acts generally make the USRAP and             nongeneral power of appointment. The trustee
every other RAP-like rule inapplicable to interests      never acquires direct ownership—as opposed to
in personal property held in trust. Thus, the vest-      ownership through entity interest(s) in a corpora-

                                                                                                            3
MICHIGAN PROBATE & ESTATE PLANNING                                                               Summer 2008


  tion, partnership or trust—of any real property.     property is ever liable to be invalidated by any
    The effect of the new Acts is that no interest form of the RAP or similar rule under Michigan
in the trust described in Illustration A1 is ever law.)
liable to be invalidated by any form of RAP or                            Illustration A2(b)
similar rule under Michigan law. As far as Michi-          Personal property in trust without nonfidu-
gan law is concerned, interests in the trust need           ciary, nongeneral powers of appointment
never vest, conditions precedent to the exercise          when trustee subsequently purchases direct
of general powers of appointment over the trust                     ownership of real property
need never be satisfied, general powers over the
                                                                The facts are the same as in Illustration A1
trust need never be exercised and absolute own-           except that eighty years after S creates the trust,
ership of the trust’s assets, powers of alienation        the trustee purchases direct ownership—as op-
over those assets and accumulations of income             posed to ownership through entity interest(s) in
from those assets may all be suspended, post-             a corporation, partnership or LLC—of real prop-
poned or allowed to go on forever.                        erty.
                                                           The interests with respect to the real property
    Real Property
                                                       directly held by the Illustration A2(a) trust must
    The new Acts’ general exemption from the RAP actually vest (whether by provision of the trust
and similar rules does not pertain to real proper- instrument or through the exercise of discretion-
ty, regardless whether such property is held in ary fiduciary powers) within 10 years (90 years
trust.5 If real property is directly owned—as op- minus 80 years)9 under Michigan’s USRAP. That
posed to being owned through entity interest(s) will be the result unless the courts improvise a
in a corporation, partnership or trust—by a trust- rule like the statutory provision in Delaware—for
ee, the trust beneficiaries’ interests in that real like Michigan’s, Delaware’s general repeal of
property will continue to be subject to the cur- RAP-like rules for property held in trust does not
rent 90-year “wait-and-see” rule of Michigan’s extend to real property10—that the perpetuities
USRAP.6                                                period runs “from the later of the date on which…
                    Illustration A2(a)                 real property…is added to or purchased by a trust
   Real property and personal property in trust        or the date the trust became irrevocable….”11 As
    without nonfiduciary, nongeneral powers of          judge-made law, such a rule would be against
                       appointment
                                                       all analogy, for if, without specific legislation, the
                                                       perpetuities period could be measured from the
         The facts are the same as in Illustration
   A1 except that the trustee does acquire direct      date trust property was acquired, it should al-
   ownership—as opposed to ownership through           ways have been within a trustee’s election under
   entity interest(s) in a corporation, partnership or the USRAP to restart the wait-and-see period by
   trust—of real property, because S creates the       wholesale reinvestment. Reductio ad absurdum!
   trust by a transfer of title to real property.      (Q.E.D.)
    Interests in the real property directly owned
                                                       Anti-Delaware-Tax-Trap Exception
by the Illustration A2(a) trust must actually vest
(whether by provision of the trust instrument or           The new Acts provide that, the general ex-
through the exercise of discretionary fiduciary emption from the RAP notwithstanding, whenev-
powers) within 90 years of the trust’s creation7 er a nonfiduciary, nongeneral power of appoint-
under Michigan’s USRAP. Otherwise, those in- ment over personal property held in trust (“first
terests are invalid and presumptively eligible for power”) is exercised so as to subject property
reformation under USRAP section 4.8 (Again, no to, or to create, another nonfiduciary power of
interest in the trust with respect to the personal appointment other than a presently exercisable

 4
Summer 2008                                                        MICHIGAN PROBATE & ESTATE PLANNING


general power (“second power”), the period dur-           never exercised so as to create any nonfi-
ing which the vesting of a future interest in the         duciary power of appointment other than a
property may be postponed by the exercise of                 presently exercisable general power
the second power is determined under a mod-
                                                               The facts are the same as in Illustration A1
ified USRAP by reference to the date the first
                                                         except that at the death of each beneficiary of a
power was created.12 For this purpose, a power
                                                         separate trust, that separate trust’s assets are
is “nonfiduciary” if it is not held by a trustee in a     distributed (the instrument provides) as the de-
fiduciary capacity,13 and the relevant modification        ceased beneficiary appoints by will. The bene-
to the USRAP is that the standard 90-year “wait-         ficiary’s testamentary power is a special power.
and-see” period is extended to 360 years.14              In default of appointment, the assets are divided
   Scope of the Anti-Delaware-Tax-Trap                   into separate trusts for the deceased beneficia-
Exception                                                ry’s descendants or, if none, for the descendants
   The purpose of this exception is to make the          of S. Either because the trust instrument rules
new Acts Delaware-tax-trap-neutral, so that the          it out or just as it happens, no beneficiary ever
trap is liable to be sprung under Michigan law           exercises the testamentary, nongeneral power
                                                         of appointment so as to create another nonfidu-
with the new Acts only in the circumstances it
                                                         ciary power other than a presently exercisable
was liable to be sprung under Michigan law with-         general power.
out the new Acts. We shall have to say a good             No interest in the trust described in Illustration
deal about the Delaware tax trap in order to ex-       B1(a) is ever liable to be invalidated by any form
plain how the exception achieves that end, but         of RAP or similar rule under Michigan law. The
we should begin by emphasizing the exception’s         anti-Delaware-tax-trap exception simply does not
narrowness. It applies:                                apply on the facts of Illustration B1(a), because
(a) only if a nonfiduciary, nongeneral power            though the trust contemplates nonfiduciary, non-
   of appointment (“first power”) is exercised,         general powers of appointment, those powers, if
(b) only if the first power’s exercise subjects         exercised at all, are all exercised so as to yield
   property to or creates another, nonfidu-             only outright distributions, presently exercisable
   ciary power of appointment,                         general powers or fiduciary powers.
(c) only if that other, nonfiduciary power is
   not a presently exercisable general power,                          Illustration B1(b)
(d) only if that other, nonfiduciary power is             Personal property in trust with nonfiduciary,
   exercised, and                                         nongeneral powers of appointment one of
(e) only for purposes of determining the va-              which is exercised so as to create a nonfi-
   lidity of interests created by that other,             duciary power of appointment other than a
   nonfiduciary power’s exercise.                             presently exercisable general power
(The confluence of these conditions is schemati-
cally described in the RAP-applicability flowchart             The facts are the same as in Illustration
                                                         B1(a) except that Two hundred years after S
provided in the Appendix. The flowchart locates
                                                         creates the trust, a beneficiary B effectively ap-
the new Acts’ anti-Delaware-tax-trap exception           points the assets of her separate trust so as to
among other circumstances in which Michigan’s            create another nonfiduciary power other than a
USRAP applies to property subject to Michigan            presently exercisable general power (“B’s Ap-
law after the new Acts’ effective date.)                 pointee’s Power”) over all of the assets of B’s
                                                         separate trust. (B is the only beneficiary who
               Illustration B1(a)                        ever exercises the testamentary, nongeneral
  Personal property in trust with nonfiduciary,           power of appointment so as to create another
  nongeneral powers of appointment that are              nonfiduciary power other than a presently exer-

                                                                                                          5
MICHIGAN PROBATE & ESTATE PLANNING                                                            Summer 2008


  cisable general power.)                             time allowable under statute, a period often simi-
    Interests created by B’s Appointee’s Power        lar to the RAP’s period of a life in being plus 21
must actually vest within 160 years (360 years        years.21
minus 200 years)15 under Michigan’s USRAP (as             Although the Trap refers to postponement of
modified for this purpose). Otherwise those in-        vesting and suspension of absolute ownership
terests are invalid and presumptively eligible for    or the power of alienation in the disjunctive, it
reformation under USRAP section 4.16 (Apart           has been interpreted so that the Trap is sprung
from interests in the assets of B’s separate trust    (i.e., causes inclusion in the relevant transfer tax
created by B’s Appointee’s Power, no interest in      base) only if under the applicable local law both
the trust is ever liable to be invalidated by any     the period during which vesting may be post-
form of the RAP or similar rule under Michigan        poned by exercise of the second power of ap-
law.)                                                 pointment (the power created by H’s exercise of
    How the anti-Delaware-Tax-Trap Exception          the first power) and the period during which ab-
Works                                                 solute ownership or the power of alienation may
              The Delaware Tax Trap                   be suspended by exercise of the second power
    “Delaware tax trap” is the colloquial name for    can be ascertained without regard to the date of
Internal Revenue Code section 2041(a)(3) and          the first power’s creation.22 So, in a jurisdiction
its gift tax counterpart, Code section 2514(d).17     without a RAP, a rule against suspension of ab-
These sections (“Trap”) provide that assets sub-      solute ownership or the power of alienation may
ject to a power of appointment (“first power”) are     prevent the Trap from being sprung (if the instru-
included in the power holder’s (“H’s”) transfer tax   ment creating the second power—by exercising
base (gift tax base or gross estate, depending on     the first—does not itself avert the Trap—by ef-
whether the triggering exercise of the power is       fectively placing one of the relevant limitations
testamentary) if the holder exercises the power       on exercise of the second power). And, contrari-
by creating another power that “under the appli-      wise, in a jurisdiction without a rule against sus-
cable local law can be validly exercised so as to     pension of absolute ownership or the power of
postpone the vesting of [interests in the assets],    alienation, a RAP may disarm the Trap.
or suspend the absolute ownership or power of              The Situation in Michigan Prior to the
alienation of such [assets], for a period ascer-                           New Acts
tainable without regard to the date of creation of        Michigan has not had a rule against suspen-
the first power.”18                                    sion of absolute ownership or the power of alien-
    The postponement of vesting is the concep-        ation with respect to land since 194923 and has
tual province of all forms of RAP, whereas sus-       never had such a rule with respect to personal
pension of absolute ownership or the power of         property: the common law RAP was partly super-
alienation is the province of a conceptually dis-     seded in Michigan, from 1847 to 1949, by statu-
tinct group of rules potentially affecting the du-    tory provisions limiting suspension of the power
ration of trusts.19 Vesting is irrelevant to rules    of alienation,24 but those provisions, which ap-
against the suspension of absolute ownership or       plied only to real property,25 were repealed by
the power of alienation, under which a suspen-        Public Acts 1949, Number 38 (effective Septem-
sion occurs when there is no person or group of       ber 23, 1949), which restored the applicability of
persons living who can convey absolute owner-         the common law RAP to real property, “thereby
ship of the property in question (as when trust       making uniform the rule as to perpetuities appli-
principal is directed to someone yet unknown or       cable to real and personal property.” And there
unborn).20 These rules are violated when such         was no rule against suspension of the power of
a suspension may last longer than the length of       alienation at common law.26

 6
Summer 2008                                                       MICHIGAN PROBATE & ESTATE PLANNING


   So, prior to the new Acts (and, as we shall see,   analysis regarding the Trap in Michigan. With-
subsequent to them), when a nonfiduciary,27 non-       out a rule against suspension of absolute owner-
general power of appointment subject to Michi-        ship or the power of alienation,31 the absence of
gan law was exercised so as to create a second        a RAP for personal property held in trust would
power of appointment, and the instrument cre-         have meant that any “second power” H might
ating the second power (by exercising the first)       create in the hypothetical described above (to
did not itself avert the Trap (by effectively plac-   the extent the power governed personal property
ing one of the relevant limitations on exercise of    held in trust) could postpone vesting for a period
the second power), the Trap analysis focused on       without end, a period that would therefore be “as-
the RAP—the USRAP since 1988.28 Again, the            certainable” (if at all) “without regard to the date
question was whether the second power could           of creation of [H’s] power.”32 That would have
be validly exercised so as to postpone vesting        meant that anytime a nonfiduciary, nongeneral
for a period ascertainable without regard to the      power of appointment was exercised so as to
date of the first power’s creation.                    create another nonfiduciary power (of any kind),
   Prior to the new Acts, Michigan law provided       the Trap would have caused assets subject to
that in the case of any power other than a pres-      the second power to be included in the trans-
ently exercisable general power, the maximum          fer tax base of the holder of the first power. And
period for which exercise of the power could          that would have made nonfiduciary, nongeneral
postpone vesting of a future interest was mea-        powers over personal property held in trusts that
sured from the time the power was created; in         were either “applicable-exclusion-amount” or
the case of a presently exercisable general pow-      “GST-exemption” sheltered very dangerous for
er, the period was measured from the time the         transfer tax purposes.
power was exercised.29 So, if H had a nonfidu-           An Aside Regarding Delaware’s “Solution”
ciary, special, testamentary power of appoint-                       to the Same Problem
ment over a trust subject to Michigan law and H          Simple RAP repeal would have made such
exercised her power by creating a second nonfi-        powers dangerous, that is, if (as the author be-
duciary, special power (or a testamentary gen-        lieves) the Trap is properly read as raising the
eral power), then even if the instrument creating     question whether, under applicable local law, the
the second power (by exercising H’s) did not it-      second power can validly be exercised so as to
self avert the Trap (by effectively placing one of    postpone vesting (or suspend absolute owner-
the relevant limitations on exercise of the second    ship or the power of alienation) for a period from
power), the Trap did not include the trust in H’s     the date of the second power’s exercise that is
gross estate, because any exercise of the sec-        ascertainable without regard to the date of cre-
ond power would be subject to a vesting period        ation of the first power. This is surely the most
reckoned from the creation of H’s power. If, on       natural reading of the Trap’s language, but it is a
the other hand, H exercised her power by creat-       reading the State of Delaware’s legislature has
ing a presently exercisable general power over        either missed or ignored, for in dealing (belat-
the trust,30 the Trap did include the trust in H’s    edly33) with the problem we have just described
gross estate, because any exercise of the gener-      (the problem of inadvertent Trap springing by the
al power would begin a new vesting period, one        exercise of what would otherwise be nontaxable
reckoned from the date of the exercise, not from      powers of appointment), Delaware—which, like
the creation of H’s power.                            Michigan, is without a rule against suspension of
 What Would Have Been Wrong With Simple               absolute ownership or the power of alienation for
                   RAP Repeal?                        property affected by its RAP repeal34—evident-
   RAP repeal was obviously liable to change the      ly thought it sufficient to provide that the “sec-

                                                                                                      7
MICHIGAN PROBATE & ESTATE PLANNING                                                               Summer 2008


ond power” “shall, for purposes of any rule of law      not work: a relation-back rule without a RAP (or
against perpetuities . . . be deemed to have been       rule against suspension of absolute ownership
created at the time of the creation of . . . the first   or the power of alienation) is otiose,37 for it can-
power.”35                                               not yield a terminus that would be different if the
    The upshot is that in Delaware, exercise of a       date of the first power’s creation were different.
“second power” over personal property held in              A Rule Against Suspension of Absolute
trust relates back to the date of the creation of         Ownership or the Power of Alienation or a
the “first power” for purposes of RAP-like rules.          Narrow Application of Some Form of RAP?
But there is no RAP-like rule for personal prop-           The real choices, then, for a state that is, like
erty held in trust in Delaware! So, how is the re-      Michigan, without a rule against suspension of
lation back to the creation of the first power sup-      absolute ownership or the power of alienation
posed to avoid the Trap? After all, the second          and wants to repeal its RAP-like rules without
power can validly be exercised to postpone the          increasing the risk of unwanted Trap springing,
vesting of interests in personal property held in       are (1) to invent a rule against suspension of ab-
trust forever, and the period that runs forever         solute ownership or the power of alienation for
from the date of the second power’s exercise is         the narrow purpose of avoiding the Trap or (2) to
certainly “ascertainable” (if at all) without regard    retain, for that purpose, a narrow application of
to the date of creation of the first power—and,          some form of RAP.
therefore, the Trap is sprung! It is trivially true        The former tack is bound to be inelegant. For
that the period that runs forever from the date         one thing, it requires the state’s lawyers and
of the first power’s creation is “ascertainable”         judges to become scholars of other states’ laws,
(if at all) only with regard to the date of the first    for by hypothesis the inventing state is, at the
power’s creation, but a reading of the Trap that        time of invention, without a rule against sus-
would make that relevant would also make the            pension of absolute ownership or the power of
Trap irrelevant, for if the question were wheth-        alienation. Furthermore, the invented rule has
er, under applicable local law, the second power        to comport with the broader objective of allow-
can validly be exercised to postpone vesting for        ing perpetual trusts, so that, in addition to a rule
a period from the date of the first power’s cre-         against suspension of absolute ownership or the
ation that is ascertainable without regard to the       power of alienation, it has to be provided that ab-
date of creation of the first power, the Trap could      solute ownership or the power of alienation is not
not possibly be sprung. Reductio ad absurdum!           suspended if the trustee has a power of sale,38
(Q.E.D.)                                                thus holding control of the trustee’s ability to sell
    What is wanted, if the Trap is to be avoided,       assets hostage to perpetuity. And, of course, the
is the specification of a period during which vest-      invention for this purpose of a rule against sus-
ing may be postponed (or absolute ownership or          pension of absolute ownership or the power of
the power of alienation suspended) that begins          alienation requires the state’s relation-back pro-
on the date of the second power’s exercise and          vision for nongeneral and testamentary general
ends on a date that cannot be ascertained with-         powers of appointment39 to be transposed from
out regard to the date of creation of the first pow-     the key of vesting to the key of ownership or
er. Such a period must be finite. This is why RAP        alienation.40
repeal (in a state without a rule against suspen-                      Michigan’s Solution
sion of absolute ownership or the power of alien-          In any case, rather than invent a rule against
ation) is liable to make nonfiduciary, nongeneral        suspension of absolute ownership or the power
powers dangerous for transfer tax purposes,36           of alienation for the narrow purpose of avoiding
and it is why Delaware’s anti-Trap provision does       the Trap, Michigan has plumped for the alterna-

 8
Summer 2008                                                       MICHIGAN PROBATE & ESTATE PLANNING


tive tack of retaining a narrow application (aimed    able general powers.
only at the Trap) of a modified form of the US-            The Bottom Line Is Delaware-Tax-Trap-
RAP for personal property held in trust. Again,       Neutrality
the new Acts provide that, the general exemp-             So, although the new Acts change the analy-
tion from the RAP notwithstanding, whenever a         sis of Trap springing in Michigan (with respect to
nonfiduciary, nongeneral power of appointment
                                                      personal property held in trust), they leave the
over personal property held in trust (“first pow-
er”) is exercised so as to subject property to, or    practical indications exactly as they were: (1) if H
to create, another nonfiduciary power of appoint-      has a nonfiduciary, nongeneral power of appoint-
ment other than a presently exercisable general       ment over personal property held in a trust sub-
power (“second power”), the period during which       ject to Michigan law and H exercises her power
vesting of a future interest in the property may be   by creating a second nonfiduciary, nongeneral
postponed by the exercise of the second power         power (or a testamentary general power), then
is determined under a modified USRAP by ref-           even if the instrument creating the second pow-
erence to the date the first power was created         er (by exercising H’s) does not itself avert the
(and the relevant modification to the USRAP is         Trap (by effectively placing one of the relevant
that the standard 90-year “wait-and-see” period
                                                      limitations on exercise of the second power), the
is extended to 360 years). This disarms the Trap,
in the circumstances described, by the conflu-         Trap will not include the trust in H’s transfer tax
ence of (1) Michigan’s relation-back provision for    base (gift tax base or gross estate, depending on
nongeneral and testamentary general powers of         whether the exercise of H’s power is testamen-
appointment41 and (2) (what is missing in Dela-       tary), whereas, (2) if H exercises her power by
ware’s imperfect realization of this tack) the ap-    creating a presently exercisable general power
plicability of a finite perpetuities testing period.   over the trust, the Trap will include the trust in
   Room to Maneuver Into the Delaware Tax             H’s transfer tax base. These results are exactly
Trap                                                  the results that obtained in Michigan prior to the
   It is important to note that the new Acts’ anti-   new Acts.44
Trap exception does not entirely preclude spring-
                                                          The difference is that under the new Acts, the
ing the Trap. There are circumstances in which
Trap springing can be beneficial, as when a nonf-      explanation of result (1) (above) is that interests
iduciary, nongeneral power holder’s death would       created by the exercise of the second power will
otherwise be a “taxable termination” for purpos-      be subject, under the Acts’ anti-Trap exception,
es of the federal generation skipping transfer        to a 360-year wait-and-see period reckoned from
(“GST”) tax and the attributable GST tax would        the creation of H’s power; and the explanation
be more than the attributable estate tax under        of result (2) (above) is that, because (on those
the Trap.42 In those circumstances, prior to the      facts) neither the USRAP nor any RAP-like rule
new Acts, it might be within the power holder’s       applies to interests created by exercise of the
election in Michigan to spring the trap by exercis-   presently exercisable general power, the power
ing her nongeneral power so as to create a pres-
                                                      can be exercised to postpone the vesting of in-
ently exercisable general power.43 And the new
Acts’ anti-Trap exception preserves that election     terests in personal property held in trust forever,
by applying the modified USRAP only for pur-           and the period that runs forever from the date of
poses of determining the validity of interests cre-   the second power’s exercise is “ascertainable”
ated by the exercise of power-of-appointment-         (if at all) without regard to the date of creation of
generated powers other than presently exercis-        H’s power.45

                                                                                                       9
MICHIGAN PROBATE & ESTATE PLANNING                     Summer 2008


A Technical Correction to Michigan’s USRAP
for Powers of Appointment over “Grandfa-
thered” Generation Skipping Trusts
   The new Acts’ technical correction for “grand-
fathered” generation skipping trusts46 is indepen-
dent of RAP repeal. It is aimed at Treasury regula-
tion section 26.2601-1(b)(1)(v)(B),47 under which
certain “longer-of-two-periods” arrangements ef-
fected by the exercise of a power of appointment
can cause a grandfathered, GST-tax-exempt
trust (a trust that was irrevocable on September
25, 1985) to lose GST-tax-exempt status.48 The
correction, which disarms offending “longer-of-
two-periods” arrangements, is a slightly modified
version of section 1(e) of the USRAP as amend-
ed in 1990 by the National Conference of Com-
missioners on Uniform State Laws.49 The Com-
missioners have never withdrawn Official Com-
ment G (with its highly unusual footnote). That
Comment erroneously suggests section 1(e) is
supererogatory and presumably accounts for
Michigan’s having initially failed, along with sev-
eral other states (Florida, Georgia, Massachu-
setts, Minnesota, Nebraska, South Carolina and
West Virginia), to enact a version of the needful
section 1(e) when it originally adopted the US-
RAP.50 In any case, the new Acts’ technical cor-
rection puts the matter right.
                   Conclusion
   Taken together, then, the new Acts (1) gen-
erally make the rule against perpetuities and all
similar rules affecting the duration of trusts inap-
plicable with respect to personal property held
in trusts that are revocable on, or created after,
May 28, 2008 (2) in a way that does not alter
the risks or opportunities under Michigan law of
springing the Delaware tax trap and (3) reduc-
es the GST-tax risks of exercising powers of ap-
pointment over trusts grandfathered under the
Treasury’s GST tax effective date regulations.




 10
Summer 2008                                                          MICHIGAN PROBATE & ESTATE PLANNING



      Appendix: Post Personal Property Trust Perpetuities Act RAP Applicability
                                    Flowchart



                     (1) Is the interest in question
                     (“instant interest”) a nonvested51
                     interest or a power of appointment?

                            No                  Yes



                   The RAP is                   (2) Is the instant interest an interest in,
                   irrelevant to                or power over, real property?
                   the instant
                   interest’s                            No                      Yes
                   validity


                       (3) Is the instant interest an interest in,            Michigan’s
                       or power over, (personal) property held                USRAP applies52
                       in a trust that was revocable on, or                   to the instant
                       created after, May 28, 2008?                           interest (90-yr.
                                                                              wait-and-see)
                                   No                  Yes


                   Michigan’s                   (4) Was the instant interest created53 by
                   USRAP applies                the exercise of a power of appointment?
                   to the instant
                   interest (90-yr.                    No                       Yes
                   wait-and-see)


                                                The RAP is
                                                irrelevant to
                                                the instant
                                                interest’s
                                                validity54




                                                                                                    11
MICHIGAN PROBATE & ESTATE PLANNING                                                               Summer 2008



                                                 (‘Yes’ to question (4) on previous page)


                 (5) Was the power whose exercise created
                 the instant interest itself created by the
                 exercise of a power of appointment?


                       No                      Yes


             The RAP is                        (6) Was the power whose exercise
             irrelevant to                     created the instant interest (“second
             the instant                       power”) a presently exercisable general
             interest’s                        power of appointment?
             validity
                                                         No                    Yes


                            (7) Was the power (“first power”)                    The RAP is
                            whose exercise created the second power              irrelevant to
                            a general power of appointment?                      the instant
                                                                                 interest’s
                                                                                 validity
                                     No                    Yes


         (8) Was either the first power or                  The RAP is
         the second power a fiduciary                       irrelevant to
         power?55                                           the instant
                                                            interest’s
                                                            validity
                  No                   Yes


       Michigan’s                      The RAP is
       USRAP applies                   irrelevant to
       to the instant                  the instant
       interest (360-yr.               interest’s
       wait-and-see)                   validity




12
Summer 2008                                                                     MICHIGAN PROBATE & ESTATE PLANNING


                            Notes                                 Against Perpetuities, 28 EST. PLAN. 68, 69-70 (2001) and
                                                                  Jonathan G. Blattmachr & Jeffrey N. Pennell, Using “Dela-
    1. See Personal Property Trust Perpetuities Act, 2008         ware Tax Trap” to Avoid Generation-Skipping Taxes, 68 J.
Mich. Pub. Acts 148 [hereinafter PPTPA] § 4; Uniform              TAX’N 242, 243-46 (1988).
Statutory Rule Against Perpetuities, 2008 Mich. Pub. Acts             18. IRC § 2041(a)(3) (2005).
149 [hereinafter USRAP Amendments] enacting sec. 1.                   19. See, e.g., Greer, supra note 17, at 70-71.
    2. PPTPA, supra note 1, § 3(1)-(2), USRAP Amend-                  20. See Ira Mark Bloom, Transfer Tax Avoidance: The
ments, supra note 1, § 5(1)(f).                                   Impact of Perpetuities Restrictions Before and After Gen-
    3. The exception is described infra in the text accompa-      eration-Skipping Taxation, 45 ALB. L. REV. 261, 267-69.
nying notes 12-14, the Delaware tax trap is described infra           21. Id.
in notes 17-18 and accompanying text and “nonfiduciary”                22. Estate of Murphy, 71 TC 671 (1979), acq. 1979-2
powers are described infra in the text accompanying note          C.B. 2.
13.                                                                   23. Mich. Comp. Laws Ann. § 554.51 (West 2005).
    4. Note that this is not to say that such interests can-          24. Lantis v Cook, 342 Mich 347, 69 NW2d 849
not be affected by “saving clauses”—provisions in trust or        (1955).
other governing instruments designed to ensure that the               25. Rodney v Stotz, 280 Mich 90, 273 NW 404 (1937).
RAP is not violated. Saving clauses do not apply the RAP              26. John C. Gray, The Rule Against Perpetuities (4th
to the interests they govern; rather, they prevent the RAP        ed. 1942). Of course, the rule against suspension of the
from invalidating those interests by forcing the interests        power of alienation has to be distinguished from prohibi-
either to vest or terminate within the relevant perpetuit-        tions against direct restraints on alienation that may be
ies period. A trust privision, for instance, that simply termi-   ineffective per se, without regard to their duration. Greer,
nates all nonvested interests 21 years after the death of         supra note 17, at 70.
the survivor of several specified people living at the time of         27. Legislative history indicates that the Trap was not
the trust’s creation is liable to have that effect regardless     intended to apply to purely fiduciary powers of appoint-
whether any form of RAP is applicable. Saving clauses             ment, e.g., a trustee’s discretionary power to invade prin-
vest or terminate interests; they do not invalidate them.         cipal. See S. REP. No. 82-382 (1951), reprinted in 1951
So, to say that the RAP is irrelevant to a given interest’s       U.S.C.C.A.N. 1535.
validity says nothing about whether the interest is liable to         28. The adoption of the USRAP displaced the common
be convulsed by the effect of a saving clause.                    law RAP in Michigan. See MICH. COMP. LAWS ANN. § 554.53
    5. See the provisions of the new Acts cited supra note        (West 2005) (“[u]nless [sic] as otherwise provided by stat-
2.                                                                ute, [Pub. Acts 1949, No. 38, discussed supra in the text
    6. MICH. COMP. LAWS ANN. § 554.72 (West 2005).                accompanying notes 25-26] shall not apply to nonvested
    7. For the sake of simplicity, the illustration assumes       property interests created on or after the effective date of
there is nothing in the trust instrument (e.g., a perpetuities    the uniform statutory rule against perpetuities”). The com-
“saving clause”) that would make the common law perpe-            mon law perpetuities testing period is still relevant under
tuities testing period relevant.                                  the USRAP, for an interest that must vest (if at all) within
    8. Mich. Comp. Laws Ann. § 554.74 (West 2005).                that period is, for that reason, valid under the USRAP. See
    9. Given the simplifying assumption described supra           Mich. Comp. Laws Ann. § 554.72 (West 2005). But an in-
in note 7.                                                        terest that may vest beyond the common law period is not
    10. DEL. CODE ANN. tit. 25, § 503(a) (2000).                  invalid under the USRAP until the relevant “wait-and-see”
    11. Id. § 503(b).                                             period has elapsed (id.), a result that flatly contradicts the
    12. PPTPA, supra note 1, § 3(3), USRAP Amendments,            common law RAP. So, one should not confuse the con-
supra note 1, § 5(2).                                             tinued relevance of the common law testing period with
    13. PPTPA, supra note 1, § 2(b), USRAP Amendments,            the continued application of the common law RAP itself;
supra note 1, § 5(3).                                             the USRAP makes use of the former while displacing the
    14. USRAP Amendments, supra note 1, § 5(2).                   latter.
    15. Given the simplifying assumption described supra              29. Id. § 556.124 (West 1988).
in note 7.                                                            30. For these purposes, a “presently exercisable” power
    16. See supra note 8.                                         is one whose exercise is neither required to be by will nor
    17. The colloquial name is derived from the provision’s       otherwise constrained to be postponed. Id. § 556.112(l).
having been enacted to disarm an estate tax avoidance             And a “general” power is one exercisable in favor of the
threat posed by a Delaware statute. For a brief historical        holder, the holder’s creditors, holder’s estate or the credi-
account of the Delaware tax trap, see Stephen E. Greer,           tors of holder’s estate. Id. § 556.112(h). The instrument
The Delaware Tax Trap and the Abolition of the Rule               creating a power of appointment can limit the manner of

                                                                                                                          13
 MICHIGAN PROBATE & ESTATE PLANNING                                                                          Summer 2008


the power’s exercise in any particular. Id. §§ 556.112(c)           52. The adoption of the USRAP displaced the common
(defining ‘power of appointment’ as “a power . . . which en-     law RAP in Michigan with respect to interests created on
ables the donee of the power to designate, within any lim-      or after the USRAP’s 1988 effective date. See supra note
its that may be prescribed, the transferees of the property     28.
[subject to the power]” (emphasis added)), 556.115(2) (re-          53. For purposes of this flowchart, a preexisting power
quiring that an exercise comply “with the requirements, if      of appointment p1 is “created” by another power p2 to the
any, of the creating instrument as to the manner, time and      extent an exercise of p2 newly subjects assets to p1. Thus,
conditions of the exercise”). See also Hannan v Slush, 5        for example, if a power holder PH exercises her power to
F2d 718, 722 (E Mich, 1925) (power must be exercised in         appoint asset A by adding A to a preexisting trust T over
the mode prescribed by donor). But unless the instrument        which a beneficiary B has a power of appointment, then
is prohibitive, there is no impediment to the exercise of a     (for purposes of this flowchart) B’s power over A is “cre-
power of appointment so as to create another power of           ated” by the exercise of PH’s power.
any quality in any permissible appointee. See MICH. COMP.           54. Remember, to say that the RAP is irrelevant to a
LAWS ANN. §§ 556.114-115 (West 1988 & Supp. 2005).              given interest’s validity says nothing about whether the
     31. See supra text accompanying notes 23-26.               interest is liable to be affected by a savings clause. See
     32. See supra note 18 and accompanying text.               supra note 4.
     33. Delaware repealed its RAP with respect to personal         55. I.e., a power of appointment held by a trustee in a
property held in trust in 1995, but only enacted the anti-      fiduciary capacity. See supra note 13.
Trap provision described in the text in July of 2000. See
DEL. CODE ANN. tit. 25, § 504 (2000).
     34. Greer, supra note 17, at 74.
     35. DEL. CODE ANN. tit. 25, § 504 (2000).
     36. See supra text accompanying notes 31-32.
     37. Other commentators have expressed doubt as to                             James P. Spica is a partner at
whether a relation-back rule by itself could be sufficient for                      Warner Norcross & Judd LLP
Delaware’s purposes. See, Greer, supra note 17.                                    practicing in the areas of taxa-
     38. Id., at 73.                                                               tion, estate planning and ad-
     39. In Michigan’s case, MICH. COMP. LAWS ANN. § 556.124                       ministration, trust banking, and
(West 1988) discussed supra in the text accompanying
                                                                                   tax-exempt charitable organi-
note 29.
                                                                                   zations. Mr. Spica is a member
     40. See supra text accompanying notes 19-20.
                                                                                   of the American Bar Associa-
     41. MICH. COMP. LAWS ANN. § 556.124 (West 1988) dis-
                                                                                   tion, the State Bar of Michigan,
cussed supra in the text accompanying note 29.
     42. See generally Blattmachr & Pennell, supra note 17;
                                                                                   the National Committee on
James P. Spica, A Practical Look at Springing the Dela-
                                                                                   Planned Giving, the Planned
ware Tax Trap to Avert Generation Skipping Transfer Tax,
                                                                Giving Roundtable of Southeast Michigan, the
41 REAL PROP. PROB. & TR. J. 165 (2006).                        Financial and Estate Planning Council of Metro-
     43. See supra notes 29-30 and accompanying text.           politan Detroit and the Legal/Financial Network
     44. See supra notes 23-30, 43 and accompanying             Advisory Committee of the Community Founda-
text.                                                           tion for Southeast Michigan. He has an LL.M. (in
     45. See supra text accompanying notes 32-37.               Taxation) from New York University, was a clerk
     46. USRAP Amendments, supra note 1, § 2(5).                on the U.S. Tax Court, a professor of law at the
     47. Treas. Reg. § 26.2601(b)(1)(v)(B) (as amended in       University of Detroit Mercy (tenured 1996) and
2003).                                                          Wayne State University, and an adjunct classics
     48. See id., § 26.2601(b)(1)(v)(D) exs. 6-7.               instructor at The Roeper School. Mr. Spica is co-
     49. Unif. Statutory Rule Against Perpetuities § 1(e)       author of Michigan Estate Planning Handbook
(amended 1990), 8B U.L.A. 237 (2001).                           (ICLE 2d ed. 2006 & Supp.) and the author of
     50. For a thorough discussion of USRAP section 1(e)        many law review articles, including “A Trap for
and its relation to Treas. Reg. § 26.2601(b)(1)-(v)(B), see     the Wary: Delware’s Anti-Delaware-Tax-Trap
Jesse Dukeminier, The Uniform Statutory Rule Against            Statute Is Too Clever by Half (of Infinity),” which
Perpetuities and the GST Tax: New Perils for Practitioners      will be published in the 2009 winter issue (volume
and New Opportunities, 185 REAL PROP. PROB. & TR. J.            43 number 4) of the American Bar Association’s
185, 187-194 (1995).                                            Real Property, Trust and Estate Law Journal.
     51. I.e., contingent.


 14
Summer 2008                                                       MICHIGAN PROBATE & ESTATE PLANNING


                              Michigan’s Estate Recovery Law
                       By Michelyn E. Pasteur and Melisa M. W. Mysliwiec

   In the fall of 2007, when Michigan legislators                           What?
were in the midst of heated negotiations over
                                                         The objective of Michigan’s estate recovery
our state’s budget imbalance, the federal gov-        program is to collect assets from deceased Med-
ernment renewed its threat to cut federal funds       icaid recipients’ estates to repay the state for the
used to support Michigan’s Medicaid program           costs incurred to provide Medicaid services to
unless Michigan towed the line and adopted an         those individuals during their lifetimes. The Law
estate recovery plan. Michigan complied by pas-       specifically limits the source of recovery to the
sage of Public Act 74 of 2007, effective Septem-      recipient’s probate estate.4 This is a very impor-
ber 30, 2007 (“Law”), becoming the last state in      tant limitation because if there is no probate es-
the union to come on board with this federal stat-    tate, there is nothing to recover against. The Law
utory requirement. Although over eight months         also stipulates that no interest can be charged
has passed since enactment, no policy or rules        on the value of the probate assets that are re-
have yet been published to implement the Law.         coverable.5
However, we can glean from the statutory lan-                               When?
guage the shape that Michigan’s estate recovery
                                                          Recovery will not begin until after the death
program will take once it is up and running. Fol-
                                                      of the Medicaid recipient. Although several other
lowing are highlights that outline the most signifi-
                                                      states place liens on the assets of the Medic-
cant parts of this new law.                           aid recipient when they begin receiving Medicaid
                      Who?                            long-term care services, Michigan’s Law prohib-
                                                      its placing or recording a lien on property that is
   Michigan’s estate recovery program applies         recoverable through estate recovery during the
only to recipients of Medicaid benefits who be-        Medicaid recipient’s life.6
gan receiving Medicaid long-term care services
                                                                            How?
after September 30, 2007.1 However, the Law
requires that individuals seeking Medicaid as-           Upon the Medicaid recipient’s death, the state
sistance shall be provided with written notice re-    of Michigan becomes a creditor of the dece-
garding the provisions of the Michigan estate re-     dent’s probate estate. However, it stands behind
covery program, including a statement that some       a number of other creditors with higher priority,
or all of their estate may be recovered.2 Further,    including:7
the Michigan Department of Community Health,            1. Costs and expenses of estate adminis-
                                                           tration;
which is charged with implementing Michigan’s
                                                        2. Reasonable funeral and burial expenses;
estate recovery program, cannot begin to recov-
                                                        3. Homestead allowance;
er estate assets until the federal government has       4. Family allowance; and
approved Michigan’s plan for implementation.3           5. Exempt property.
As of May 2008, the Department of Community           This means that if the Medicaid recipient has
Health has submitted a proposed plan amend-           a surviving spouse, at least $55,0008 could be
ment to the federal government for review; how-       subtracted from the decedent’s probate assets,
ever, the terms of the plan amendment have not        in addition to the administrative expenses of the
yet been approved.                                    estate and funeral costs, before any portion of

                                                                                                      15
MICHIGAN PROBATE & ESTATE PLANNING                                                            Summer 2008


the decedent’s probate assets are recoverable         tution;13 or if the Medicaid recipient’s sibling who
through estate recovery.                              has an equity interest in the home resides in the
                                                      home and resided in the home for at least one
                      Why?
                                                      year immediately before the Medicaid recipient’s
    The state of Michigan and the federal govern-     admission to a medical institution.14
ment are looking to collect funds to help pay back        Additionally, certain portions of a Medicaid re-
the cost of long-term care funded through the         cipient’s estate are exempt from estate recovery
Medicaid program. Although this objective may         if recovery would cause a hardship.15 Any por-
sound like a good idea to some, the reality is that   tion of an estate that is the primary income-pro-
states that have implemented estate recovery          ducing asset of the Medicaid recipient’s survi-
programs have had a net recovery of only about        vors (e.g. a family farm or business) is exempt
one half of one percent of what was spent by the      from estate recovery as a hardship.16 Further, the
state on Medicaid assistance. In other words, in      portion of the value of the Medicaid recipient’s
states that have implemented estate recovery,         homestead that is equal to or less than 50 per-
after accounting for the costs of implementing        cent of the average price of a home in the county
the estate recovery program, the actual amount        the homestead is located in as of the date of the
recovered has been de minimus. Interestingly,         Medicaid recipient’s date of death is also exempt
Michigan’s Law states that estate recovery shall      from estate recovery as a hardship.17 There are
not be sought if the costs of recovery exceed the     no details in the Law that suggest how the home-
amount recoverable or if the recovery is not in       stead is to be valued, or how the average price
the best economic interest of the state.9 In ad-      of homes in the county will be determined.
dition, the Law requires the Department of Com-           Although Michigan’s Law permits excep-
munity Health to submit a report to the Michigan      tions from estate recovery where hardship can
Senate and House of Representatives, not later        be proved, with respect to determining whether
than one year after implementation of Michigan’s      a hardship exists, the rebuttable presumption is
estate recovery program and each year there-          that no hardship exists if the hardship resulted
after, detailing the cost to administer Michigan’s    from estate planning methods under which as-
program and the amounts recovered.10                  sets were diverted in order to avoid estate re-
                                                      covery.18
                   Exceptions
                                                             Avoiding Estate Recovery
    There are certain types of assets that are ex-
empt from recovery and certain situations speci-    The simplest way for a Medicaid recipient to
fied in the Law where assets will not be pursued. avoid estate recovery is to avoid having a pro-
For example, recovery of assets from the home of bate estate. This can be accomplished in a num-
a Medicaid recipient is restricted while the Med- ber of ways, including:
icaid recipient’s spouse resides in the home;11 or 1. Titling assets as joint with rights of sur-
if the Medicaid recipient’s child who is under the    vivorship [but watch out for divestment
age of 21, blind, or permanently and totally dis-     penalties if the joint owner added is
abled resides in the home;12 or if the Medicaid       someone other than the spouse or an
recipient’s caretaker relative resides in the home    eligible family member].
and resided in the home for at least two years     2. Transferring assets to the spouse during
immediately before the Medicaid recipient’s ad-        the Medicaid recipient’s life.
mission to a medical institution providing care    3. Execution of a Lady Bird deed to transfer
that permitted the Medicaid recipient to stay in      real property immediately upon death.
their home rather than move to a medical insti-    4. Executing POD (“Payable on Death”) or

 16
Summer 2008                                                          MICHIGAN PROBATE & ESTATE PLANNING


     TOD (“Transfer of Death”) designations                                 Michelyn E. Pasteur, vice-
     on bank accounts, savings bonds, and                                   president and treasurer of
     other similar assets.                                                  Foster Zack Little Pasteur &
  5. Completing beneficiary designations for                                 Manning, PC, practices in the
     life insurance, mutual funds, retirement                               areas of estate planning, el-
     accounts, and other similar assets.                                    der law, Medicaid planning,
   We are anxiously awaiting the details of Mich-                           probate and trust administra-
igan’s plan to implement estate recovery under                              tion, commercial transactions,
the new Law. Once the plan is approved by the                               creditor’s rights and bankrupt-
federal government, policies and procedures will         cy, and real estate law. Named in the Best Law-
need to be put in place. It is currently estimated       yers in America Consumers Guide in the area of
that Michigan’s estate recovery program will be          bankruptcy, she is a graduate of Michigan State
up and running around October of 2009. How-              University and Thomas M. Cooley Law School.
ever, in the meantime, we can anticipate the ma-
jor components of that plan and take steps to                             Melisa M.W. Mysliwiec is an
counsel our clients accordingly.                                          attorney at Foster Zack Little
                                                                          Pasteur & Manning, P.C., in
                                                                          Okemos, where she practices
                        Notes                                             in the areas of estate plan-
                                                                          ning, trust and estate admin-
   1. MCL 400.112k.                                                       istration, elder law and Medic-
   2. MCL 400.112g(7).                                                    aid planning. She is a member
   3. MCL 400.112g(5).
   4. MCL 400.112h(a).                                                    of the Greater Lansing Estate
   5. MCL 400.112g(8).                                  Planning Council. Melisa is a member of the
   6. MCL 400.112g(9).                                  Planned Giving Committee for the Capital Area
   7. MCL 700.3805(1).                                  United Way and volunteers with Service for Sol-
   8. $55,000 is the amount currently allowed under the diers, a program that provides free legal services
homestead allowance, family allowance, and exempt
property statutory exemptions. See MCL 700.2402, MCL for deploying members of the Armed Forces.
700.2404, and MCL 700.2405, and the Estates and Pro-
tected Individuals Code Cost-of-Living Adjustments, as
published by the Michigan Department of Treasury on
January 22, 2008.
   9. MCL 400.112g(4).
   10. MCL 400.112j(2).
   11. MCL 400.112g(6)(a).
   12. MCL 400.112g(6)(b).
   13. MCL 400.112g(6)(c).
   14. MCL 400.112g(6)(d).
   15. MCL 400.112g(3)(e).
   16. MCL 400.112g(3)(e)(ii).
   17. MCL 400.112g(3)(e)(i).
   18. MCL 400.112g(3)(e)(iii).




                                                                                                       17
MICHIGAN PROBATE & ESTATE PLANNING                                                                   Summer 2008


                                 A Primer on Antilapse Statutes
                                           By Mark S. Frankel

   We usually expect that the persons named in               MCL §700.2603-2604 provides a statutory
our will as devisees will be around when we die.         scheme to expressly deal with such an eventu-
We expect them to sit quietly at the reading of          ality. The antilapse statute divides devisees into
the will (even though no one does that anymore)          two categories, those related to the testator and
and nod thankfully when they are mentioned.              those unrelated to the testator. In the case of a
But what happens when a devisee predeceases              devisee to a relative of the testator, a lapsed gift
the maker of a will? What do we tell a personal          becomes a substitute gift and passes to the de-
representative to do with a share of an estate to        ceased devisee’s descendants.
be given to someone who has already passed                 § 700.2603. Substitute gift.
away? What should we do to draft around such               Sec. 2603. (1) If a devisee fails to survive the
uncertainty?                                               testator and is a grandparent, a grandparent’s
   As we know from such law school standards,              descendant, or a stepchild of either the testator
                                                           or the donor of a power of appointment exercised
the Rule in Shelly’s Case and the Rule Against
                                                           by the testator’s will, the following apply:
Perpetuity, the courts have disliked uncertainty           (a) Except as provided in subdivision (d), if the
with regard to the disposition of property. A con-         devise is not in the form of a class gift and the de-
cern about lapsed gifts has long been a subject            ceased devisee leaves surviving descendants, a
for legislature and court alike. It is interesting         substitute gift is created in the devisee’s surviv-
that in Michigan nearly all the reported cases on          ing descendants. Those surviving descendants
the subject predate not just the current probate           take by representation the property to which the
statute, but its predecessor as well.                      devisee would have been entitled had the devi-
   Fortunately, the Michigan Legislature has               see survived the testator.
thought this one through. No, the deceased de-               Section (1) is interesting in that it requires the
visees’ share does not go to the state, although         deceased devisee to be related to the testator in
one could be justified in coming to that conclu-          order for a substitute gift to be created. Subsec-
sion. Rather, the Estates and Protected Individu-        tion (1)(a) addresses deceased devisees where
als Code (EPIC) provides a solution in the so-           the devise is not in the form a class gift. Class
called “antilapse” statute. This article will discuss    gifts are addressed later. Essentially, where
the mechanics of applying the antilapse statute,         the deceased devisee is a relative of the testa-
both to wills and trusts, and point out some of its      tor, a substitute gift is created that passes from
shortcomings that need to be addressed in draft-         the deceased devisee by intestate succession.
ing estate planning documents.                           No mention is made of passing through the de-
                                                         ceased devisee’s estate or pursuant to his or her
                        Wills                            will.
    If a gift under a will fails, usually by the death     Subsection (1)(b) addresses the issue of class
                                                           gifts.
of a devisee prior to the passing of the testa-
                                                           (b) Except as provided in subdivision (d), if the
tor, the gift is said to have lapsed. Of course, as
                                                           devise is in the form of a class gift, other than
all practitioners understand, the first defense to          a devise to “issue”, “descendants”, “heirs of the
avoid lapsed gifts is good drafting. However, in           body”, “heirs”, “next of kin”, “relatives”, or “fami-
administering an estate, we are often left with a          ly”, or to a class described by language of similar
will drafted by someone else or by the testator in         import, a substitute gift is created in the surviving
a holographic will. What then?                             descendants of a deceased devisee. The prop-

 18
Summer 2008                                                         MICHIGAN PROBATE & ESTATE PLANNING


  erty to which the devisee would have been en-         or class of devisees or simply distributed as part
  titled had all class members survived the testa-      of the residue). Be careful to use language evi-
  tor passes to the surviving devisees and the de-      dencing “a sufficient indication of an intent con-
  ceased devisees’ surviving descendants. Each          trary to the application of” the antilapse statute,
  surviving devisee takes the share to which he or      or the statute will apply.
  she would have been entitled had the deceased
                                                           What happens if the will grants a devisee a
  devisees survived the testator. Each deceased
  devisee’s surviving descendants who are substi-
                                                        power of appointment? A power of appointment
  tuted for the deceased devisee take by repre-         is a right given in a written instrument such as a
  sentation the share to which the deceased devi-       will or trust, allowing the taker of a gift to decide
  see would have been entitled had the deceased         how to distribute the gift after the death of the
  devisee survived the testator. For the purposes       holder of the power. Called “general” if no restric-
  of this subdivision, “deceased devisee” means         tions are placed on whom the distributees may
  a class member who fails to survive the testator      be; otherwise called “limited” or “special.” Sub-
  and leaves 1 or more surviving descendants.           section (e) provides:
   Class devisees are treated the same as non-            (e) Unless the language creating a power of ap-
class devisees. A substitute gift is created in the       pointment expressly excludes the substitution of
decedents of the deceased devisee. A class gift           the appointee’s descendants for the appointee,
is not redistributed to the other class members           a surviving descendant of a deceased appointee
as one might suspect.                                     of a power of appointment can be substituted for
                                                          the appointee under this section, whether or not
   As nearly always, the effects of the above
                                                          the descendant is an object of the power.
sections can be avoided if desirable. The statute
                                                           This section would apply only if the appoin-
expressly provides as follows:
                                                        tee had failed to survive the testator, otherwise,
  (c) For the purposes of section 2602(1), words of
  survivorship, such as in a devise to an individual    the rules regarding appointments would prevail.
  “if he survives me” or in a devise to “my surviving   Here the rules of substitute gifts would apply,
  children”, are not, in the absence of additional      unless the power appointment was limited, and
  evidence, a sufficient indication of an intent con-    the limitation expressly excluded a surviving de-
  trary to the application of this section.             scendant of the deceased appointee. Essentially
  (d) If the will creates an alternative devise with    a testator can veto the distribution of an inter-
  respect to a devise for which a substitute gift is    est in the estate to the descendants of a devi-
  created by subdivision (a) or (b), the substitute     see who holds a power of appointment, by ex-
  gift is superseded by the alternative devise only     press language blocking such a transfer. Such
  if an expressly designated devisee of the alter-      language would likewise avoid a substitute gift
  native devise is entitled to take under the will.
                                                        that would be contrary to such restriction in the
    Subsection (1)(d) clearly allows a testator to      power of appointment.
create his or her own rules regarding substitute           What, you may ask, happens if one is care-
gifts, here called an alternate devise. Subsection      ful to create alternative devises, and they fail as
(1)(c) does bear a warning for drafters. Merely         the alternative has passed away before the tes-
using the phrase “if he survives me” or “my sur-        tator? The legislature has answered this in sub-
viving children” does not create an alternative         sections (2) and (3). Subsection (3) contains im-
devise. Something much more concrete, disen-            portant definitions necessary to make sense of
franchising one entitled to a substitute gift under     subsection (2).
subsection (1)(a), is necessary. It is important to       (2) If, under subsection (1), substitute gifts are
inquire as to the testator’s intent and draft ac-         created and not superseded with respect to
cordingly (i.e., providing that a lapsed gift be giv-     more than 1 devise and the devises are alterna-
en as an alternative devise to a named devisee            tive devises, one to the other, the determination

                                                                                                          19
MICHIGAN PROBATE & ESTATE PLANNING                                                                   Summer 2008


  of which of the substitute gifts take effect is re-     devisee of the primary devise; and would have
  solved as follows:                                      taken a share if all the other alternatives devi-
  (a) Except as provided in subdivision (b), the de-      sees had survived. This section gives priority to
  vised property passes under the primary substi-         a named, alternative devisee over potential sub-
  tute gift.                                              stitute devisees not named in a will. Again, this is
  (b) If there is a younger-generation devise, the
                                                          a point that drafters need to address to affect the
  devised property passes under the younger-gen-
                                                          wishes of a testator.
  eration substitute gift and not under the primary
  substitute gift.
                                                              This is all well and good if one is leaving one’s
  (3) As used in this section:                            property to one’s family. What about a devise to
  (a) “Primary devise” means the devise that would        an unrelated devisee? Say you want to leave
  have taken effect had all the deceased devisees         your golf clubs or your mah-jongg set to a friend?
  of the alternative devises who left surviving de-       The legislature has the covered that as well. But
  scendants survived the testator.                        possibly not like you would think.
  (b) “Primary substitute gift” means the substitute        § 700.2604. Failure of testamentary provision.
  gift created with respect to the primary devise.          Sec. 2604. (1) Except as provided in section
  (c) “Younger-generation devise” means a devise            2603, a devise, other than a residuary devise,
  for which all of the following are true:                  that fails for any reason becomes a part of the
  (i) Is to a descendant of a devisee of the primary        residue.
  devise.                                                   (2) Except as provided in section 2603, if the res-
  (ii) Is an alternative devise with respect to the         idue is devised to 2 or more persons, the share
  primary devise.                                           of a residuary devisee that fails for any reason
  (iii) Is a devise for which a substitute gift is cre-     passes to the other residuary devisee or to other
  ated.                                                     residuary devisees in proportion to the interest
  (iv) Would have taken effect had all the de-              of each in the remaining part of the residue.
  ceased devisees who left surviving descendants              Drafting a provision for a gift to an unrelated
  survived the testator except the deceased devi-         party takes some additional thought. If a devisee
  see or devisees of the primary devise.                  who is not related to the testator does not survive
  (d) “Younger-generation substitute gift” means          the testator, the devisee’s heirs are out of luck.
  the substitute gift created with respect to the         There is no substitute gift; the property becomes
  younger-generation devise.                              part of the residue of the testator’s estate. If the
    In most cases, if two devisees who were alter-        unrelated devisee is a residual beneficiary, the
native devisees die, creating substitute gifts, and       residue merely passes to the remaining residual
these two devisees were alternate devisees to             beneficiaries as if the deceased devisee had not
each other, the alternate devise is ignored. The          existed.
devised property will pass to the heirs of the pri-           Interestingly, there is nothing in the statute
mary devise. The devise is treated as if the alter-       that specifically authorizes the creation of an al-
native devisees had survived.                             ternative devise for an unrelated devisee. Fortu-
    The lone exception to this rule is for a “young-      nately, there is nothing preventing it either. Care-
er-generation devise.” What if there are alternate        ful drafting that states the testator’s intent should
devisees, and one or more of the alternates sur-          be sufficient to avoid the harshness of this provi-
vives; a surviving alternate devise may, in fact,         sion.
supercede the substitute gifts created by the an-
                                                                      Trusts
tilapse statute with regard to the deceased de-
visees. However, the surviving alternative devi-     The legislature recognized the differences
see must be all of the following: a descendant of between disposition of an estate through a will
a devisee of the primary devise; an alternative and through a trust. While given similar treat-

20
Summer 2008                                                         MICHIGAN PROBATE & ESTATE PLANNING


ment, there are significant differences. The          who is not considered to have predeceased the
trust antilapse provisions are contained in MCL      distribution date under section 2702.
§§700.2713-.2716.                                     There is really nothing new here. The terms
    First, MCL §700.2713 contains several defi-     are defined as they are applied in general us-
nitions necessary to understand the substantive age. But the definitions do help in establishing a
provisions                                         baseline understanding.
   Sec. 2713. As used in this section and sections    Section 2714 contains nearly the same terms
   2714 to 2716:                                   as those in the antilapse statute for wills.
  (a) “Alternative future interest” means an ex-         Sec. 2714. (1) Subject to subsection (2), a future
  pressly created future interest that can take ef-      interest under the terms of a trust is contingent
  fect in possession or enjoyment instead of anoth-      on the beneficiary surviving the distribution date.
  er future interest on the happening of 1 or more       If a beneficiary of a future interest under the
  events, including survival of an event or failure to   terms of a trust fails to survive the distribution
  survive an event, whether an event is expressed        date, the following apply:
  in condition-precedent, condition-subsequent, or       (a) Except as provided in subdivision (d), if the
  another form. A residuary clause in a will does        future interest is not in the form of a class gift
  not create an alternative future interest with re-     and the deceased beneficiary leaves surviving
  spect to a future interest created in a nonresidu-     descendants, a substitute gift is created in the
  ary devise in the will, whether or not the will spe-   beneficiary’s surviving descendants. The sur-
  cifically provides that a lapsed or failed devise is    viving descendants take by representation the
  to pass under the residuary clause.                    property to which the beneficiary would have
  (b) “Beneficiary” means the beneficiary of a fu-         been entitled had the beneficiary survived the
  ture interest and includes a class member if the       distribution date.
  future interest is in the form of a class gift.        (b) Except as provided in subdivision (d), if the
  (c) “Class member” includes, but is not limited        future interest is in the form of a class gift, other
  to, an individual who failed to survive the distri-    than a future interest to “issue”, “descendants”,
  bution date but who would have taken under a           “heirs of the body”, “heirs”, “next of kin”, “rela-
  future interest in the form of a class gift had he     tives”, or “family” or a class described by lan-
  or she survived the distribution date.                 guage of similar import, a substitute gift is cre-
  (d) “Distribution date” means, with respect to a       ated in the surviving descendants of a deceased
  future interest, the time when the future interest     beneficiary. The property to which the benefi-
  takes effect in possession or enjoyment. The           ciaries would have been entitled had all of them
  distribution date does not need to occur at the        survived the distribution date passes to the sur-
  beginning or end of a calendar day, but can oc-        viving beneficiaries and the surviving descen-
  cur at a time during the course of a day.              dants of the deceased beneficiaries. Each sur-
  (e) “Future interest” includes, but is not limited     viving beneficiary takes the share to which he or
  to, an alternative future interest and a future in-    she would have been entitled had the deceased
  terest in the form of a class gift.                    beneficiaries survived the distribution date. Each
  (f) “Future interest under the terms of a trust”       deceased beneficiary’s surviving descendants
  means a future interest that is created by a           who are substituted for the deceased beneficia-
  transfer creating a trust or to an existing trust or   ry take by representation the share to which the
  by an exercise of a power of appointment to an         deceased beneficiary would have been entitled
  existing trust, directing the continuance of an ex-    had the deceased beneficiary survived the dis-
  isting trust, designating a beneficiary of an exist-    tribution date. As used in this subdivision, “de-
  ing trust, or creating a trust.                        ceased beneficiary” means a class member who
  (g) “Surviving beneficiary” or “surviving descen-       fails to survive the distribution date and leaves 1
  dant” means a beneficiary or a descendant who           or more surviving descendants.
  does not predecease the distribution date and          (c) For the purposes of section 2701, words of

                                                                                                            21
MICHIGAN PROBATE & ESTATE PLANNING                                                                  Summer 2008


  survivorship attached to a future interest are not,    gifts pass under the Primary Substitute Gift or to
  in the absence of additional evidence, a suffi-         the Younger-Generation Future Interest.
  cient indication of an intent contrary to the ap-          The interesting question arises when there
  plication of this section. Words of survivorship       is no surviving taker. Obviously, good drafting
  include words of survivorship that relate to the
                                                         would address this issue, but we do not always
  distribution date or to an earlier or an unspeci-
  fied time, whether those words of survivorship
                                                         see good drafting, so the legislature created
  are expressed in condition-precedent, condition-       Section 2716.
  subsequent, or another form.                             Sec. 2716. (1) Except as provided in subsection
  (d) If a governing instrument creates an alterna-        (2), if, after the application of sections 2714 and
  tive future interest with respect to a future inter-     2715, there is no surviving taker, the property
  est for which a substitute gift is created by subdi-     passes in the following order:
  vision (a) or (b), the substitute gift is superseded     (a) If the trust is created in a nonresiduary de-
  by the alternative future interest only if an ex-        vise in the transferor’s will or in a codicil to the
  pressly designated beneficiary of the alternative         transferor’s will, the property passes under the
  future interest is entitled to take in possession or     residuary clause in the transferor’s will. For pur-
  enjoyment.                                               poses of this section, the residuary clause is
  (2) Subsection (1) does not apply to a future in-        treated as creating a future interest under the
  terest if the beneficiary of the interest died or ir-     terms of a trust.
  revocably transferred the interest before April 1,       (b) If a taker is not produced by the application of
  2000.                                                    subdivision (a), the property passes to the trans-
   The interesting diversion from the prior sec-           feror’s heirs under section 2720.
tion is that there is no distinction made between            Analyzing this section is actually a bit more
beneficiaries who are related or unrelated to the         fun, it brings in the wrinkles associated with tes-
donor or settlor of the trust. Substitute gifts for      tate and intestate succession. First, we have to
non-class and class beneficiaries are created             find that there is no surviving taker under the trust
for the decedents of the deceased beneficiaries           for a specific gift. This includes scouring sections
regardless of the relationship between the ben-          2714 and 2715 for possible substitute takers.
eficiary and the donor. This again is something           Once satisfied there are no takers as subsec-
that a drafter needs to take into account. What          tion 2716(1)(a) dictates, we look to the manner
does the donor want to have happen to a gift if          in which the trust was created. This is an inter-
the beneficiary does not survive until the distri-        esting distinction. If the trust was created by the
bution date? This raises another difference. The         donor’s will but not as part of a residuary clause,
substitute gift is created not on the date of the        (i.e., the trust was created as a specific, non-re-
death of a donor but on the distribution date of         siduary bequest) then the lapsed gift is distrib-
the gift, which may be different. A drafter needs        uted pursuant to the residuary clause of the will.
to be cognizant of this distinction.                     This requires that the trust be both created by
   Section 2715 addresses the issues of multiple         the donor’s will and that it is not merely part of
substitute gifts in the case of alternative benefi-       a residuary distribution. This would exclude, po-
ciaries. The treatment here is identical to the pro-     tentially, trusts created and funded separate from
visions of MCL §700.2603(2) (so identical that           the donor’s will and trusts that are created by a
they need not be reprinted here). The only draft-        residuary clause in a will. Essentially these gifts
ing difference is the substitution of the term “fu-      are thrown back into the estate to be distributed
ture interest” for “devise” to account for the dif-      with the residue.
ference between a disposition by will and one by             Subsection 2716(1)(b) address those trusts
trust. Suffice it say that if both alternative benefi-     that do not fall into subsection (1)(a). If there is
ciaries fail to survive to the distribution date, the    no taker, then this lapsed gift will be distributed

 22
Summer 2008                                                          MICHIGAN PROBATE & ESTATE PLANNING


pursuant to MCL §700.2720 to the transferor’s            appointment, that is a limited or special power
heirs. Section 2720 provides for intestate distri-       of appointment, the failed gift is distributed un-
bution to the heirs of the donor and points out          der the donor’s will or to the donor’s heirs as the
the necessity to carefully draft a trust for such an     case may be. If the power of appointment was a
eventuality. The donor, who carefully eschews            general power, the gift shifts entirely to the ben-
his heirs in making gifts through his trust to oth-      eficiary, and the beneficiary is the “transferor” for
ers, may find that his heirs take his estate if alter-    the purposes of 2716(1).
native beneficiaries are not carefully provided.
                                                                     Pets and Other Oddities
  Section 2716(2) addresses the trust concept of a
  power of appointment.                                     We have all read about trusts that provide for
  (2) If, after the application of sections 2714 and     pets as beneficiaries. When I was single and
  2715, there is no surviving taker and if the future    just out of law school, I drafted my own trust that
  interest was created by the exercise of a power        had my dog as the primary beneficiary. Unfortu-
  of appointment, the following apply:
                                                         nately, she would have inherited only debt at that
  (a) The property passes under the donor’s gift-
                                                         time. Fortunately for my children, I have revised
  in-default clause, if any, which clause is treated
  as creating a future interest under the terms of       my estate plan since. What happens when the
  a trust.                                               lucky pet passes away? Also, what happens to a
  (b) If a taker is not produced by the application of   trust where there are no clearly defined benefi-
  subdivision (a), the property passes as provided       ciaries? Both of these situations are addressed
  in subsection (1). For purposes of subsection (1),     in MCL §700.2722. The provisions of this section
  “transferor” means the donor if the power was a        are a bit long to be reprinted here, so I will sum
  non-general power and means the donee if the           them up.
  power was a general power.                                Subsection (1) provides that trusts for non-
    A power of appointment is a right given in a         charitable purposes, including those where the
written instrument such as a will or trust, allowing     disposition of the trust is left to the discretion of
an individual to decide how to distribute one’s          the trustee, with no definite beneficiary, may be
property. Called “general” if no restrictions are        performed by the trustee for at most 21 years,
placed on whom the distributees may be; other-           even if the trust contemplates a longer duration.
wise called “limited” or “special.” In the case of       Subsection (2) does its best to validate trusts for
this statutory provision, a limited or special pow-      pets to provide for their care for their lifetime.
er is referred to as a “non-general” power. Typi-        Such dispositions are to be liberally construed to
cally a power of appointment is incurred where           carry out the intent of the transferor.
a donor leaves a portion of the donor’s trust to a          Subsection (3) creates express prohibitions
beneficiary, often a spouse, and allows the ben-          against a trustee merely usurping the trust for
eficiary to decide how the beneficiary’s residue           the trustee’s own benefit. Upon termination of
is to be distributed after the beneficiary’s death.       the trust the residue is distributed as directed by
    Section 2716(2)(a) provides that if a gift cre-      the trust instrument ((3)(b)(i)); pursuant to the re-
ated by a power of appointment fails, then the           siduary clause in the transferor’s will if the trust
gift shall pass by the terms of the trust’s gift-in-     was created by a non-residuary clause itself
default clause. If the trust has no gift-in-default      ((3)(b)(ii)); or by intestate succession to the trans-
clause, or such clause fails to produce a taker,         feror’s heirs pursuant to section 2720 ((3)(b)(iii)).
then there is a default back to 2716(1). How-            No real surprises here. The balance of this statu-
ever, there is a twist here that depends on the          tory section provides for oversight and manage-
nature of the power of appointment. Where the            ment of the trust. Of interest is subsection (3)(d),
donor has granted only a non-general power of            which thoughtfully provides for the creation of an

                                                                                                           23
MICHIGAN PROBATE & ESTATE PLANNING                                                           Summer 2008


interested party to advocate for the enforcement                        Mark S. Frankel is a partner
of the trust if there is no one appointed for that                      in the law firm of Couzens,
purpose in the trust.                                                   Lansky, Fealk, Ellis, Roeder &
   As always, careful and thoughtful planning                           Lazar PC in Farmington Hills,
will address the issues raised by the antilapse                         Michigan. His practice con-
statute. However, if faced with inadequate doc-                         centrates in civil litigation in-
uments, EPIC provides a thorough framework                              cluding real estate, contracts,
to guide a personal representative or trustee                           creditor’s rights, and complex
through to a final distribution.                                         probate matters. Mr. Frankel is
                                                     frequently appointed as a trustee, personal rep-
                                                     resentative, and conservator. He is on the facili-
                                                     tation panel for both the Oakland County Circuit
                                                     and Probate Courts. Mr. Frankel is a candidate
                                                     for the Oakland County Probate Court.




 24
Summer 2008                                                         MICHIGAN PROBATE & ESTATE PLANNING


                                Doctrine of Equitable Deviation
                                            By Alan A. May

   Two recent decisions by the Michigan Court of       ciary of the trust to protect the trust property. As
Appeals broadened and affirmed probate court            to these general principles, the Court of Appeals
intervention to impose changes to testamentary         correctly cites Evans v Grossi, 324 Mich 297, 37
documents both before and after death in irrevo-       NW2d 111 (1949) (analyzed hereinafter).
cable situations. These decisions, though unpub-
                                                          The Court of Appeals could have stopped
lished, cite supporting doctrine, which if followed,
would have both great and perhaps unintended           at this point, and it would have been arguable
effects and consequences upon the practice of          whether Kotsis was a valid extension of Evans,
trust law and, conceivably, the law of wills.          which struck no beneficiaries.
   Each case is attached for the reader to re-            The Kotsis court went further and, using the
view. The author will summarize the cases in the       words “in addition,” said:
chronological order of their rendition and then          Respondent also claims that the probate court
analyze.                                                 erred in removing him as a beneficiary of the
 Pre-Death Change to Irrevocable Crummy                  Trust. A court may act in opposition to the pro-
                 Trust                                   visions of a trust agreement when it is neces-
                                                         sary to preserve the trust property or to protect
   In the matter of In Re Kotsis Family Trust, the
                                               1
                                                         the rights of the beneficiaries. Evans v Grossi,
trustees sought judicial equitable probate court         324 Mich 297, 305; 37 NW2d 111 (1949). In ad-
intervention to change an insurance policy bene-         dition, the equitable deviation doctrine permits a
ficiary in a policy owned by an irrevocable life in-
                                                         court to modify or deviate from an administra-
surance Crummy trust. The change sought was
                                                         tive or distributive provision of a trust agreement
from the trust as beneficiary of the policy to a
                                                         “if[,] because of circumstances not anticipated
number of beneficiaries, excluding one son with
                                                         by the settlor the modification or deviation will
whom the settlor had an unforeseen breach of
                                                         further the purposes of the trust.” 2 Restatement
affinity. As the son would, at this point, still have
had a Crummy right of withdrawal of the depos-           Trusts, 3d § 66(1), p 492. The purpose of the
ited life insurance premiums, the trustees also          equitable deviation doctrine is to give effect to
sought to change the beneficiaries of the trust to        what the grantor’s intent would have been had
exclude the son in question so that he could not         the circumstances been foreseen or anticipated.
exercise his right of withdrawal and frustrate the       Id. at 493.
purposes of the trust. The probate court heard
                       2                                   Even without the words “in addition,” it could
evidence as to the reasons for the request as          be argued that the invocation of equitable devia-
well as the motivation of the trustees. The pro-       tion, in this case, is obiter dictum. Assuming the
bate court and appeals court correctly deter-          doctrine and not the case will be cited, the prac-
mined that a trustee can preserve assets and           titioner should not rely on “obiter dictum” as a
that preventing a lapse in the policy, because of
                                                       defense but should understand the doctrine and
the son’s exercise of his Crummy right of with-
drawal, was a valid exercise of the trustee’s          its intricacies, which the Kotsis court fails to set
power to preserve. The probate court and court         forth in its snippet of the Restatement of Trusts.
of appeals found that the probate court had to         Hopefully, this article will offer some enlighten-
make the changes to strike the son as a benefi-         ment.

                                                                                                          25
MICHIGAN PROBATE & ESTATE PLANNING                                                                  Summer 2008


Post-Death Use Under the Name “Doctrine                      Antecedent Supreme Court Authority
of Exigent Circumstances” In Re Howard J
Stoddard Trust3                                          Evans v Grossi6 Dealt With a Testamentary
                                                         Trust
   The Stoddard case does not mention equi-
table deviation. It cites the Doctrine of Exigent            It is to be noted that although the court used
Circumstances as a reason for a post mortem              the terms “will” and “trust” interchangeably, the
                                                         court iterates that it has no power to make new
change.
                                                         wills where there is a clearly expressed intent.         7

   The Howard J. Stoddard Trust did not provide
                                                         It is probable the court used the terms in such
for a division of corpus nor did it prevent it. The      a manner because the instant trust was in the
family played out their sibling rivalry through ten      will.
years of litigation, culminating in one beneficiary           In pertinent summary, the settlor allowed for
petitioning to divide the trust. Bud Stoddard op-        trust termination with a sole criterion. Did the dis-
posed the division. After nine days of trial, the        tributee, in the opinion of the trustee, waste her
probate court ruled that the contentious history         second $10,000 distribution? The trustee could
of administration of the trust and the detrimental       not formulate such an opinion as the beneficiary
effect on the family relationships constituted exi-      was living in a period during World War II in Italy
gent circumstances, permitting the division.      4      when Italy was an enemy. If the distribution had
   In affirming the probate court, the court of ap-       been made, it would have been illegal and con-
peals said:                                              sidered trading with the enemy.
  Michigan’s probate courts have equitable juris-            The trustee(s) sought the intervention from
  diction over proceedings involving the adminis-        chancery (probate court had no equitable juris-
  tration, distribution modification, reformation, or     diction in 1949). Chancery refused to give an in-
  termination of a trust. MCL 700.1302(b). Exigent       struction. The Supreme Court of Michigan said
  circumstances, unforeseen by the settlor, can          that chancery had a right and duty to give in-
  provide a basis for a court to exercise its equi-      structions.8



  table powers to modify a trust. Young v Young,             The Supreme Court of Michigan could have
  255 Mich 173, 179-180; 237 NW 535 (1931).              played a simple logic game and said that Mrs.
  A probate court exercising its equitable pow-          Grossi could not waste what she did not receive.
  ers “may act in opposition to the provisions of a      The court, however, took the longer road saying,
  trust, and it may do whatever is necessary, not        inter alia:
  only for the preservation of the trust property, but     (a) The lower court can do whatever is neces-
  also, whatever is necessary for the protection of        sary to preserve the trust and protect the rights
                                                           of beneficiaries and promotion of their interests.
  the rights of the beneficiaries and the promotion
                                                           (b) The Grossi court cited Young v Young, cit-
  of their interests” Evans v Grossi, 324 Mich 297,
                                                           ing Illinois law, to the effect that there is a long
  305; 37 NW2d 111 (1949).”                                line of cases establishing the principle that when
   The reader is directed to note that both the            such an unusual exigency occurs, in regard to
Kotsis and Stoddard cases cite Grossi, but in              the handling of property or corpus of the trust
lieu of equitable deviation the Stoddard court             fund, the court has the right and duty to autho-
cites Young v Young, and exigent circumstanc-
                        5                                  rize changes.9
                                                           (c) The court further cites Illinois law:
es. It is necessary at this point to analyze the
                                                                Exigencies often arise not contemplated by
two reported and cited cases Grossi and Young                   the party creating the trust, and which, had
because they explore equitable intervention in                  they been anticipated, would undoubtedly
greater depth.                                                  have been provided for, where the aid of the

 26
Summer 2008                                                          MICHIGAN PROBATE & ESTATE PLANNING


       court of chancery must be invoked to grant                         Observations
       relief imperatively required; and in such cas-
                                                       1. Nowhere is there a mention of the word ref-
       es the court must, as far as may be occupy
                                                   ormation. Nowhere does the word construction
       the place of the party creating the trust, and
                                                   appear. More important there is no mention of
       do with the fund what he would have dic-
                                                   rules of construction to determine the settlor’s in-
       tated had he anticipated the emergency. *
                                                   tent.
       * * From very necessity a power must exist
                                                       2. The author believes that since the terms
       somewhere in the community to grant relief
                                                   were changed, the changes were nunc pro
       in such cases of absolute necessity, and un-
                                                   tunc.
       der our system of jurisprudence, that power
                                                       3. The two Michigan Supreme Court decisions
       is vested in the court of chancery.
                                                   (though one alludes to “deviation”) are relying on
  (d) The court concludes, in affect, that the 1942
                                                   a Doctrine of Exigent Circumstances. This may
  distribution was against federal law, and the trust-
                                                   be the same as equitable deviation, but the fo-
  ees are not bound by the sole criterion of mak-
  ing a decision on the basis of what Mrs. Grossi
                                                   cus of the name of this doctrine is more on the
  did or did not do with the second $10,000. In ef-
                                                   causing event rather than the court’s power.
  fect the court struck down a dispositive term of a
                                                       4. There is no clarity as to whether these doc-
  trust, but not to change beneficiary.
                                                   trines could be applied to a will.
                                                       5. Kotsis actually changed dispositive and
Young v Young                                      distributive provisions by excluding a beneficia-
                                                   ry. Stoddard only ordered a division. Stoddard
   The Young court suffers from the same im-
                                                   appears to be a small extension of Young. Kot-
precision as the Evans’ court; treating “wills” sis, though it does preserve corpus by thwarting
and “trusts” as fungible words. As the trustees a Crummy withdrawal, actually deviates from a
brought the action, again, the Michigan Supreme distributive plan not given specific cognizance by
Court must have been addressing a testamen- either Grossi or Young and also did it in dicta.
tary trust.
                                                                         Analysis
   The question presented was if the “will” pre-
vented the sale or mortgage of a certain hotel, Restatement of Law of Trusts—Equitable
and insurance proceeds were insufficient to re- Deviation11
build the hotel after a fire, could the property be
sold and added to the insurance proceeds and           The author faults the Kotsis court, not only for
                                                   citing the restatement as to the use of the Doc-
administered in lieu of the real estate? A vendee
                                                   trine of Equitable Deviation as obiter dictum, but
did not believe the lower court had the power to
                                                   also for not citing the plethora of caveats the re-
order the sale.                                    statement makes in its discussion. Rather than
  (a) The court cites a Harvard Law Review article
                                                         attach it (26 pages) the reader is urged to read
  regarding “deviation” from the terms of a trust.10
                                                         the restatement discussion before using the doc-
  (b) Statutory authority on sale does not divest
                                                         trine or defending against it.
  equity power and jurisdiction from common law
                                                             The following from the discussion are of im-
  courts unless the statutory remedy was declared
                                                         portance.
  an exclusive remedy.                                     (a) The doctrine does not require changed cir-
  (c) The lower court’s approval of the sale and           cumstances, only that the settlor was unaware
  maintenance of the fund as personalty were               of the circumstances in establishing the trust.
  proper, because the exigent circumstances of             This broadens the area of concern.
  the fire were unforeseen.                                 (b) The situation need not be an emergency.

                                                                                                        27
MICHIGAN PROBATE & ESTATE PLANNING                                                              Summer 2008


  (c) The purpose of the use of the doctrine is to      used with caution; there are benefits with bur-
  give rise to the settlor’s probable intent had the    dens. In Kotsis, the settlor elected tax savings
  unforeseen circumstances been known at the            over revocability. The Kotsis’ court allowed the
  time of the execution.                                father to have his cake and eat it too. The Inter-
  (d) After a showing of probable intent, of the set-
                                                        nal Revenue Service may take a dim view of the
  tlor, the burden of persuasion shifts to the person
  claiming the circumstances were anticipated.
                                                        efficacy of this case as it concerns taxes.  12



  (e) The court must decide whether the change             In Re Ida Lotti Revocable Trust was a recent
                                                                                           13



  will advance the purpose of the trust, an admit-      case that could have applied Kotsis but refused
  tedly subjective analysis.                            to allow a distributive change. Although it prob-
  (f) Act with caution when diminishing one’s inter-    ably left the “deceased” more “appalled” than
  est.                                                  Howard Stoddard would have been, it correctly
  (g) Instances of use:                                 refused to do so in a well-reasoned decision us-
  1. Illegality or impossibility (as in Evans).         ing well-settled Michigan presumptions.
  2. Inefficiency of a small trust.                         Ida Lotti left a revocable living trust that be-
  3. Prevention of harm to a beneficiary.
                                                        came irrevocable at her death. The trust provid-
  4. Not to be used just when it is advantageous to
  a beneficiary.
                                                        ed for distribution to Mrs. Lotti’s daughters and
  5. Should not defeat the purpose of a trust.          (emphasis added) their named husbands. Natu-
  (h) Cases are annotated when the doctrine has         rally, both daughters divorced. The sons-in-law
  been employed and when not employed, includ-          attempted to get their share. The Lotti appellate
  ing will cases.                                       court properly applied existing law. It said that
  (i) There is a traditional refusal to deviate from    a gift to a husband and wife named in a “will”
  a distributive provision, and the doctrines sug-      looks at the marital relationship that existed at
  gested use is vis-a-vis administrative provisions.    the time the “will” was made, despite subse-
  The states allowing changes to distributive pro-      quent divorce or annulment. The presumption is
  visions concern:
                                                        “strongly fortified” when they are named, as well
  1. Changing restrictions prohibiting invasions of
  principal.
                                                        as described, as husband and wife. Nothing in
  2. A statute allowing the same.                       the trust defeated the presumption. Lotti could
  (j) Use has taken place when the unforeseen cir-      certainly have restated her trust after her daugh-
  cumstance is an unanticipated “special needs”         ters’ divorces or said in her original trust what
  situation.                                            should happen if circumstances were different
   The author concludes at this point that the          at her death, as opposed to at settlement. The
Kotsis’ case need not have cited the Doctrine of        statute on the effect of divorce, causing disin-
Equitable Distribution and should not have cited        heritance, did not apply because donative intent
the restatement of trusts, as it does not favor the     here was from that of a mother-in-law and not a
applicability of the doctrine to distributive provi-    spouse. The divorce judgment said that rights of
sions. The author can find no published appel-           personal inheritance, by operation of law, were
late court decisions in Michigan that change dis-       not changed. The Court of Appeals said not only
positive provisions. The author does not accept         was this not an operation of law case. but the
the observation that a father cannot conceive of        sons-in-law were specifically named beneficia-
changes and feelings towards his son; it hap-           ries. It reversed the probate court that said the
pens all the time, and is a reason why the Kot-         sons-in-law had waived by accepting such phas-
sis’ decision should not even be applied to simi-       es in the divorce decree.
lar fact situations. (What happens when there is           Oddly, the court cited In Re Kremlick to the
                                                                                                   14


rapprochement as often occurs?) This change of          effect that:
affinity is why irrevocable instruments are to be          It is a fundamental precept which governs judi-

 28
Summer 2008                                                          MICHIGAN PROBATE & ESTATE PLANNING


  cial review that the intent of the testator is to be   the following.
  carried out as nearly as possible.                       (a) As recently as Temple v Temple, a February
    It is odd because Kremlick is one of the few           28, 2008 published case, number 273911, the
cases in the United States that is cited for allow-        Court of Appeals allows attorney fees for a trust-
ing a reformation of a will, post mortem. In the           ee’s successful defense, citing a will case, In Re
Kremlick case, the Supreme Court of Michigan               Hammond,15 and says:
allowed a change of name of an intended ben-                     We conclude the trial court citation of Ham-
                                                                 mond is equally applicable to trustees un-
eficiary. Some cite this as a cy pres case, though
                                                                 der the statutory framework of EPIC.
the words are never used.                                  (b) So too in a 2008 unpublished Court of Ap-
    The Lotti matter, in reality, is no different than     peals case, Evans v Bank One, No 270498.
the Kotsis matter. A father stopped liking his son,        (c) Kremlick supra changed beneficiaries of a
and it is quite probable that the mother-in-law            will and allowed extrinsic evidence.
ceased to like her former sons-in-law. Converse-           (d) The Lotti court used will law to decide the
ly, Mrs. Lotti could have made the necessary               trust case.
changes had she known enough to do so.
                                                         Scrivener Error
    As stated by the author, Lotti is well-reasoned
and based upon published opinion. It is likely,             What greater unforeseen circumstances to
however, that neither equitable deviation nor exi-       a settlor is that the scrivener, whom he trusted,
gent circumstances were pleaded in Lotti. In Lot-        erred. It is oxymoronic to make a presumption
ti, given the probate court’s ruling on the law, had     that the settlor preferred error to propriety.
exigent circumstances been pleaded, it is likely
                                                                             Conclusion
it would have come to the same result with ad-
ditional support. It is conceivable that the Court          As valuable as “post death irrevocability”
of Appeals would have sustained such a ruling            change might be, under either the Doctrine of
because it would have been presented with a              Equitable Deviation or Exigent Circumstances, it
different theoretical approach, more in tune with        should not be applied to distributions except in
equity rather than law.                                  cases of patent ambiguity, and perhaps scriven-
    There was no ambiguity in Kotsis or in Lotti         er error. To do otherwise would open the door to
documents. Extrinsic evidence was still accept-          numerous evidentiary hearings to discover “ab-
ed in Kotsis. Note again point 4d supra that the         solute and pure” intent and negate presumptions
restatement suggests, after showing a probable           of intent, which though occasionally flawed have
intent of the settlor, the burden of persuasion          withstood the test of time and provided consis-
shifts to the person claiming the circumstances          tency. We would end up with fact-based law
were anticipated. The extrinsic facts not admis-         precedent.
sible in Lotti, because of the way the case was             Illegality (Evans) and asset substitution
pleaded would have been admissible had exi-              (Young) do not change John to Mary. Kotsis
gent circumstances been pleaded and had the              did make such a change, and, if followed or ex-
Court of Appeals seen more equitable circum-             panded, the result would be the destruction of
stances, especially if the shifting burden of per-       a century’s worth of presumptions, which may
suasion was not met.                                     not satisfy every dad or mother-in-law, but give
                                                         guidance to those not presumed to be ignorant
Wills as well as Trusts?
                                                         of the law. Further, the presumptions as they
   It is reiterated that the Evans’ court says that      are now stated supply the careful scrivener with
a court cannot remake a will and then proceeds           enough tools to define the client’s testamentary
to change the term of a trust. However, consider         wishes. The bench is urged to be cautious when

                                                                                                           29
 MICHIGAN PROBATE & ESTATE PLANNING                                                                    Summer 2008


equitable deviation or exigent circumstances are                                    Alan A. May, vice president of
pleaded and also define whether the doctrines                                        Kemp, Klein, Umphrey, Endel-
apply to wills as well as trusts.                                                   man & May, P.C., Troy, is a
                                                                                    lifelong Michigan resident. He
                                                                                    received his B.A. in 1963 from
                           Notes
                                                                                    the University of Michigan,
    1. November 7, 2007 - #273265.
                                                                                    where he was president of
    2. By striking him as a beneficiary of the Trust, trustees                       the Phi Sigma Delta fraternity.
certainly thought they were preserving the positive estate                          He graduated cum laude from
tax implications of Crummy.                                      the University of Michigan Law School in 1966.
    3. December 4, 2007 - #270508.                               Throughout his career, Mr. May has practiced in
    4. One beneficiary opined that her father would have
been “appalled” at the amount of litigation involved in the
                                                                 the Metropolitan Detroit area, concentrating on
Trust. The author will return to this attribution later in the   probate law. He is a member of the Michigan and
article.                                                         District of Columbia Bar Associations. Mr. May
    5. 255 Mich 173 (1931).                                      serves as Michigan special assistant attorney
    6. 324 Mich 309 (1949).                                      general and Wayne County public administrator.
    7. Id. at 304 (and what if there is not such intent?)
    8. The practitioner is probably well aware of probate
                                                                 He has chaired the Federal Judicial Evaluations
courts that still forebear from instructing fiduciaries, leav-    Committee and the Michigan Civil Rights Com-
ing the fiduciary(ies) to the shield of the document only.        mission, and he was a six-year district chairper-
    9. Opp cit p. 305.                                           son of the Republican Party of Oakland County.
    10. Loc cite 5 p. 179.                                       Mr. May served for four years on the Michigan
    11. Restatement of law of trusts - third, part 5, chapter
13 § 66.
                                                                 Civil Service Commission and was a delegate to
    12. A good discussion of the possible IRS view may be        the 1984 and 1988 Republican National Conven-
found in Michigan Revocable Grantor Trusts - revising the        tions. An avid author in the field of probate law,
Trust after the Grantor’s death, § 15.11.                        Mr. May also has been a lecturer and instructor
    13. Unpublished February 12, 2008 - #274810.                 for the Institute of Continuing Legal Education,
    14. 417 Mich 237, 240 (1983).
                                                                 the Michigan Trial Lawyers Association, Wayne
    15. 215 Mich App 379 (1996).
                                                                 State University, and Oakland University. Until
                                                                 2001, he practiced under the firm name of May
                                                                 & May, P.C.




 30
Summer 2008                                                     MICHIGAN PROBATE & ESTATE PLANNING


                        Settling Claims for Decedents and Minors
                                        By Kristen D. Arnett

    Settling wrongful death claims for decedent the personal representative must be sure that
estates and personal injury claims for minors the decedent had not signed a settlement, waiv-
presents certain challenges. When a wrongful er, or release affecting the personal representa-
death action is brought, the individual who has tive’s ability to file the wrongful death action.10
suffered the injury is no longer living and must For example, the court found that where a de-
have another form of representation to proceed cedent signed a medical-malpractice arbitration
with a case. Similarly, a minor who has been in- agreement, the agreement was binding on the
jured must bring action through a representa- personal representative.11
tive.                                                   After a personal representative has been
                                                     properly appointed, he or she must bring the ac-
         Settling Wrongful Death Claims
                                                     tion in the proper venue. Generally, the venue
    Let’s first look at the procedure for bringing a will lie where the original injury occurred,12 even
wrongful death action on behalf of a deceased if the death occurred elsewhere.13
individual. In Michigan, a wrongful death action        After initiating a wrongful-death action, the
is entirely statutory;1 there is no common law personal representative must notify the inter-
cause of action for wrongful death. Its purpose ested persons that a wrongful death action has
is to permit an action to be brought where the been initiated. The term “interested person” is de-
decedent would have had a cause of action had fined by Michigan statute to include (1) the dece-
he survived.2 A cause of action is based on ordi- dent’s spouse, children, descendants, parents,
nary negligence3 and accrues on the date of the grandparents, brothers and sisters or, if none of
wrongful act, not on the date of death,4 except in these persons survive the decedent, those per-
cases of medical malpractice.5                       sons to whom the decedent’s estate could pass
    The action is prosecuted by the personal rep- by intestate succession, (2) the children of a de-
resentative of the decedent’s estate6 as plaintiff. ceased spouse, and (3) those persons who are
It is important that a personal representative ac- devisees under a decedent’s will, testamentary
tually be appointed by the court. If the nominat- trust, or who are beneficiaries of the decedent’s
ed personal representative brings an action with- living trust.14 Michigan’s court rule also defines
out first being appointed by the court, the defen- interested persons as the heirs of the decedent,
dant may file a motion for summary disposition other persons who may be entitled to distribution
on the basis that the plaintiff lacks legal capacity of wrongful-death proceeds, and the claimants
to sue.7 Under some circumstances, if the plain- of the estate whose interests are affected.15 The
tiff has not been, but subsequently is, properly personal representative must serve on all inter-
appointed, the appointment may relate back to ested parties a copy of the complaint as well as
the filing of the wrongful death claim even if the a notice that informs the interested parties of the
appointment (but not the filing of the action) oc- following:
curred after the statute of limitations has run.8      1. The name and address of the personal
However, in order for this exception to apply, the        representative and the attorney for the
plaintiff must have reasonably believed he or             personal representative;
she had authority to act as personal representa-       2. A statement that the attorney for the per-
tive without court appointment.9                          sonal representative must be advised
    In addition to being appointed by the court,          within 60 days after the mailing of the

                                                                                                   31
MICHIGAN PROBATE & ESTATE PLANNING                                                             Summer 2008


      notice of any material fact that an inter-        personal representative must petition the probate
      ested person considers to constitute evi-         court for both leave to settle the claim and au-
      dence of a claim for damages, and that            thority to distribute the proceeds.19 See Exhibit A
      failure to do so may adversely affect the         – Petition for Authority to Settle Wrongful Death
      interested person’s recovery of damages           Claim; see Exhibit B – Petition for Authority to
      and could bar the interested person’s             Distribute Proceeds. For leave to settle the claim
      right to any claim of damages at a hear-          to be granted, a hearing must be scheduled, and
      ing to distribute the proceeds;                   notice of the hearing must be sent to all interest-
  3. A statement that the interested persons            ed persons. See Exhibit C – Notice of Interested
      will be notified of a hearing on the distri-       Persons. At the hearing, the court must decide
      bution of the proceeds after adjudication         whether to accept or reject the claim. The notice
      or settlement;                                    to interested persons, where no action is pend-
  4. A statement that in order to recover dam-          ing, must include the following:
      ages, the interested person must pres-              1. The name and address of the personal
      ent a claim for damages to the personal                 representative and the attorney for the
      representative on or before the date set                personal representative;
      for hearing on a motion to distribute the           2. A statement that the interested person
      proceeds, and that the failure to do so                 must present a claim for damages to the
      shall bar the person from making a claim                personal representative on or before the
      for damages.16                                          date set for hearing on a motion to dis-
    It is good practice to send this notice by certi-         tribute the proceeds, and that the failure
fied mail, return receipt requested, although it is            to do so shall bar the person from mak-
not required by court rule. If an interested person           ing a claim for damages.20
fails to present a timely claim for damages, he             As already mentioned, it is good practice to
will be barred from claiming any of the proceeds.       send this notice by certified mail, return receipt
However, an interested person’s failure to pres-        requested. When deciding upon a distribution,
ent a claim for damages does not preclude the           it is important to note that even if an interested
personal representative from requesting a distri-       person has not made a claim for damages, he
bution be made to that interested person.17             or she is not precluded from receiving a distribu-
    The personal representative may determine           tion.21
that settlement of the claim is in the best interest        If an interested person is under a disability
of the estate. If a wrongful death claim is settled     and is unrepresented, the court will appoint a
after an action has been commenced, the settle-         representative and notify that representative of
ment will be made in the court in which the case        such appointment. Likewise, for a person who is
is pending. However, if the settlement is made          considered a disappeared person, a representa-
prior to the initiation of an action, the settlement    tive would be appointed to represent the disap-
will be made in the probate court.                      peared person in his or her absence.22
    If the action is pending and settlement is de-          Assuming that no interested person is under a
sired by the parties, the personal representative       disability or is considered a disappeared person,
may file a motion in the court in which the action       the interested persons may agree to the distri-
is pending, requesting leave to settle the claim.       bution and all sign a sworn stipulation or written
The court, with or without notice, and upon a           agreement. The court will enter an order in ac-
hearing, shall determine whether to approve the         cord with the stipulation or agreement. However,
settlement.18                                           if no agreement to distribution can be reached
    However, if no action has been initiated, the       among the interested persons, the court will

 32
Summer 2008                                                        MICHIGAN PROBATE & ESTATE PLANNING


schedule a hearing and order distribution as dis-      appointed to represent the minor, the court must
cussed below.                                          appoint “a competent and responsible person to
   If no settlement is reached and the action is       appear as next friend on his or her behalf, and
adjudicated, the court or jury may award damag-        the next friend is responsible for the costs of the
es that are fair and equitable under all of the cir-   action.”30 If the minor is the defendant in an ac-
cumstances. Determination of amount of dam-            tion, and no conservator has been appointed,
ages is based primarily on three categories: (1)       the court must appoint a guardian ad litem to
reasonable medical, hospital, funeral, and burial      represent the minor.31 The order of priority for
expenses for which the estate is liable, (2) rea-      appointment of a next friend or guardian ad litem
sonable compensation for the decedent’s con-           is as follows: (1) if the minor has attained the
scious pain and suffering between the time of in-      age of 14, the minor may nominate a person for
jury and the time of death, and (3) damages for        appointment as guardian ad litem or next friend.
the loss of financial support23 and the loss of so-     The nominee must provide the court with a writ-
ciety and companionship of the deceased.               ten consent prior to the appointment;32 (2) if the
   The court will order payment from the wrong-        minor is under the age of 14, a nomination may
ful death award for the decedent’s reasonable          be made by the minor’s “next of kin or…another
medical, hospital, funeral, and burial expens-         relative or friend the court deems suitable.” The
es.24 The remaining amounts will be allocated          nominee must consent in writing;33 (3) if no nomi-
between the decedent’s conscious pain and suf-         nation is made or approved within 21 days after
fering and the survivors’ loss of financial support,    service of process, another party, or the court on
society, and companionship. The only portion of        its own motion, may nominate a person for ap-
the award that is considered part of the dece-         pointment;34 and (4) the court may refuse to ap-
dent’s estate is that amount (if any) allocated to     point anyone it deems unsuitable.35
the decedent’s conscious pain and suffering.25             Settlement of a claim involving a minor must
This portion is distributed according to the dece-     be approved by the court. MCL 700.5102 only
dent’s will or, if none, then by intestate succes-     describes the procedure that may be followed for
sion.26 Any portion allocated to the loss of finan-     payments to a minor of less than $5,000 a year
cial support and the loss of society and compan-       after a settlement has been reached. This statu-
ionship27 is distributed directly to those who have    tory provision is not intended as a short cut to
suffered such a loss.28 This portion is not subject    avoid the court procedures necessary to effectu-
to estate claims.                                      ate a binding settlement of the minor’s claim. A
                                                       parent has no inherent authority to enter a bind-
 Settling Personal Injury Claims for Minors
                                                       ing compromise of a minor’s claim without court
   In other situations, a minor may suffer injury.     review and approval, even for amounts less than
Because a minor is legally incompetent to rep-         $5,000. A binding settlement may require the ap-
resent himself, the minor must be properly rep-        pointment of a next friend (or guardian ad litem)
resented for any resolution of the action to be        to review the proposed settlement on behalf of
binding.                                               the minor.
   For actions initiated in circuit court on behalf        After service of notice in a proceeding for
of a minor, the Michigan Court Rules specify           the appointment of a conservator or other pro-
that any such action is brought by a “next friend,     tective order, the court in which the petition has
guardian, or conservator.” MCR 2.420. If the mi-       been filed has exclusive jurisdiction to determine
nor has a conservator, the conservator is the          whether a conservator or other protective order
proper person to bring or defend an action on          is necessary and also to determine “how the pro-
behalf of a minor.29 If no conservator has been        tected individual’s estate...is managed, expend-

                                                                                                      33
MICHIGAN PROBATE & ESTATE PLANNING                                                                Summer 2008


ed, or distributed to or for the use of the protect-     been commenced, MCR 2.420(B) controls.42 Any
ed individual or any of the protected individual’s       proposed settlement must be brought before the
dependents or other claimants.”36 In addition            presiding judge, who will pass on the fairness
to exclusive jurisdiction, the court in which the        of the proposed settlement. In circuit court, if a
petition has been filed also has concurrent ju-           claim for damages is made based upon person-
risdiction to determine the validity of any claims       al injury, the minor must appear in court and the
against the protected individual and his or her          court may require medical testimony if it is unsat-
estate, as well as questions of title regarding the      isfied that the full extent of the injury is known.
individual’s property.37                                 During such a hearing, the court for good cause
    If a settlement is reached in a matter involv-       may excuse the minor’s presence.43 If the next
ing a minor prior to the initiation of the action, the   friend, guardian, or conservator also has a claim
proposed settlement must be submitted to the             and will share in the same action, a guardian ad
probate court for review and approval.38 A guard-        litem must be appointed to represent the minor’s
ian ad litem may be appointed to represent the           interest in the settlement.44 If a guardian or con-
minor’s interest.39 Different rules apply for set-       servator has been appointed, but the amount of
tlements with annual distributions of $5,000 or          the settlement exceeds the fiduciary’s bond, the
less and settlements with annual distributions of        court may approve the settlement, but no judg-
greater than $5,000. Settlements that pay out            ment may be entered nor may the case be dis-
$5,000 or less per year should still be approved         missed until the probate court determines wheth-
by the court to effectuate a binding settlement.         er the bond is sufficient.45 The court may also re-
After court approval, the funds may then be dis-         quire that a conservator provide security before
tributed to (1) the minor if the minor is married,       receiving the minor’s money or other property.46
(2) the person who has care and custody of the               Just as with settlements prior to an action
minor and with whom the minor resides, or (3)            being commenced, a conservator must be ap-
into a state or federally insured savings account        pointed by the probate court for a minor who is
in the minor’s name with notice to the minor of          to receive distributions of greater than $5,000
the deposit.40 However, these options are not            per year before the court will enter judgment or
available if a conservator has been appointed or         dismiss the case.47 The court will not enter judg-
if a conservatorship proceeding is pending.              ment or dismiss the case until the probate court
    Settlements that will pay no more than $5,000        determines that the bond of the conservator is
per year until the minor reaches adulthood may           sufficient.48
include structured settlements, court-established            After the court determines that a conservator-
trusts, and other arrangements that can be au-           ship or other protective order is appropriate, the
thorized by a protective order. The petition for         probate court has “all those powers over the mi-
authority to settle a matter can be combined with        nor’s estate and business affairs that are or may
a petition for a protective order authorizing such       be necessary for the best interests of the minor
types of arrangements.                                   and members of the minor’s immediate family.”49
    If a settlement provides for distributions of        These powers may include the following if the
greater than $5,000 per year for a minor, a con-         court determines that it is in the best interest of
servator must be appointed.41 If one has not al-         the minor: (1) the exercise or release of a pow-
ready been appointed, the court’s review and             er of appointment over which the minor is a do-
approval of the settlement should be made in             nee, (2) a renunciation or disclaimer of an inter-
conjunction with a petition for appointment of a         est, (3) to make a gift in trust or otherwise, or (4)
conservator for the minor.                               to change a beneficiary designation on an insur-
    In situation in which an action has already          ance or annuity policy.

 34
Summer 2008                                               MICHIGAN PROBATE & ESTATE PLANNING


    If the court finds that a minor’s assets are in
need of protection, the court has broad author-
ity to tailor relief short of the appointment of a full
conservator.50 For example, protective arrange-
ments may include payment, delivery, deposit, or
retention of money or property; sale, mortgage,
lease, or other transfer of property; entering into
an annuity contract, contract for life care, deposit
contract, or contract for training and education;
or any addition to or establishment of a suitable
trust.51 The court …may authorize, direct, or rat-
ify a contract, trust, or other transaction relating
to the protected individual’s property and busi-
ness affairs if the court determines that the trans-
action is in the protected individual’s best inter-
ests.52 The court must consider creditors’ inter-
ests as well as whether the minor needs ongoing
protection of a conservator before entering into
the types of protective arrangements described
above.53




                                                                                         35
MICHIGAN PROBATE & ESTATE PLANNING                                                            Summer 2008


                                               Exhibit A

              PETITION FOR AUTHORITY TO SETTLE WRONGFUL DEATH CLAIM


In the matter of

       __________________ (“Petitioner”), court-appointed personal representative of the Estate

                                                                  
of________________, deceased (“the Estate”), and pursuant to MCLA 700.3924, petitions this court

for authority to settle the Estate’s wrongful death claim, as follows:

       1. Petitioner is the personal representative of the Estate of ________________ (“Decedent”),

who was killed as a result of injuries sustained __________.

       2. The Decedent died on ______________ as a result of injuries suffered in an accident which

occurred that same day. [Optional: Decedent was a passenger in an automobile driven by ________

______.]

       3. The accident occurred when __________________.

       4. Following the accident, Decedent was taken to ______________ Hospital, where he was

pronounced dead.

       5. The death certificate lists “________________” as the cause of death, noting that the inju-

ries occurred as a result of “__________________”.

       6. Petitioner is informed and believes that the defendant, ______________ (“Defendant”) is

insured by ________________ with a policy of insurance providing a single limit of $_________. [Op-

tional: Petitioner is informed and believes that no additional insurance coverage is available and that

the driver of the vehicle is without significant assets that could be executed upon.]

       7. Defendant, through its agents and representatives, has offered to pay the Estate the sum

of $_______________ in cash in settlement of the wrongful death action, as a full, final and com-

plete settlement of all claims that the Estate may have against Defendant. [Optional: The reasonable

medical, hospital, funeral, and burial expenses incurred as a result of the accident will be covered by

separate provisions in Defendant’s insurance policy.]

       8. Petitioner believes that the settlement offer is fair, just and proper in light of the amount of

 36
Summer 2008                                                       MICHIGAN PROBATE & ESTATE PLANNING


insurance money available and possible questions that exist regarding causation of death from the

accident.

       9. Petitioner requests the Court to conduct a hearing and either approve or reject the proposed

settlement.

       10. Petitioner has provided notice to all persons who may be entitled to damages under MCL

600.2922. A list of those interested parties, their addresses, and their relationship to the Decedent, is

attached.

RELIEF REQUESTED

       Petitioner requests that the Court approve the proposed settlement.

       I declare that this petition has been examined by me and that its contents are true to the best

of my information, knowledge, and belief.
Date:                                     ____________________________________
                                                 [name of Petitioner]




                                                                                                     37
MICHIGAN PROBATE & ESTATE PLANNING                                                          Summer 2008


                                               Exhibit B

                   PETITION FOR AUTHORITY TO DISTRIBUTE PROCEEDS OF

                                    WRONGFUL DEATH CLAIM


In the matter of


       ________________ (“Petitioner”), court-appointed personal representative of the estate of

___________ (“the Decedent”), deceased, and pursuant to MCL 700.3924, represents as follows:

       1. Petitioner has filed a Petition for Authority to Settle Wrongful Death Claim in the amount

of $_______________. [Optional: The expenses incurred by Decedent as a result of the accident

(including reasonable medical, hospital, funeral and burial expenses) and legal fees incurred in the

settlement of the wrongful death action will be paid through separate provisions of Defendant insur-

er’s insurance policy.] [No portion of the proceeds is allocable to Decedent’s conscious pain and suf-

fering./_______% of the proceeds are allocable to Decedent’s conscious pain and suffering and the

balance is allocable to loss of financial support and loss of society and companionship] If the Court

approves the proposed settlement amount, Petitioner requests authority to:

               a. Settle Decedent’s wrongful death claim and to deliver and execute a Release of Li-

ability in favor of ______________ Insurance Company;

               b. Distribute the $______________ settlement to the following persons in the following

proportions: [insert ].

               c. Petitioner believes that the above distribution is fair because: __________.

RELIEF REQUESTED

       For reasons stated above, Petitioner requests that the court enter an order distributing the

proceeds of the wrongful death settlement as set forth above.

       I declare that this petition has been examined by me and that its contents are true to the best

of my information, knowledge, and belief.
Date:                                             ___________________________________
                                                                  , Petitioner


 38
Summer 2008                                                     MICHIGAN PROBATE & ESTATE PLANNING


                                               Exhibit C

                                 NOTICE OF WRONGFUL DEATH
                                        SETTLEMENT

TO:    [Insert names of interested parties]

The estate of                  has filed a Petition for Authority to Settle Wrongful Death Claim
with the      _______________ County Probate Court. A copy of the Petition is enclosed.

The name and address of the personal representative are:

       [insert name and address of personal representative]

The name and address of the attorney handling the wrongful death settlement are:

       [insert name and address of attorney]

You will be notified of the hearing to determine the distribution of proceeds after the settlement of
the claim for damages.

To recover damages pursuant to law, any person who may be entitled to damages must present a
written claim for damages to the Personal Representative on or before the date set for hearing on
the petition for distribution of the proceeds, and failure to present a claim for damages within the
time provided shall bar such person from making a claim to any of the proceeds.

[name of law firm]


[name of lawyer]




                                                                                                  39
 MICHIGAN PROBATE & ESTATE PLANNING                                                                          Summer 2008


                          Notes                                be met in order to receive a share of the proceeds are (1)
                                                               designation in [MCL 600.2922(3)] and (2) damages. 236
    1. MCL 600.6921 et seq; Jenkins v Patel, 471 Mich          Mich App at 450.
158, 684 NW2d 346 (2004), on remand 263 Mich App 508,              22. MCL 700.3924(c).
688 NW2d 543.                                                      23. A surviving spouse must generally show the amount
    2. Powers’ Estate v City of Troy, 4 Mich App 572, 145      that the decedent had contributed and might have been
NW2d 418 (1966); see also Xu v Gay, 257 Mich App 263,          expected to contribute toward the surviving spouse’s sup-
668 NW2d 166 (2003).                                           port. Wavle v Michigan United Rys Co, 170 Mich 81, 135
    3. There is no provision for the recovery of exemplary     NW 914 (1912).
damages in the Wrongful Death Act. Bernier v Board of              24. MCL 600.2922(6)(d).
County Road Comm’rs, 581 F Supp. 71 (WD Mich 1983).                25. MCL 600.2922(6)(d); Mason v Bd of County Rd
Similarly, the Act does not permit damages for loss of en-     Comm’rs, 221 Mich App 1 (1997).
joyment of life (“hedonic damages”). Brereton v US, 973 F          26. MCL 600.2922(6)(d); MCL 700.3924(d).
Supp 752 (ED Mich.1997).                                           27. Damages for loss of society and companionship
    4. Hardy v Maxheimer, 429 Mich 422, 416 NW2d 299           are intended to compensate for the destruction of the fam-
(1987).                                                        ily relationship. McTaggart v Lindsey, 202 Mich App 612,
    5. Penner v Seaway Hosp, 102 Mich App. 697, 302            509 NW2d 881 (1993). Evidence of a spouse’s remarriage
NW2d 285 (1981).                                               is inadmissible as to the issue of damages for loss of soci-
    6. MCL 600.2922(2).                                        ety and companionship. Schaible v Myers, 411 Mich 704,
    7. MCR 2.116(C)(5); Osner v Boughner, 152 Mich App         311 NW2d 297 (1981).
754, 394 NW2d 411 (1986).                                          28. MCL 600.2922(6)(d); MCL 700.3924(d).
    8. Osner v Boughner, supra.                                    29. MCR 2.201(E)(1)(a).
    9. Id.                                                         30. MCR 2.201(E)(1)(b).
    10. Kane v Rohrbacher, 83 F3d 804 (6th Cir 1996).              31. MCR 2.201(E)(1)(c).
    11. Ballard v Southwest Detroit Hosp, 119 Mich App             32. MCR 2.201(E)(2)(a)(i).
814 (1982).                                                        33. MCR 2.201(E)(2)(a)(ii).
    12. MCL 600.1629.                                              34. MCR 2.201(E)(2)(a)(iii).
    13. Karpinski v St John Hosp-Macomb Ctr Corp, 238              35. MCR 2.201(E)(2)(b).
Mich App 539, 606 NW2d 45 (1999).                                  36. MCL 700.5402(a)-(b).
    14. MCL 600.2922(3).                                           37. MCL 700.56402(c).
    15. MCR 5.125(C)(13).                                          38. MCR 2.420(A); Smith v YMCA of Benton Harbor,
    16. See MCL 600.2922(2)-(4).                               216 Mich App 552, 550 NW2d 262 (1996).
    17. In re Estate of Kubiskey, 236 Mich App 443, 600            39. MCL 700.5407(1).
NW2d 439 (1999).                                                   40. MCL 700.5102.
    18. MCL 600.2922(5).                                           41. MCL 700.5102.
    19. See MCL 700.3924 for the procedure for settling a          42. See Smith v YMCA of Benton Harbor, 216 Mich
wrongful death claim.                                          App 552, 550 NW2d 262 (1996).
    20. MCL 700.3924(2)(b)-(f).                                    43. MCR 2.420(B)(1).
    21. See In re Estate of Kubiskey, supra, in which the          44. MCR 2.420(B)(2).
court of appeals stated that “the goal of statutory inter-         45. MCR 2.420(B)(3).
pretation is to identify and to give effect to the intent of       46. MCR 2.201(E)(3)(b).
the Legislature [Cites omitted]. The first step in ascertain-       47. MCR 2.420(B)(4).
ing such intent is to focus on the specific language of the         48. MCR 2.420(B)(3).
statute…With respect to subsection 222(f) of the RPC               49. MCL 700.5407(2)(b).
[the precursor to MCL 700.3924(f)]…The Legislature has             50. MCL 700.5408.
plainly provided that the consequence of an interested             51. MCL 700.5408(1).
party’s “failure to present a claim for damages within the         52. MCL 700.5408(2).
time provided,” is that the interested party is barred from        53. MCL 700.5408(3).
“making a claim to any of the proceeds.” “Making a claim”
for proceeds is not the same things as “receiving a dis-
tribution” of proceeds, and nowhere in Sec. 222 does it
provide that interested parties must “make a claim: in or-
der to receive a distribution of the proceeds…By the clear
language of the statute, the only prerequisites that must


 40
Summer 2008                                          MICHIGAN PROBATE & ESTATE PLANNING


                    Kristen D. Arnett is an attor-
                    ney at the firm of Foster Zack
                    Little Pasteur & Manning, P.C.
                    in Okemos, Michigan. Her
                    practice focuses on trusts and
                    estates, guardianships, con-
                    servatorships, and contested
                    matters. Kris is the President
                    of the Women Lawyers As-
sociation of Michigan and the Ingham County
Bar Association Young Lawyers Section. She
graduated from Michigan State University Eli
Broad College of Business and the West Virginia
College of Law. She would like to acknowledge
Nancy L. Little for her input on this article.




                                                                                    41
MICHIGAN PROBATE & ESTATE PLANNING                                                             Summer 2008


                                            Departments

                  Tax Nugget                           es).
                                                           There are also some facts that might have
               By Lorraine F. New
                                                       caused the court to rule the other way: the de-
The Pendulum Swings Back—Estate of                     cedent was the general manager and kept a 52
Anna Mirowski v Commissioner, TC Memo                  percent majority interest in the FLP. Judge Chie-
2008-74 (3/26/08)                                      chi held that the decendent’s powers to deter-
                                                       mine the amount and timing of distributions were
    The latest case in the Family Limited Partner-     sufficiently limited by the terms of the governing
ship (FLP) wars went to the taxpayer. The case         instruments and the fiduciary duties imposed on
had many good facts:                                   her because of applicable state law.
   • a history of laudable achievements for                Due to gifts made just prior to death, the de-
      the family                                       cedent owed gift taxes that exceeded her as-
   • years of gifts (over $24 million)                 sets outside of the FLP. However, the decision
   • financial-decision independence of the             indicated that she could have used distributions
      decedent                                         from the FLP, or a loan with them, as collateral
   • a clear and repeated aim of having the            to pay the tax.
      decedent’s daughters work together and                Unlike other cases, the decedent’s daughters
      have a successful working relationship           were credible witnesses. The decedent did not
   • the decedent and her children planning            put personal assets into the FLP, did not take out
      the FLP in 2000 and 2001                         funds for her own use, and kept out a sizeable
   • the decedent’s wish to consolidate her            amount in her own name, although not enough
      84 accounts at 10 institutions and enjoy         to pay her potential gift tax.
      the benefits of such consolidation, such              The most useful holding was that the FLP was
      as lower charges and the ability to make         “a valid functioning investment operation “and so
      gifts of it                                      met the exception to inclusion under Code sec-
In this case, the court decided that facilitation of   tion 2036(a). In practice, this means that the gifts
lifetime giving was a legitimate and significant        were included at a discounted value and not at
non-tax reason for setting up a FLP.                   full value in the estate. The gifts were agreed to
    The Internal Revenue Service (IRS) saw a           be revalued at higher than reported, $6 million
scenario that appeared similar to cases it has         per child, an increase of about $5 million, versus
been winning. The decedent died on September           the $14 million asked for by IRS. The estate had
11, 2001, just weeks after signing the documents       to go to tax court, but this case provides useful
to set up the FLP and days after funding it and        guidance as to” how to do it better.”
making gifts. However, her death was unexpect-
ed and not related to a condition that affected
her judgment or was terminal.
    The IRS had previously won cases where es-
tate taxes were paid from the FLP. In this case,
the FLP was to be divided into three equal parts
and the distribution was seen as proper. In her
decision, Judge Chiechi made it clear that es-
tate taxes are not the obligation of the decedent
(which was a bothersome detail in earlier cas-

 42
Summer 2008                                            MICHIGAN PROBATE & ESTATE PLANNING


                     Lorraine F. New of Lorraine
                     F. New PLLC, Birmingham,
                     Michigan, practices in the
                     area of estate tax returns. Ms.
                     New, formerly of IRS Estate
                     and Gift Tax Division, Detroit,
                     Michigan, worked in estate
                     tax since 1988 and was the
                     division manager from Janu-
ary 2002 to January 2007. On February 1, she
formed Lorraine F. New PLLC, where she will
use her expertise to assist taxpayers and their
representatives through the intricacies of the
IRS; with estate planning, return preparation or
review, appeals, drafting of legal opinions or pri-
vate letter ruling requests, and representation for
controversies at every level at any place in the
country. Ms. New is also of counsel for George
W. Gregory PLLC.




                                                                                      43
MICHIGAN PROBATE & ESTATE PLANNING                                                             Summer 2008


              Legislative Report                              and
                                                           • accumulation of income. (Section 3(1)).
           By Harold G. Schuitmaker
                                                            With one narrow exception, all of the following
              New Laws of Interest                       may be indefinitely suspended, postponed, or al-
                                                         lowed to go on with respect to personal property
    Public Act 20 of 2008 (MCL 691.1131) re-             held in trust:
vises the standards under which Michigan courts            • the vesting of a future interest;
may recognize a final, foreign money judgment               • the satisfaction of a condition precedent
(certain exceptions and time limits apply).                   to the exercise of a general power of
    Public Act 41 of 2008 (MCL 700.3206) modi-                appointment;
fies the language in EPIC for anatomical gifts. In          • the exercise of a non-general testamen-
particular, it includes the power to give authority           tary power of appointment;
to resolve conflicts between the terms of a health          • absolute ownership;
care directive and administration of means nec-            • the power of alienation; and
essary to ensure the medical suitability of the an-        • accumulation of income. (Section 3(2)).
atomical gift.                                              The narrow exception deals with the “Del-
    Public Act 148 of 2008 and Public Act 149            aware Tax Trap” and retains a 360-year rule
of 2008 (MCL 554.72 and 554.75)—Modifying                against perpetuities for certain powers of ap-
the Rule Against Perpetuities                            pointment created by the exercise of other pow-
    The common law rule against perpetuities is          ers of appointment.
the principle that no interest in property is good          Note, however, the ninety-year rule against
unless it must vest, if at all, not later than twenty-   perpetuities for real property held in trust re-
one years plus the period of gestation after some        mains the law. Generally, the rule for personal
life or lives in being at the time of creation of the    property is in perpetuity.
interest.
    The previous Michigan rule against perpetuit-
ies was generally ninety years (MCL 554.71 et.
seq.). This was based upon the recommenda-
tion of the National Conference of Commission-
ers on Uniform State Laws in 1988. Some states
have already abolished the rule and some have
set the period up to 365 years.
    The purpose of this legislation is to make it
easier to create a private, long lasting trust in
Michigan. These laws would help to identify the
sites of dynasty trusts in Michigan.
    The affect of these laws, taken together, is to
generally make the rule against perpetuities, and
other rules affecting the duration of a personal
property trust, inapplicable.
    The following do not affect the duration of a
personal property trust:
    • perpetuities;
    • suspension of absolute ownership;
    • suspension of the power of alienation;

 44
Summer 2008                                           MICHIGAN PROBATE & ESTATE PLANNING


                    Harold G. Schuitmaker, of
                    Schuitmaker, Cooper, Schuit-
                    maker & Cypher, P.C., Paw
                    Paw, is admitted to the Michi-
                    gan and Florida bars, practices
                    in the areas of estate planning
                    and probate, municipal law,
                    corporations, and real estate.
                    Mr. Schuitmaker is a Fellow of
the Michigan State Bar Foundation, and holds
an AV Peer Review rating and an ICLE Certifi-
cate of Completion in the Probate and Estate
Planning Program. He is a member of the Pro-
bate and Estate Planning Section Council, cur-
rently serving as its= Secretary, is on the Probate
Forms Committee, and is a former member of
the Probate Court Rules Committee. He also
formerly served on the State Board of Medicine
for 10 years. Mr. Schuitmaker is a member of the
National Association of Elder Law Attorneys, the
Kalamazoo County Bar Association, and the Van
Buren County Bar Association. He also serves in
numerous civic and charitable organizations. He
is a past president of the Rotary District Founda-
tion, a Level II Certified Assessing Officer with
the State Assessor Board, and a member of the
Chemical Bank Shoreline Kalamazoo Communi-
ty Board. Mr. Schuitmaker is a regular contribu-
tor to the Michigan Probate and Estate Planning
Journal.




                                                                                     45
MICHIGAN PROBATE & ESTATE PLANNING                                                                Summer 2008


  Probate & Estate Planning Council                       (C) the person who acquires from the decedent
                                                          the right to receive the amount by bequest, de-
                Q&A
                                                          vise, or inheritance, if the amount is received
            By Shaheen I. Imami and                       after a distribution by the decedent’s estate of
            Patricia Gormely Prince                       such right.
                                                            Such language clearly provides that the re-
                     Question:                          cipient of the IRA, whether a beneficiary or dis-
                                                        tributee, is responsible for the income tax liability
 Who Is Liable for the Income Tax Conse-                generated by future distributions.
quences Related to a Decedent’s IRA Where                   Such a reading of 26 USC 408(d)(1) and 26
 Distributions Are Made to Beneficiaries?                USC 691(a)(1) is supported by case law as well.
                                                        In Cutler v Commr of Internal Revenue, TC Memo
                      Answer:
                                                        2007-348, 2007 WL 4165262 (US Tax Ct), the
   It is well-established under the Internal Rev-       U.S. Tax Court upheld a grant of summary judg-
enue Code that a beneficiary of an IRA bears the         ment to the Internal Revenue Service where the
tax consequences of distributions from that IRA.        taxpayer claimed that he was not responsible for
See 26 USC 408(d)(1); 26 USC 691(a)(1). Spe-            the tax of an inherited IRA. The U.S. Tax Court
cifically, 26 USC 408(d)(1) provides as follows:         held that:
  (d) Tax treatment of distributions.--                   A distribution to the beneficiary of a decedent’s
  (1) In general.--Except as otherwise provided in        IRA is includable in the gross income of the
  this subsection, any amount paid or distributed         beneficiary. Secs. 408(d)(1), 691(a)(1); Estate
  out of an individual retirement plan shall be in-       of Kahn v. Commissioner, 125 T.C. 227, 232,
  cluded in gross income by the payee or distribu-        2005 WL 3081656 (2005). When such a dis-
  tee, as the case may be, in the manner provided         tribution is made in a lump sum to the benefi-
  under section 72. [Emphasis added].                     ciary, the portion equal to the value of the IRA
Additionally, 26 USC 691(a)(1) provides as fol-           on the date of the decedent’s death, less any
lows:                                                     nondeductible contributions made to the IRA,
  (a) Inclusion in gross income.--                        is income in respect of a decedent (IRD) under
  (1) General rule.--The amount of all items of           section 691(a)(1). Estate of Kahn v. Commis-
  gross income in respect of a decedent which are         sioner, supra. That portion is includable in the
  not properly includible in respect of the taxable       gross income of the beneficiary in the year the
  period in which falls the date of his death or a        distribution is received. Sec. 691(a)(1); Estate
  prior period (including the amount of all items of      of Kahn v. Commissioner, supra. Any balance of
  gross income in respect of a prior decedent, if         the distribution, which represents appreciation
  the right to receive such amount was acquired           and income accruing between the date of death
  by reason of the death of the prior decedent or         and the date of the distribution, is taxable to the
  by bequest, devise, or inheritance from the prior       beneficiary under sections 408(d)(1) and 72. Es-
  decedent) shall be included in the gross income,        tate of Kahn v. Commissioner, supra.
  for the taxable year when received, of:                  Unless the plain language of a trust instru-
  (A) the estate of the decedent, if the right to re-   ment or will provides differently, there is no basis
  ceive the amount is acquired by the decedent’s
                                                        in federal tax law to support an attempt to shift
  estate from the decedent;
  (B) the person who, by reason of the death of
                                                        the income tax consequences of the IRA to the
  the decedent, acquires the right to receive the       residue or other beneficiaries of a trust or estate.
  amount, if the right to receive the amount is not     See also, 13 MI Pl & Pr §§ 108B:7, 108B:10.
  acquired by the decedent’s estate from the de-
  cedent; or

 46
Summer 2008                                                         MICHIGAN PROBATE & ESTATE PLANNING


                   Shaheen I. Imami, of Patricia        thor for Lawyers Cooperative Publishing Com-
                   Gormely Prince PC, Farming-          pany. Ms. Prince is also a consultant for the pro-
                   ton Hills, practices in the areas    bate and estate sections of Callaghan’s Michi-
                   of contested probate litigation,     gan Pleading and Practice. She has taken the
                   estate planning and adminis-         ICLE 40-hour mediation training and has been
                   tration, general civil litigation,   appointed to the court lists in Wayne and Oak-
                   and mediation. He is a council       land County Probate Courts, as well as many of
                   member of the Probate and            the other circuit and probate courts in the state.
                   Estate Planning Section and a        She has served as a speaker at ICLE seminars
regular member of the Business Law and Alter-           in the areas of estate and tax planning. In addi-
native Dispute Resolution Sections of the State         tion, Ms. Prince has also appeared as a guest on
Bar of Michigan. Mr. Imami is a contributor to          the television show Due Process and has been
Michigan Probate Litigation: A Guide to Contest-        interviewed in the Detroit Free Press on probate-
ed Matters (ICLE 2d ed 2000 & Supps) and has            related matters.
been a contributor and speaker for ICLE on top-
ics involving estate administration and contested
probate litigation. He also cowrote the article,
“The Probate Judge Ordered Mediation—Now
What?” for the Fall 2002 issue of the Michigan
Probate and Estate Planning Journal. Mr. Imami
has completed ICLE’s 40-hour mediation train-
ing and is a certified general civil mediator.



                  Patricia Gormely Prince, of
                  Patricia Gormely Prince PC,
                  Farmington Hills, practices in
                  the areas of probate and es-
                  tate planning, tax planning,
                  estate administration, and re-
                  lated contested probate mat-
                  ters. She is a current mem-
                  ber and past chairperson of
the Probate and Estate Planning Council of the
State Bar of Michigan. She is also a member of
the Women Lawyers Association of Michigan
and the Real Property, Probate, and Trust Law
Section of the American Bar Association. Ms.
Prince is a past editor of the Michigan Probate
and Estate Planning Journal, a chapter author
of Michigan Probate Litigation: A Guide to Con-
tested Matters (ICLE 2d ed 2001), coauthor of
“How to Protect the Protected Person,” 75 Mich
BJ 1296 (1996), and a former supplement au-

                                                                                                      47
MICHIGAN PROBATE & ESTATE PLANNING                                                       Summer 2008


 Ethics and Unauthorized Practice of                    of summarizing Michigan’s statutory
                Law                                     framework for protecting the elderly
                                                        from physical and financial abuse.
      By Ramon F. Rolf, Jr. and W. Josh Ard             Michigan’s “Vulnerable Adult Statute”
        Review of Ethics Issues from the                [MCL 750.174(a)] is reviewed in detail
         48th Annual Probate Seminar                    by Mr. Buttigleri.
                                                    •   As our clients age, issues of testamen-
   The Annual Probate Seminar provides an ex-           tary capacity and diminished capacity
cellent summary on Michigan Probate, Elder              seem to arise daily. Jeffrey A. Fields
Law, and Estate Planning in Michigan. We have           presented “Litigating Testamentary
attempted to highlight presentations from the           Capacity Challenges.” The outline dis-
48th Annual Probate and Estate Planning Insti-          cusses standards of proof in incapacity
tute relating to ethical issues in our practices.       cases, the use of expert witnesses and
   • George W. Gregory presented “’You’re               strategies for avoiding contests.
       Fired!’ – Terminating Your Worst Cli-        •   Attorney malpractice claims are unfor-
       ent When You’re Not Donald Trump.”               tunately not uncommon today. Sha-
       We have all taken on clients and then            heen I. Imami presented “Malpractice
       asked ourselves in the middle of the             Traps (and Ethical Issues) For the
       night – “Why?” Obviously, doing your             Unweary Estate Planner (and Pro-
       due diligence up front in deciding               bate Practitioner).” Shaheen’s outline
       whether to take on the representation            discusses issues of standing in legal
       at the outset is the best course of ac-          malpractice cases in Michigan, ethi-
       tion. George’s presentation picks up             cal issues representing a fiduciary and
       after the attorney/client relationship           violations of Michigan’s Rule of Profes-
       has been entered into. Important points          sional Conduct and concludes with a
       raised in the presentation were: (i) the         review of recent Michigan cases involv-
       use of an engagement letter and (ii)             ing malpractice.
       willingness to end the engagement.           •   Attorneys Catherine A. Jacobs and
   • Robert E. Kass and Hayley Rohn pre-                John D. Mabley are fixtures at the An-
       sented an excellent summary of the               nual Probate and Estate Planning In-
       practical and ethical steps to consider          stitute. This year Catherine and John
       when you (the attorney) retire or be-            presented, “Staying Out of Trouble in
       come disabled. A summary of the Mich-            the Information Age; an Ethic Safety
       igan Rules of Professional Conduct are           Net.” Clients’ confidences and conflicts
       found in the outline. We counsel our             of interest in the age of new communi-
       clients to plan ahead for contingencies          cation technology (i.e. e-mail and fax)
       and to plan early. The outline empha-            are reviewed with guidance on how to
       sizes the need to have a succession              minimize risks of violating our ethical
       plan in place to protect both you and            rules.
       your clients.                                •   A full disclosure of a protected individu-
   • As estate planners we are all aware of             al’s property (now to include joint prop-
       the increased number of elderly clients.         erty) is the goal of the new Probate
       The statistics clearly show this trend           Court form, PC 674, Inventory. PC 674
       will continue in the future. Attorney            now contains a value column for each
       Joseph P. Buttigleri did a masterful job         asset which includes jointly-owned

 48
Summer 2008                                                   MICHIGAN PROBATE & ESTATE PLANNING


      property. Inclusion of joint property now                     Ramon F. (Fred) Rolf, Jr., of
      ensures full disclosure of the protected                      Currie Kendall PLC, Midland,
      person's assets to all interested per-                        practices in the area of pro-
      sons.                                                         bate and estate planning. He
  •   Conservatorships are often restricted                         is a member and past chair-
      and require a court order in advance                          person of the Probate and Es-
      of making disbursements. In an effort                         tate Planning Section’s Unau-
      to promote uniformity Probate Court                           thorized Practice and Multidis-
      form PC 673 has been developed to                             ciplinary Practice Committee.
      be used when the conservator must           Mr. Rolf also is a past president of the North-
      petition the court in order to make dis-    eastern Michigan Estate Planning Council and
      bursements. These new court forms           a Fellow of the American College of Trust and
      were discussed as part of the Michigan      Estate Counsel.
      Speaker Track: View From the Reg-
      istrar’s Counter which was presented
      by Michael J. McClory, Jill Koney Daly,                        W. Josh Ard of the Law Of-
      Susan B. Flakne and Donald J. Hous-                            fice of Josh Ard, PLLC in Wil-
      ey.                                                            liamston, Michigan, practices
                                                                     in the areas of elder law, pro-
                                                                     bate law, consumer law, and
                                                                     administrative law. Mr. Ard
                                                                     specializes in special needs
                                                                     planning and planning and
                                                                     dealing with incapacity. For-
                                                  mer chair of the Elder Law and Advocacy Sec-
                                                  tion, the Consumer Law Section, and the Legal
                                                  Education and Professional Standards Commit-
                                                  tee of the State Bar of Michigan, Mr. Ard is cur-
                                                  rently chair of the Standing Committee on the
                                                  Unauthorized Practice of Law. He also formerly
                                                  served as the research attorney at Thomas M.
                                                  Cooley’s Sixty Plus Elderlaw Clinic. Mr. Ard is
                                                  vice president of the Ingham County Bar Associ-
                                                  ation and administrator of the probate, elder law,
                                                  and consumer law lists for the State Bar.




                                                                                                49
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                   ICLE Products of Interest to Probate Practitioners
Books
  Michigan Revocable Grantor Trust, Second Edition
  Edited by Richard C. Lowe and Christine M. Savage
  Covers planning, drafting, and implementing revocable grantor trusts, including chapters on qualified domestic
  trusts, special needs trusts, and revising the trust after death. Include comprehensive sample forms..
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  Estates and Protected Individuals Code with Reporter’s Commentary, 2008 Edition
  By John H. Martin

  Includes EPIC with Reporter’s Commentary by John H. Martin, with major supplemental commentary added in
  2005 and updated each year. Also includes Probate Court Rules. The contents of this book are also published
  in the Michigan Probate Sourcebook.

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  Advising Closely Held Businesses in Michigan
  Edited by Jeffrey S. Ammon, Thomas G. Appleman, and Daniel D. Kopka

  Comprehensive guide to advising Michigan nonpublic businesses, both corporations and LLCs. Covers busi-
  ness formation, advising ongoing businesses, handling employment issues, planning for succession, and dis-
  solution. Includes numerous forms.
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Upcoming ICLE Seminars

  Third Annual Family & Closely Held Business Institute
  Co-Sponsored by the Business Law, Probate and Estate Planning, and Taxation Sections of the State Bar of Michigan

  With a new focus on the maturing small business, new topics, new experts, and expanded tracks, this ad-
  vanced-level seminar brings together national and local experts to help you manage the intersection of busi-
  ness strategies, family dynamics, taxes, and estate planning. Understand the diverse roles you play and gain
  confidence in your ability to coordinate mutiple issues for your clients.
  Live Dates:    October 16, 2008       Location: Plymouth                                                 Seminar #:
                                                                                                           2008CI1191
  General fee: $285.00                  Cosponsor Member: $255                ICLE Partners: $235.00




                                                                                                                      51
MICHIGAN PROBATE & ESTATE PLANNING                                                                    Summer 2008


                                    State Bar of Michigan
                             Members of Section Council—2007–2008

                                                     Officers

  CHAIRPERSON:                         VICE-CHAIRPERSON:                       TREASURER:
  Lauren M. Underwood                    Harold G. Schuitmaker                 GEORGE W. GREGORY
     32100 Telegraph, Ste. 200              181 West Michigan Ave, Ste. 1            401 S. Old Woodward,
     Bingham Farms, MI 48025                Paw Paw, MI 49079                        Ste. 456
  CHAIRPERSON-ELECT:                     SECRETARY:                                  Birmingham, MI 48009
  Nancy L. Little                      DOUGLAS G. CHALGIAN
     2125 University Park Dr.,               139 W. Lake Lansing Rd.,
     Ste. 250                                Ste. 200
     Okemos, MI 48864                        East Lansing, MI 48823


                                               Council Members

TERM EXPIRES 2008:                     TERM EXPIRES 2009:                      TERM EXPIRES 2010:
Daniel E. Cogan                        William J. Ard                          Susan M. Allan
       2723 S. State St., Ste. 210             1340 Trotters Ln.                     P.O. Box 75000
       Ann Arbor, MI, 48104                    Williamston, MI 48895                 Detroit, MI 48275
John R. Dresser                        Ellen Sugrue Hyman                      Hon. Kathryn A. George
       112 S. Monroe St.                       P.O. Box 1023                         440 N. Rose St.
       Sturgis, MI 49091                       Okemos, MI 48805                      Mount Clemens, MI 48043
Robin D. Ferriby                       Marilyn A. Lankfer                      Amy N. Morrisey
       333 W. Fort St., #2010                  333 Bridge St., NW                    345 S. Division St.
       Detroit, MI 48226                       P.O. Box 352                          Ann Arbor, MI 48104
Mark K. Harder                                 Grand Rapids, MI 49501          Rebecca A. Schnelz
       85 E. 8th St., Ste. 310         Patricia M. Ouellette                         1200 N. Telegraph Rd.
       Holland, MI 49423                       2400 Lake Lansing Rd., Ste. F         Pontiac, MI 48341
Shaheen I. Imami                               Lansing, MI 48912               Thomas F. Sweeney
       31300 Northwestern Highway      James B. Steward                              255 S. Old Woodward, 3rd Fl.
       Farmington Hills, MI 48334              205 S. Main St.                       Birmingham, MI 48009
Richard J. Siriani                             Ishpeming, MI 49849             Marlaine C. Teahan
       30150 Telegraph Rd., Ste. 371   Robert P. Tiplady II                          2125 University Park Dr.,
       Bingham Farms, MI 48025                 2723 S. State St., Ste. 400           Ste. 250
                                               Ann Arbor, MI 48104                   Okemos, MI 48864




 52
Summer 2008                                                             MICHIGAN PROBATE & ESTATE PLANNING



                                                   Ex Officio

Raymond T. Huetteman, Jr.              John E. Bos                             Kenneth E. Konop
      1298 Pepperidge Way                     139 W. Lake Lansing Rd.,                840 W. Long Lake Rd.,
      Ann Arbor, MI 48105                     Ste. 200                                Ste. 200
Joe C. Foster Jr.                             Lansing, MI 48823                       Troy, MI 48098
      2125 University Park Dr.,        W. Michael Van Haren                    John A. Scott
      Ste. 250                                111 Lyon St. NW, Ste. 900               1000 S. Garfield, Ste. 3
      Okemos, MI 48864                        Grand Rapids, MI 49503                  Traverse City, MI 49686
Russell M. Paquette                    Robert B. Joslyn                        Dirk C. Hoffius
      19701 Vernier Road, Ste. 290            200 Maple Park Blvd., Ste. 201          333 Bridge St. NW,
      Harper Woods, MI 48225                  St. Clair Shores, MI 48081              P.O. Box 352
James A. Kendall                       Robert D. Brower, Jr.                          Grand Rapids, MI 49501
      6024 Eastman Ave.,                      250 Monroe Ave NW, Ste 800       Henry M. Grix
      Midland, MI 48640                       Grand Rapids, MI 49503                  38525 Woodward Ave.,
James H. LoPrete                       John D. Mabley                                 Ste. 2000
      40700 N. Woodward Ave.,                 31313 Northwestern Hwy.,                Bloomfield Hills, MI 48304
      Ste. A                                  Ste. 215                         Phillip E. Harter
      Bloomfield Hills, MI 48304               Farmington Hills, MI 48334              Calhoun County Probate Court
                                                                                      161 E Michigan Ave
Everett R. Zack                        Raymond H. Dresser, Jr.
                                                                                      Battle Creek, MI 49014
      2125 University Park Dr.,               112 S. Monroe St.
                                                                               Michael J. McClory
      Ste. 250                                Sturgis, MI 49091
                                                                                      2 Woodward Ave.,
      Okemos, MI 48864                 John H. Martin                                 1307 CAYMC
Douglas J. Rasmussen                          400 Terrace St., P.O. Box 900           Detroit, MI 48226-5423
      500 Woodward Ave., Ste. 3500            Muskegon, MI 49443               Douglas A. Mielock
      Detroit, MI 48226                Patricia Gormely Prince                        313 S. Washington Sq.
Susan S. Westerman                            31300 Northwestern Hwy.                 Lansing, MI 48933-2144
      345 S. Division St.                     Farmington Hills, MI 48334
                                                                               COMMISSIONER LIAISON
      Ann Arbor, MI 48104              Brian V. Howe
                                              8253 New Haven Way,              Lori A. Buiteweg
Fredric A. Sytsma
                                              Ste. 102                               121 W. Washington St.,
      333 Bridge St., NW,
                                              Canton, MI 48187                       Ste. 300
      P.O. Box 352
                                                                                     Ann Arbor, MI 48104
      Grand Rapids, MI 49501           Richard C. Lowe
Stephen W. Jones                              2375 Woodlake Dr.,
      200 E. Long Lake Rd., Ste. 110          Ste. 380
      Bloomfield Hills, MI 48304               Okemos, MI 48864




                                                                                                              53
 MICHIGAN PROBATE & ESTATE PLANNING                                                                          Summer 2008


                                        Probate and Estate Planning Section
                                         2008-2009 Committee Assignments

Editor’s note: The Probate and Estate Planning Council welcomes your participation on committees. If you
are interested in serving on any of the committees listed below, please contact Nancy L. Little, Chair, or the
chair of the committee on which you would like to serve.
INTERNAL GOVERNANCE                            Michael McClory, Chair                      Melisa M. W. Mysliewiec
  Nancy L. Little, Chair                         Douglas A. Mielock
                                                                                      STATE BAR JOURNAL
  Harold Schuitmaker, Chair Elect                Lauren M. Underwood
                                                                                        Amy M. Morrissey, Chair
BUDGET                                       RELATIONS WITH STATE BAR
                                                                                      TECHNOLOGY AND ELECTRONIC
                                             Mission: In addition to maintaining
Mission: To develop the annual                                                        COMMUNICATION
                                             relations with the State Bar, this
budget and to alert Council as to                                                     Mission: To develop the Section Web
                                             committee will work with the State
revenue and spending trends.                                                          site and Listserv and to monitor and
                                             Bar to develop a plan for our Section
   George W. Gregory, Chair                                                           evaluate the content of electronic
                                             on civic education, marketing/press
     Nancy L. Little                                                                  communication between and among
                                             releases, and the State Bar’s new
     Mark Harter                                                                      the Council and Section Members.
                                             initiative to publicize the good deeds
                                             of lawyers to the general public.           William J. Ard, Chair
BYLAWS
                                                Thomas F. Sweeney, Chair                    John R. Dresser
  Marilyn K. Lankfer, Chair
    Robert P. Tiplady                              John R. Dresser
                                                   Michael J. McClory                 LEGISLATION AND LOBBYING
MICHAEL W. IRISH AWARD                             Amy Morrissey
                                                                                      LEGISLATION COMMITTEE
Mission: To honor a practitioner                   Derek A. Walters
                                                                                        John R. Dresser, Co-chair
(supported by recommendations                ANNUAL MEETING                             Harold C. Schuitmaker, Co-chair
from his or her peers) whose
                                             Mission: To arrange the annual
contributions to the Section reflect                                                   UNIFORM POWER OF ATTORNEY ACT
                                             meeting at a time and place and
the high standards of professionalism                                                 Mission: To review the Uniform
                                             with an agenda that will accomplish
and selflessness exemplified by                                                         Power of Attorney Act.
                                             necessary Section business and will
Michael W. Irish.                            address, as appropriate, matters           Daniel Marsh, Chair
  Brian V. Howe, Chair                       of professional concern to the                Susan Allen
    Hon. Phillip E. Harter                   Membership.                                   William J. Ard
    Marilyn K. Lankfer                                                                     Kristen Arnett
                                                Harold Schuitmaker, Chair
                                                                                           Douglas G. Chalgian
LONG-RANGE PLANNING                                                                        Daniel E. Cogan
                                             EDUCATIONAL AND                               Kristen R. Gross
Mission: To refine the Section’s
                                             ADVOCACY SERVICES FOR                         Liam K. Healy
Strategic Plan through periodic
                                             SECTION MEMBERS
review and to identify priorities and                                                      James Lampertiues
methods for implementing those               AMICUS CURIAE                                 Michele Marquardt
priorities so as to meet the evolving          Ellen Sugrue-Hyman, Chair                   Stanford J. Mall
needs of Section members.                         Melisa M. W. Mysliwiec                   Deb Mitton
                                                  Derek A. Walters                         Wendy M. Parr
  Douglas G. Chalgian, Co-chair
                                                                                           Ellen Sugrue-Hyman
  Lauren M. Underwood, Co-chair              CONTINUING EDUCATION AND ANNUAL
                                                                                           Derek A. Walters
                                             PROBATE SEMINAR
NOMINATIONS                                    Douglas Chalgian, Chair                MICHIGAN TRUST CODE
Mission: To select nominees for                                                       Mission: To review the Uniform
                                             PAMPHLETS
Council who are committed to                                                          Trust Code and to determine the
the probate and estate planning                Ellen Sugrue-Hyman, Chair              need for adopting such legislation in
                                                  James B. Steward                    Michigan.
practice and who are candidates
for leadership of our diverse and            SECTION JOURNAL                            Mark K. Harder, Chair
changing Section.                              Nancy L. Little, Chair                      Daniel E. Cogan

 54
Summer 2008                                                                             MICHIGAN PROBATE & ESTATE PLANNING


     Douglas G. Chalgian                      Mission: To determine local practice          Mission: To determine the issues
     David Kerr                               issues that could be conformed to a           between the Elder Law Section and the
     John Dresser                             standard of Michigan probate and              Probate and Estate Planning Section, and
     Marilyn K. Lankfer                       trust practice and to work with probate       with the Council, to develop a process to
     Douglas A. Mielock                       registers and other stakeholders in           resolve those issues.
     John Sharp                               achieving uniformity of probate and trust        Amy R. Tripp, Chair
     Bob Taylor                               practice throughout the state.                     William J. Ard
     Robert P. Tiplady                           Derek A. Walters, Chair                         Melisa M. W. Mysliwiec
     James Spica                                    Rhonda M. Clark-Kreuer                  FAMILY LAW SECTION LIAISON
     Tess Sullivan                                  Cindy Rude
     Marlaine C. Teahan                                                                       Patricia M. Ouellette, Chair
     Prof. Lawrence Waggoner                  PRACTICE ISSUES, RELATED                      REAL PROPERTY SECTION LIAISON
                                              AREAS, AND LIAISONS                             Vacant
PROFESSIONALISM AND                                                                         STATE BAR SECTION TO SECTION ACTION
                                              CHARITABLE GIVING/EXEMPT
STANDARDS                                                                                   TEAM LIAISON
                                              ORGANIZATIONS
ETHICS                                        Mission: To educate practitioners about         Robert P. Tiplady, Chair
  David Kerr, Chair                           charitable giving and to determine the        TAX SECTION LIAISON
    Marilyn Lankfer                           need for Michigan legislation authorizing
                                                                                              Lorraine New, Chair
                                              exempt organizations to serve as trustees
UNAUTHORIZED PRACTICE AND                                                                   STATE BAR LIAISON
                                              of charitable trusts.
MULTIDISCIPLINARY PRACTICE
                                                Robin D. Ferriby, Chair                       Vacant
  Bob Taylor, Chair
                                                  Mark Kellogg                              COURT RULES AND FORMS COMMITTEE
    Shaheen I. Imami
                                                  Marlaine Teahan                           LIAISON
    Patricia Ouellette
    Amy Tripp                                 COMMITTEE ON SPECIAL PROJECTS                   Marlaine C. Teahan, Chair
                                                Amy M. Morrissey, Co-Chair                       Douglas G. Chalgian
SPECIALIZATION AND CERTIFICATION                                                                 Ellen Sugrue-Hyman
                                                Richard J. Siriani, Co-Chair
  James B. Steward, Chair                                                                        Douglas A. Mielock
     William J. Ard                           TRANSFER TAX                                       Mark R. Pasquali
     George W. Gregory                        Mission: To monitor developments                   Harold Schuitmaker
     Wendy Parr                               regarding transer taxes, particularly
                                                                                            TRUST INSTITUTIONS AND MBA LIAISON
                                              at the state level, and to recommend
PRACTICE MANAGEMENT                           any appropriate action for the state of         Susan Allen, Chair
  Patricia M. Ouellette, Chair                Michigan.                                         Tess Sullivan

                                                Thomas F. Sweeney, Chair                    PROBATE JUDGES ASSOCIATION LIAISON
ADMINISTRATION OF JUSTICE                                                                     Hon. Phillip Harter
                                                  George W. Gregory
CONTESTED AND UNCONTESTED PROBATE                 Marguerite Munson Lentz                     Hon. Kathryn A. George
PROCEEDINGS                                       Lorraine New                                Hon. Darlene A. O’Brien
Mission: To monitor forms, procedures,            Patricia M. Ouellette                     LAW SCHOOL LIAISON
standard jury instructions, and legislation       Christine M. Savage
                                                                                              William J. Ard
so as to facilitate the administration        GUARDIANSHIPS AND CONSERVATORSHIPS
of prompt and consistent justice in           Mission: To identify and to participate
contested and uncontested probate court       in arriving at practical solutions to
proceedings and through alternative           perceived and actual abuses under
dispute resolution.                           current law and court rules.
  Shaheen I. Imami, Co-Chair                     Constance Brigman, Chair
  Douglas G. Chalgian, Co-Chair                     Hon. David M. Murkowski
    Kristen D. Arnett                               Rebecca A. Schnelz
    Hon. Kathryn A. George                    BUSINESS LAW AND BUSINESS LAW
    Rebecca A. Schnelz                        SECTION LIAISON
    Lauren M. Underwood                         John R. Dresser, Chair
UNIFORMITY OF PRACTICE                        ELDER LAW SECTION LIAISON

                                                                                                                                55
MICHIGAN PROBATE & ESTATE PLANNING           Summer 2008


                                     Notes




56
Summer 2008           MICHIGAN PROBATE & ESTATE PLANNING


              Notes




                                                     57
MICHIGAN PROBATE & ESTATE PLANNING           Summer 2008


                                     Notes




58
Summer 2008           MICHIGAN PROBATE & ESTATE PLANNING


              Notes




                                                     59
MICHIGAN PROBATE & ESTATE PLANNING           Summer 2008


                                     Notes




60
F.P. HORAK COMPANY                                                 Presorted Standard
401 Saginaw St.                                                       U.S. Postage
Bay City, MI 48707                                                        PAID
                                                                      Saginaw, MI
                                                                    Permit No. 269




                  SCHEDULE OF MEETINGS OF
          THE PROBATE AND ESTATE PLANNING SECTION

               Date                Place
               November 1, 2008    Genoa Woods Conference Center,
                                   Brighton (Organizational Meeting)
               November 22, 2008   University Club, East Lansing
               December 13, 2008   State Bar Building, Lansing
               January 10, 2009    University Club, East Lansing
               February 14, 2009   University Club, East Lansing
               March 14, 2009      University Club, East Lansing
               April 18, 2009      University Club, East Lansing
               June 6, 2009        University Club, East Lansing