Estate Planning Blog
Three Rivers Estate Planning Law Blog

Common Issues in Estate Planning:

Posted December 5, 2018

Many people believe that by having a Will they will avoid probate. While a Will may make probate easier, there still must be probate of those items titled in the decedent's name alone. The Will tells the court which people should be entitled to the decedent's estate and probate passes title to those people. A living trust, on the other hand, can avoid probate if all of the decedent's assets are owned by the trust. Upon death, title to those assets pass according to the terms of the trust without need of probate.

What is a Durable Power of Attorney? Unlike conventional estate planning documents that deal with transfer of property to beneficiaries at the death of the client the durable power of attorney (DPOA) operates during the client’s lifetime and allows individuals chosen by the client to act on behalf of the client. A general power of attorney, as developed by common law, allows a person to authorize another to act in his or her place. There are limitations. Powers that are considered personal to the principal and are outside the scope of agency law cannot be delegated to an agent. These powers are

  • the power to make a will;
  • the power of agent to represent principal in court; and
  • the power to maintain an action for divorce.

The relationship resulting from DPOAs is recognized as a type of consensual relationship that falls outside the common-law definition of agency. However, those relationships carry the consequences that one person’s acts are ascribed to another, similar to the agency function. The Restatement provides a starting point for legal analyses of the relationship.

 

Rights of a Surviving Spouse

Posted November 14, 2018

Under MCL 700.2202 the surviving spouse of a decedent who lived in Michigan and who dies testate (with a will) may file with the court an election in writing that the spouse elects 1 of the following:

  • That the spouse will abide by the terms of the will.
  • That the spouse will take 1/2 of the sum or share that would have passed to the spouse had the decedent died intestate (without a will), reduced by 1/2 of the value of all property derived from decedent by any other means other than testate or intestate succession upon decedent's death. The property derived by the surviving spouse includes the following:
  • A transfer made within 2 years before the decedent's death to the extent that the transfer is subject to federal gift or estate tax.
  • A transfer made before the date of death subject to a power retained by the decedent that would make the property, or a portion of the property, subject to federal estate tax.
  • A transfer effectuated by the decedent's death through joint ownership, tenancy by the entireties, insurance beneficiary, or similar means.

If a widow, that she will take her dower right as provided by law. Dower entitles the widow to the use during her natural life, of 1/3 part of all the lands in which her husband was seized of an estate of inheritance at any time during the marriage. It would be rare for this election to be made.

In an intestate estate (without a will) if the surviving spouse is a widow, she may elect to take her intestate share or her dower rights. It should be noted that this election only applies to a widow and not a widower. Within 28 days after the personal representative's appointment, the personal representative must give notice of the rights of election, allowances and exempt property to the surviving spouse. This may be accomplished by using Notice to Spouse of Rights of Election and Allowances, Proof of Service, and Election. MCR 5.305(B) provides the proof of service of the notice does not need to be filed with the court. MCR 5.305(A) provides that no notice need be given in the following situations:

  • The right of election is made before notice is given.
  • The spouse is the personal representative or one of the personal representatives.
  • There is a waiver of the rights and allowances.

 

Distributions and my Estate:

Posted October 9, 2018

Estate and Protected Individuals Code (EPIC) favors distribution in-kind. However, this preference should give way to an exercise of fiduciary discretion to make sales of assets during the course of administration that are reasonable and prudent under the circumstances. The personal representative is given authority in MCL 700.3906(1)(c) to allocate assets in the residuary estate on a non-pro rata basis so long as the allocation is fair and equitable. Distributions in-kind, in other than supervised administration, will normally be accomplished without a court order with an appropriate transfer document such as a deed or assignment. Pursuant to MCL 700.3906 and subject to the above paragraph unless the will indicates a contrary intention, the distributable property of a decedent's estate must be distributed in kind to the extent possible through application of the following provisions:

  • A specific devisee is entitled to the property devised to him or her.
  • A spouse or child who selects particular estate property as part of exempt property is entitled to that property.
  • A homestead or family allowance, or devise of a stated sum of money, may be satisfied in-kind if all of the following are true:
  • The person entitled to payment does not demand cash.
  • The property distributed in-kind is valued at its fair market value as of its distribution date.
  • Publicly traded securities are valued at the last sale on the business day preceding distribution, or if there was no sale, at the median between the amounts bid and offered at the close of that day.
  • An account receivable (assuming a solvent debtor and no defense or dispute) is valued at the amount due with accrued interest or discounted to the distribution date.
  • Property that does not have a readily ascertainable value (e.g., real estate) is valued as of a date not more than 28 days before the distribution date.
  • A residuary devisee does not request that the property remain a part of the estate residue.

Pursuant to MCL 700.3908 after the probable charges against the estate are known, the personal representative may mail or deliver a proposal for distribution to all persons who have a right to object to the proposed distribution. The right of a distributee to object to the proposed distribution on the basis of the kind or value of property the distributee is to receive, if not waived earlier in writing, terminates if the distributee fails to object in a writing received by the personal representative within 28 days after mailing or delivery of the proposal.

Pursuant to MCL 700.3914(1), subject to the rights of creditors and taxing authorities, competent successors (a person, other than a creditor, who is entitled to property of a decedent under the decedent's will or this act) may agree to alter the interests, shares, or amounts to which they are entitled under the will or under intestate laws, in any manner that they provide in a written agreement executed by all who are affected by its provisions. No order approving the agreement is necessary, but one may be requested.

 

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