Michigan Estate Planning Lawyers
Michigan estate planning is a practice of law in accordance with the laws of Michigan as they govern wills, trusts and various different nuanced estate planning vehicles. In addition, the practice includes navigating the probate process of estates in Michigan. To have a complete estate plan in Michigan, a variety of considerations should be made. A complete estate plan might include a last will and testament, a trust vehicle in certain instances, and documents reflecting one’s end of life decisions at a minimum. Michigan estate planning law is unique as it involves specific Michigan statutes and a select number of court opinions governing various aspects of one’s estate.
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Estate Planning Law in Michigan
Trusts in Michigan
A trust is the right to the beneficial enjoyment of property to which another holds legal title. The property is held by the trustee at the request of the settlor for the benefit of a third party (the beneficiary). In the State of Michigan, this is statutorily governed by the Estates and Protected Individuals Code (EPIC). In order to establish a valid trust in Michigan, the trust must comply with the requirements contained in the Michigan Trust Code, MCL 700.7101, et seq. From a legal standpoint, a trust must have met a number of elements. No matter which method of creating a trust is chosen, a trust is validly created only if all of the statutory requirements are met. There are numerous other legal considerations but in general, the following non-exhaustive list must be met in any case:
(1) the settlor has the capacity to create a trust;
(2) the settlor indicates an intention to create the trust;
(3) the trust either has a definite beneficiary, is a charitable trust, is a trust for a non-charitable purpose, or is a pet care trust;
(4) the trustee has duties to perform; and
(5) the same person is not the sole trustee and sole beneficiary.
Creation of a Trust Michigan
Among the five methods of creating a trust in Michigan, one is the transfer of property to another person as trustee during the settlor’s lifetime or by disposition taking effect upon the settlor’s death. A will may fund a trust. One of the ways that a will may validly devise property to the trustee of a trust is at the testator’s death, so long as the trust is identified in the testator’s will and the trust terms are set forth in a written instrument other than the will. It does not matter that the trust predated its funding because a trust can be executed before, concurrently with, or after the execution of the will which funds it. Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust. In other words, unless the terms of the trust explicitly state that the trust is irrevocable, the trust is deemed revocable. A revocable trust differs from an irrevocable trust in that the settlor reserves the right to terminate the trust and recover the trust property without the consent of the trustee or a person holding an adverse interest.
Oral Trusts in Michigan
The trust does not technically have to be in writing but the creation of an oral trust must meet all the other elements of a trust and may only be established with clear and convincing evidence. The Michigan Trust Code specifically permits the creation of an oral trust although we strongly advise anyone forming a trust in Michigan to do so in writing and with the assistance of an estate planning lawyer. A trust need not be evidenced by a trust instrument, but the creation of an oral trust and its terms may be established only by clear and convincing evidence. Meeting this evidentiary standard can be contentious and expensive.
Charitable Trusts in Michigan
A charitable trust in Michigan is one created for the relief of poverty, the advancement of education or religion, the promotion of health, scientific, literary, benevolent, governmental, municipal purposes or any 501(c)(3) permissible purpose or any other purpose with a beneficial community achievement.
Trust Reformations in Michigan
If the intent and the terms of the trust were affected by a mistake of fact or a mistake of law, Michigan law provides a mechanism to reform the terms of a trust, even if those terms are otherwise clear and unambiguous. The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intention if it is proved by clear and convincing evidence that both the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. A mistake of fact is a misunderstanding, misapprehension, error, fault, or ignorance of a material fact or a belief that a certain fact exists when in fact it does not exist. The party seeking reformation bears the burden of proving it by clear and convincing evidence.
"Terror Clauses" in Michigan Trusts
In Michigan, “terror” clauses (also known as “in terrorem” clauses or “no-contest” clauses) are generally valid and enforceable. However, a provision in a trust that purports to penalize an interested person for contesting the trust or instituting another proceeding relating to the trust shall not be given effect if probable cause exists for instituting a proceeding contesting the trust. For example, if the trustee is misappropriating assets. Probable cause to contest the trust exists, the terror clause is unenforceable and the trustee can be removed for a serious breach of trust. The classic example of contesting a trust is objecting to an appointment of a trustee but there are many other possible legal challenges.
Spendthrift Provisions in Michigan
Spendthrift provisions are valid and enforceable in Michigan This type of trust provision” restrains either the voluntary or involuntary transfer of a trust beneficiary’s interest. Spendthrift provisions generally preclude the beneficiary’s creditors from satisfying the beneficiary’s debt with the beneficiary’s trust interest. Bear in mind that there are exceptions to spendthrift provisions. For example, a trust beneficiary’s interest may be reached to satisfy an enforceable claim against the beneficiary where the claims involve: (a) A trust beneficiary’s child or former spouse who has a judgment or court order against the trust beneficiary for support or maintenance. (b) A judgment creditor who has provided services that enhance, preserve, or protect a trust beneficiary’s interest in the trust. (c) This state or the United States. Furthermore, during the lifetime of the settlor, the property of a revocable trust is subject to the claims of the settlor’s creditors and this is true regardless of whether the terms of the trust contain a spendthrift provision.
Wills in Michigan
Validity of a Will in Michigan
Estates and Protected Individuals Code (EPIC) MCL 700.1101 is the law governing wills in the State of Michigan. Traditionally, a will might be created holographically or by other clear and convincing evidence. The elements of a valid will in Michigan include (but not necessarily limited to) to following:
1. Testator is 18 years old.
2. Testator has sufficient mental capacity.
3. Will is in writing.
4. Will is signed by the testator.
5. Signed by two people who witnessed the signing of the will or the testator’s acknowledgement of the signature.
All valid wills require that the testator be at least 18 years old and have “sufficient mental capacity.” Additionally, a will must generally be (a) in writing, (b) signed by the testator, and (c) signed by at least two persons who witnessed either the signing of the will by the testator or the testator’s acknowledgment of the signature or of the will. A writing that does not satisfy all of the above requirements, may qualify as a valid holographic will under MCL 700.2502(2) even if not witnessed “if it is dated, and if the testator’s signature and the document’s material portions are in the testator’s handwriting.” The only other option is if it can be established “by clear and convincing evidence” that the testator intended the journal entry to be the will (labeled as a will, unambiguous, definitive in its donative nature, etc.)
Mental Capacity for a Will in Michigan
When focusing on mental capacity, the following factors will usually be incredibly important to consider:
1. Individual has ability to understand that this is a provision for the disposition of property after death.
2. Able to know the nature and extent of their property.
3. Knows the natural objects of his or her bounty.
4. Able to understand in a reasonable manner the general nature and effect of his or her act in signing the will.
MCL 700.2501 states that an individual has sufficient mental capacity to make a will if that person has the ability to understand (1) that he is providing for the disposition of his property after his death, (2) the nature and extent of his property, (3) the general nature and effect of signing the will, and if that person (4) knows the natural objects of his bounty. The facts do not suggest that Dan, even though he was ill, lacked sufficient mental capacity to understand he was making a will, the nature and extent of his property, the natural objects of his bounty, or the act of signing the will.
Signatures and Witness Requirements
There are certain rare cases where witness requirements may change. If the will has the testator’s signature, is dated and is in the testator’s handwriting or if shown by clear and convincing evidence that the decedent’s intent was that the writing is a will, a revocation, alteration or revival of a formerly revoked will.
Revocation of a Will in Michigan
A will can be revoked in Michigan. There are many ways this might happen. For example, here’s a non-exhaustive list.
1) Execution of a subsequent will that revokes the previous will or a part of the will expressly or by inconsistency. Execution of a second writing should be signed by the testator, signed by two witnesses (if not witnessed, still valid if its material portions are in the handwriting of the testator signed by the testator and dated).
2) Performance of a revocatory act on the will, if the testator performed the act with the intent and for the purpose of revoking the will or a part of the will or if another individual performed the act in the testator’s conscious presence and by the testator’s direction.
3) Burning, tearing, canceling, obliterating, or destroying the will or a part of the will whether or not the words are touched on the will itself.
4) In some cases, divorce can operate to revoke a will but only where MCL 700.2807 applies. This Michigan statute states, in part, that a divorce revokes a disposition or appointment of property made by a divorced individual to his or her former spouse in a “governing instrument.” A will is a “governing instrument” for the purposes of this statute pursuant to MCL 700.1104. MCL 700.2806(a) defines a “disposition or appointment of property” as “a transfer of an item of property or another benefit to a beneficiary designated in a governing instrument.”
Elective Share in Michigan
The surviving spouse of a decedent who was domiciled in Michgan and who dies testate may file with the court an election in writing that the spouse elects 1 of the following:
1) Spouse will abide by terms of the will.
2) Spouse will take 3 of the sum or share that would have passed to the spouse had the testator died intestate, reduced by % of the value of all property derived by the spouse from the decedent by any other means other than testate or intestate succession upon the decedent’s death
Other Important Michigan Estate Planning Statutes
Trident Associates and Bad Faith Dismissals of Chapter 11 Petitions in the Sixth Circuit Trident Associates Limited Partnership (“Trident”) is a limited partnership in Michigan.