Estate Planning Blog
Kalamazoo Estate Planning Blog

Personal Property Distribution:

Posted January 8, 2017

MCL 700.3902 describes the order in which assets are appropriated or abate. This essentially gives the order in which assets may be used to satisfy charges against the estate. This become important in estates where the estate is insufficient to pay all charges and devisees. Except as provided in connection with the share of the surviving spouse who elects to take an elective share, distributees' shares abate, without a preference or priority between real and personal property, in the following order:

  • Property not disposed of by the will.
  • Residuary devises.
  • General devises.
  • Specific devises

For the purposes of abatement, a general devise charged on specific property is a specific devise to the extent of the value of that specific property and, upon the failure or insufficiency of the property on which the devise is charged, a general devise to the extent of the failure or insufficiency. Abatement within each classification is in proportion to the amount of property each beneficiary would have received if full distribution of the property had been made in accordance with the terms of the will. Abatement within each classification is in proportion to the amount of property each beneficiary would have received if full distribution of the property had been made in accordance with the terms of the will.

Pursuant to MCL 700.3902(3) if the will expresses a different order of abatement, the will controls. If the testamentary plan or the devise's express or implied purpose would be defeated by the order of abatement , the distributees' share abate as found necessary to give effect to the testator's intention. Thus, the court is authorized to direct a different scheme of abatement to avoid frustration of the decedent's intent.

 

Trusts and the Court:

Posted December 4, 2016

A court may construe the terms of a trust instrument to carry out the, decedent original Trustee or "settlor", intent. However, an appropriately executed trust instrument is to be given effect according to its terms, and, in determining the settlor’s intent, the court must first look to the expression of intent in the trust instrument and construe the instrument so that each word has meaning, to the extent possible. (extrinsic evidence may be introduced to determine intent only when the estate-planning documents are internally inconsistent). The intent of the settlor as gathered from the entire trust instrument controls an apparently inconsistent term when the inconsistency cannot be reconciled.

Generally, the rules of construction that apply to deeds, contracts, and other written instruments apply to trusts. EPIC also contains specific rules of construction that are applicable to trusts, including the following:

  • An individual who does not survive an event by 120 hours is considered to have predeceased the event.
  • The donor’s intent in requiring that a power of appointment be exercised by specific reference is presumed to be to prevent an inadvertent exercise of the power..
  • Adopted and illegitimate individuals and their descendants are included in class gifts in accordance with the rules for intestate succession.
  • Terms of relationship that do not differentiate between blood relationships and affinity relationships (e.g., nieces and nephews) are construed to exclude affinity relationships.
  • Terms of relationship that do not differentiate between relationships by the half blood and by the whole blood (e.g., brothers and sisters) are construed to include both types of relationships.
  • Antilapse provisions may apply to preserve the interest of a deceased beneficiary for his or her surviving descendants.
  • Multigenerational class gifts that do not specify the manner in which the property is to be distributed among class members are to be distributed according to the laws of intestate succession.
  • Property that is to be distributed by representation is to be distributed on a per capita at each generation basis.
  • Age of majority means the legal age of majority in effect when the trust instrument was executed.

If the settlor’s intent cannot be determined from the trust instrument, parol evidence is admissible to aid in the construction.  Be aware that matters involving the construction of terms of the trust can also be resolved by a proper nonjudicial settlement agreement under MCL 700.7111.

Karam v Law Office of Kliber, 253 Mich App 410; 655 NW 2d 614, (2002).

 

What is a Durable Power of Attorney?

Posted November 1, 2016

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 October 28, 2016

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:

1. That the spouse will abide by the terms of the will.

2. 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:

3. 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.

4. 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.

5. 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:

1. The right of election is made before notice is given.

2. The spouse is the personal representative or one of the personal representatives.

3. There is a waiver of the rights and allowances.

 

 

 

 

 

 

 

 

 

 

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