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Jun 2013
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June 26, 2013

Probate Litigation - Frequently Asked Questions

ABOUT THE PROBATE COURT

What is the Probate Court?
  • The Probate Court is a Michigan state court that operates at the county level with Probate Judges who are elected in non-partisan elections for six-year terms.  Almost every county in Michigan has its own probate court. 
What types of cases are heard in Probate Court?
  • The probate court is a special court that deals with only certain types of cases about: (1) estates and trusts; (2) protection of minors and incapacitated adults (called Guardianships and Conservatorships); and (3) commitment of the mentally ill.
  • Depending on the claim and underlying facts, sometimes the Probate Court is the only court that can hear the claim, while other times the Probate Court has the option of ruling on the claim as well as another court (e.g. Circuit Court). 
What is probate litigation?
  • When a legal dispute arises in probate court, is it often referred to as “probate litigation.” 
When a person dies, is the Probate Court always involved to transfer assets?
  • Not always.  It depends on what type of assets the person left behind.  The probate court’s involvement is only necessary when the decedent leaves “probate assets,” meaning, property in the decedent’s name alone.
Can a decision made by the probate court judge be appealed?
  • Yes.  Parties in probate litigation have the right to appeal the decision within 21 days after entry of a final Order.  Depending on the type of claim involved, the appeal will be directed to either the Circuit Court for the same county or to the Michigan Court of Appeals.
What is an “interested person”?
  • This is a term used in Probate Court which means a person who has an interest in the case, and who entitled to participate in the case if desired.


What is a Will?
  • It is a document that directs where the decedent wants his or her probate assets to go.  Classic examples of probate assets are personal property like furniture, a vehicle, and real estate held as a “tenant-in-common.” 
What are the requirements for a valid Will?
  • It must be in writing and signed by the decedent in the presence of two witnesses who also sign the Will.
  • If an above requirement is missing, the Will can still be valid if (1) it is dated, signed by the decedent, and the material portions are in the decedent’s handwriting; (2) or it is proven by clear and convincing evidence that the document or writing was intended to be a Will.
How long is a Will good for?
  • There is no expiration date for a Will.  A Will is valid until it is revoked.  However, it is a good idea to have your Will updated periodically. 
What happens if you die without a Will?
  • If you die without a Will, your probate assets are transferred under Michigan’s default “intestate” laws.  Under Michigan’s intestate laws, the assets are distributed to your heirs under a formula that considers whether the decedent was married, had children, had a spouse with children, or had living parents.  
Can you cut your spouse and children out of your Will?
  • Yes.  However, whether a person dies with or without a valid Will, the surviving spouse and minor and dependent children of a decedent have certain rights to estate assets which are detailed by Michigan statute.


What is a Personal Representative?
  • It is the person appointed by the Court who administers the deceased person’s estate.  The Personal Representative is issued “Letters of Authority” by the Court which tells the world that this person has legal authority to manage the decedent’s assets.  If the decedent left a Will, it is usually the person nominated in the Will to serve in this role. 
What is the Personal Representative’s job?
  • The Personal Representative legally steps into the shoes of the decedent.  The personal representative needs to “marshal” the assets (collect and protect them), pay expenses (funeral bill, estate administration, medical bills, creditors, taxes, etc.), and then distribute what’s left.  If the decedent left a Will, then the remaining assets will transfer as stated by the Will.  If the decedent did not leave a Will, then the remaining assets are distributed according to Michigan’s default “intestate” laws. 
Can the Personal Representative charge a fee for his or her services?
  • Yes, a “reasonable” fee under Michigan law, unless the Will states otherwise.  What is considered “reasonable” is often a source of litigation, and there is no set figure or range which is recognized as reasonable.  Rather, what is reasonable depends on the specific facts and the complexity of administration.  The Personal Representative’s reasonable fee is paid with Estate assets. 
Can the Personal Representative retain an attorney to assist with administration?
  • Yes, under Michigan law, unless the Will states otherwise.  Because the duties of a Personal Representative are not intuitive and are complex, it is highly recommended that a Personal Representative retain counsel to assist with administrative.  The Personal Representative’s reasonable attorneys’ fees are paid by the Estate. 


What is a Trust?
  • A trust is a legal entity established by a person to transfer property into and have that property managed and disposed of by a trustee.  
  • Unlike a Will, a trust can be oral. 
When can a trust be created? 
  • A trust is either created during the settlor’s lifetime (called an intervivos trust) or created when the settlor dies by Will (testamentary trust).  
Why would someone want to set up a trust? 
  • Common objectives are to reduce estate tax liability, to avoid Probate Court involvement after death, to dictate how his or her assets are to be managed if he or she becomes incapacitated, and to keep estate-planning intentions private.  Unlike a Will, a trust is a private document that is not filed with the Probate Court unless there is a dispute regarding the trust or the trust agreement states that it should be registered with the Probate Court. 
What is the name of the person that creates a trust?
  • The person that creates the trust is called the “settlor” or “grantor.” 
How do assets get into the trust? 
  • It depends on the type of asset and when the transfer occurs.
  • For example, real property is transferred to the trust by a deed, just as if the trust was a person.  Personal property (like contents of a house), on the other hand, is transferred by bill of sale.  Financial accounts are transferred under the protocol set forth by the particular financial institution (typically involves the institution’s particular forms).
  • A common mistake is that a trust is created, but no assets are then transferred into the trust.
  • Litigation can result over whether an asset was intended to be a trust asset.     

What is the difference between a revocable and irrevocable trust?
  • A revocable trust can be changed or revoked by the settlor.  In contrast, an irrevocable trust cannot be changed or revoked by the settlor.  Upon the death of the settlor, a revocable trust becomes irrevocable.
  • While a gross over-simplication, for tax and creditor purposes, whether the settlor is considered to still be the owner of the assets in the trust depends on how much control the settlor retains over the assets once transferred.  One aspect of control is whether the settlor can change the trust’s terms or revoke the trust. 
Can a trust agreement be modified?
  • Yes, with the Court’s approval, depending on the particular facts and reason.  For example, it is possible for a trust agreement to be amended because of a drafting mistake, or a chance of circumstances that the settlor could not have anticipated at the time the trust agreement was drafted.
  • However, the Court will not modify the trust agreement if doing so would conflicts with a material purpose of the trust.   
What is a Constructive Trust?
  • It is not a “trust” in the typical sense.  Rather, it is a remedy that the Court grants if someone is in possession of property that rightfully belongs to someone else.
  • For example, if someone is in possession of bank account funds that belong to someone else, the Court can enter an Order that the bank account funds are being “held in a constructive trust” for the true owner. 
Can the trustee charge a fee for his or her services?
  • Yes, a “reasonable” fee under Michigan law, unless the trust agreement states otherwise.  What is considered “reasonable” is often a source of litigation, and there is no set figure or range which is recognized as reasonable.  Rather, what is reasonable depends on the specific facts and the complexity of administration.  The trustee’s reasonable fee is paid with trust assets. 
Can the Trustee retain an attorney to assist with administration?
  • Yes, under Michigan law, unless the trust agreement states otherwise.  Because the duties of a trustee are not intuitive and are complex, it is highly recommended that a trustee retain counsel to assist with administrative.  The trustee’s reasonable attorneys’ fees are paid by the trust. 
Can a trustee be forcibly removed?
  • Yes, under circumstances explained by the trust agreement or by the Court if the circumstances warrant removal.
  • A probate court can remove a trustee if the trustee has committed a serious mistake, is not cooperating with a co-trustee which is substantially impairing administration, the trustee is persisting failing to administer the trust effectively, or there has been a substantial change of circumstances and doing so is in the trust beneficiaries’ best interests.
  • Seeking removal of a trustee is also a common source of probate litigation. 
Does the terms of the Will or Trust Agreement impact the transfer of jointly-held property?
  • Usually, no.  Jointly-held property transfers to the survivor, regardless of what the decedent’s Will or trust agreement says.  Common examples of jointly-held property is real property if titled as “tenants by the entireties” (married persons) or “joint tenants with rights of survivorship.”
  • However, litigation can arise as to whether the decedent intended for the survivor on the account to get all of the funds, or rather, whether the survivor was simply listed as a joint owner for convenience purposes (e.g. to help the elderly person pay his or her bills).  
Does the terms of the Will or Trust Agreement impact the transfer of contractual assets? 
  • No.  Examples of contractual assets are “Pay on Death” (POD) accounts, life insurance, and retirement accounts.  These assets have a contractually-named beneficiary (usually designated on a “Beneficiary Designation Form”).  The financial institution pays the named beneficiary regardless of what the decedent’s Will or Trust Agreement say.  
What happens if the decedent’s intentions are not clear from the document? 
  • If the decedent’s intentions are not clear from the Will or trust agreement, for example there is some ambiguous language, the Probate Court will enter an order clarifying the meaning.  Whether the Probate Court will look to evidence outside of the document itself to clarify the meaning depends on whether the Probate Court agrees that the decedent’s intentions are not clear from the document. 
When a person dies, how do their creditors get paid?
  • By the decedent’s Estate or the decedent’s trust if revocable during life.  A claim filed against the Estate is submitted to the Personal Representative, and a claim against the Trust is submitted to the trustee.  There are specific time limits to when a claim can be asserted against an Estate or Trust, and failure to do so could result in the creditor’s claim being barred. 


What are common grounds for contesting a will or trust? 
  • Will or Trust Agreement was revoked
  • Existence of a later Will or restated Trust Amendment
  • Coercion and undue influence (e.g. “Grandma was pressured to sign the Will against her wishes”)
  • Fraud (e.g. “Grandma was tricked into signing a Will she thought was a letter”)
  • Mental Incapacity (e.g. “Grandma didn’t understand she was signing a Will”)
  • Improper execution (e.g. not signed by decedent)
  • Forgery
What is a no-contest clause?
  • It is a provision found in some Wills and Trust Agreements which result in a beneficiary losing his or her interest in the Estate or Trust if the beneficiary challenges the Will or Trust Agreement and/or the fiduciary’s administration.
  • A no-contest clause is not enforceable under Michigan law, even if the beneficiary loses the challenge, if there was “probable cause” to commence the contest. 
If a Will or Trust contest is successful, how is the property distributed?
  • If the Will being challenged was the decedent’s first Will, then Michigan’s intestate laws would govern distribution of the decedent’s assets.
  • If the Will being challenged was not the last Will executed, then the preceding Will would govern the transfer of property.  So, if the decedent had three Wills drawn up over time, and the last and third Will was set aside, the decedent’s assets would be distributed under the decedent’s second Will.
  • If the first trust agreement is invalidated, the decedent’s Will would govern.
  • If a trust amendment is invalidated, the trust agreement’s most recent version would govern. 


What is a fiduciary?
  • A fiduciary is a person in a position of trust or confidence.
  • The following roles are considered fiduciaries:  Personal Representative of the Estate, Trustee, Guardian, Conservator, Attorney, person acting as agent under a Power of Attorney document.
  • A person can also be considered a fiduciary depending on the circumstances.  For example, a child can be considered a fiduciary for a parent if the child is managing all or most of the parent’s finances and the parent is physically or mentally ailing.   
What are the types of fiduciary duties?
  • Because of this position of trust and confidence, a fiduciary owes special duties to whom that person represents.  A fiduciary has a duty of loyalty, to not self-deal, to act solely in the best interests of the beneficiaries or principal, a duty to keep adequate records, a duty of care, and a duty of impartiality amongst beneficiaries. 
What is the duty to not self-deal/loyalty?
  • A fiduciary at all times wears two hats:  a fiduciary hat and a personal hat.
  • The fiduciary cannot act in a way to personally benefit from his or her fiduciary actions.
  • Here are a few examples.  If the trustee embezzled trust property, this would be self-dealing and a clear breach of this duty.  If the trustee bought trust property, this would be a breach of loyalty because as the purchaser the trustee has an incentive to pay the trust as little as possible.  If the trustee refuses to make discretionary distributions to a beneficiary because the trustee is a remainder beneficiary, this could also violate the duty of loyalty.   
What is the duty of care?
  • A fiduciary must act as a prudent person would in dealing with the property of another, which includes investing funds, diversifying, and protecting assets.
  • A breach of this duty can lead to litigation (e.g. “The Trustee should have diversified the trust’s investments”).
What is the duty of impartiality?
  • If a fiduciary estate has 2 or more beneficiaries, the fiduciary must act impartially in investing, managing, and distributing the fiduciary assets and not favor one beneficiary over another.
Breach of Fiduciary Duty Litigation
  • If a fiduciary has breached a duty, a claim to remedy the breach can be filed in Probate Court against the fiduciary.
  • Depending on the facts, the fiduciary may be held personally liable for the financial loss to the fiduciary estate.
  • Warner Norcross & Judd’s Litigation Team has handled every variety of fiduciary breach claims, both in cases defending the fiduciary and in cases contesting the fiduciary’s actions.


What is an accounting?
  • It is a report prepared by a fiduciary that shows the assets coming in and the assets going out of a fiduciary estate in a given time period.  Usually, accountings are issued annually.  Fiduciaries who most often prepare accountings are trustees, Personal Representatives, conservators, and agents serving under a power of attorney.  
  • Litigation commonly arises over why an accounting has not been provided, actions taken or not taken by the fiduciary as shown on the accounting, and whether there is enough information provided on the accounting. 
What must be included on a trust accounting?
  • A trust accounting should list: (1) the starting value of the trust property and liabilities at the beginning of the period; (2) all income and receipts received by the trust during the period; (3) all payments and disbursements made from the trust during the period; (4) the ending value of the trust property and liabilities at the end of the period; and (5) the source and amount of the trustee’s compensation. 
Does an accounting have to be put into a certain format? 
  • No.  However, the State of Michigan has created a template form that can be used by a fiduciary to prepare an accounting.
What information is a trust beneficiary entitled to? 
  • A trustee has a duty to keep the beneficiaries reasonably informed about trust administration.
  • Upon the reasonable request of a trust beneficiary, a trustee must provide a copy of the terms of the trust document that describe or affect the trust beneficiary’s interest, and information about the trust assets.
  • Within 63 days after accepting the position of trustee, a trustee must notify the beneficiaries of the acceptance, if the trust is registered and if so with which court, and the trustee’s name, address, and telephone number.
  • Within 63 days of a trustee learning an irrevocable trust has been created, or that a formerly revocable trust has become irrevocable (e.g. the settlor dies), then the trustee must notify beneficiaries of the trust’s existence, who the settlor is, if the trust is registered and if so with which court, and that the beneficiary has a right to a copy of the trust agreement’s terms that describe or affect the trust beneficiary’s interests.
  • Unless the trust agreement says otherwise, the trustee is required (at least annually) to send a trust accounting to: (1) the trust beneficiaries that are currently eligible to receive mandatory or discretionary distributions of income or principal from the trust; (2) any other trust beneficiaries who ask to receive the accounting; and (3) any other trust beneficiaries who the trustee believes should receive the accounting.
  • The Court may also order the trustee to provide an accounting at any time.
If the information is not provided by the trustee, what remedies are available?
  • The beneficiary or other interested party may petition the Probate Court to order the trustee or other fiduciary to produce the information and/or documents, or may ask for the trustee or fiduciary to be removed.


What is a Guardian?
  • A guardian is a person who has been court appointed to make personal decisions for the ward, such as where to live and medical care decisions. 
When is a Guardianship needed?
  • When the ward is unable to make informed decisions for themselves because a minor, mentally incapacitated, or developmentally disabled.
What responsibilities does a Guardian have?
  • A guardian is responsible for the ward’s well-being.  A guardian is required to file an annual report detailing the ward’s care and condition. 
What is a Conservator?
  • A conservator is a person who has been court appointed to manage the ward’s finances, such as paying bills or applying for Medicaid.
When is a Conservator needed?
  • When the ward is unable to handle their own finances because a minor, mentally incapacitated, or developmentally disabled. 
What responsibilities does a Conservator have?
  • A conservator is required to handle the ward’s finances, which includes paying bills, ensuring taxes are filed, and applying for governmental benefits when appropriate.   A conservator is required to file an inventory (what the ward had when the conservator took over), an annual accounting for each year the conservator serves (showing income and expenses for the ward), and a final accounting. 
What are common sources of litigation in Guardianships and Conservatorships?
  • Common sources of litigation are whether a guardian or conservator is actually needed, who the guardian or conservator should be, whether someone took advantage of the ward prior to appointment of the guardianship or conservatorship and how that can be remedied, the conservator’s accounting or lack thereof, and whether the appointed guardian or conservator is doing an adequate job. 
How does a Guardian or Conservator get appointed?
  • Any person concerned about an individual’s welfare can file a petition for appointment of a guardian or conservator for an individual. The same person may be both the guardian and conservator, although this is not required.
Who can be a Guardian or Conservator?
  • Any suitable person.  Typically, if a person needs a Guardian and Conservator, this is the same person.  If there are multiple suitable persons interested in serving, the priority is set forth by Michigan statute. 
Is there such a thing as a Guardian or Conservator that just assists with specific needs?
  • Yes.  When a guardian or conservator is appointed, the ward is basically stripped of his or her legal rights.
  • There are less drastic options if appropriate.  The powers of a guardianship or conservatorship can be “limited” so that the ward can maintain some of his or her rights.
  • Alternatively, the Court can enter a “protective order” to give another person the authority to act on someone else’s behalf for a particular issue only or single transaction.  
 

What is a Power of Attorney?
  • A power of attorney (POA) is a document giving another person legal authority to act on his or her behalf regarding finances.
  • The person giving the authority is called the “principal,” and the person getting the authority is called the “agent.”
  • A POA is “durable” if the agent has power to continue to act once the principal is mentally incapacitated.
  • A POA is a powerful document, and this power is often abused by the agent, leading to litigation. 
When does the Agent under a Power of Attorney have the authority to act?
  • This depends on the language of the POA.
  • Some agents can act immediately.  Some, agents do not have authority to act for the principal until the principal is incapacitated (referred to as a “springing” power of attorney).
What is the difference between a Power of Attorney and Conservator?
  • The principal appoints their own Power of Attorney without court involvement, while the Court appoints the Conservator.
  • An agent appointed as Power of Attorney has no duty to exercise this power.  However, a Conservator is required to take over managing the ward’s finances upon appointment.
  • A principal who names a Power of Attorney maintains the ability to handle his or her finances alongside his or her agent (if and until deemed incapacitated), while a person who has a full Conservator no longer has any legal authority to make decisions for himself or herself. 
Can I name two or more people to serve as my Power of Attorney?
  • Yes. 
Can the Court appoint Co-Guardians or Co-Conservators?
  • Yes. 
What is a Patient Advocate Designation?
  • A Patient Advocate Designation is a document giving another person legal authority to make medical care decisions for you if you are not capable of doing so.  Sometimes, this decision-making power given to another person is referred to a Power of Attorney for Healthcare. 
What is the difference between a Guardian and a Patient Advocate Designation?
  • The principal appoints their own patient advocate without court involvement while still capacitated, while the Court appoints the Guardian. 
What is a Guardian Ad Litem?
  • While confusing, this is not a Guardian in the typical sense. A Guardian Ad Litem (GAL) is appointed by the Court on a temporary basis to represent a person before the court where the person is unable to adequately represent themselves.  The GAL may make a recommendation to the Court as to what should be done in the person’s best interests, but has no authority to make decisions for the person (as compared to a “Guardian”).
Can a person change their estate plan after a Guardian or Conservator is appointed?
  • Yes.  Appointment of a Guardian or Conservator does not automatically preclude a person from updating their estate plan.  However, this scenario often leads to litigation regarding whether the person had sufficient mental capacity to update their estate plan.


Can a gift be “undone”?
  • Yes, with Court involvement.  Sometimes a transfer is called a “gift” but was not actually intended to be a gift, or was the giftor was tricked or lacked mentally capacity to understand what he or she was gifting. 


What is the standard for mental capacity to make a will or a trust?
  • To have sufficient mental capacity to make a will or a trust, an individual must satisfy four requirements.  First, the individual must be able to understand that he or she is providing for the disposition of his or her property after his or her death.  Second, the individual must be able to know the nature and extent of the property that he or she owns.  Third, the individual must be able to know the identity of his or her heirs.  Fourth, the individual must be able to generally understand the significance of signing the document. 
Does the same mental capacity standard also apply to will or trust amendments or revocations? 
  • Yes.  Just as an individual must possess sufficient mental capacity to make a will or trust, the individual must also possess sufficient mental capacity to execute a document that amends or revokes the will or trust.
When is mental capacity evaluated?
  • In lack-of-capacity litigation, the Court’s job is determine whether the individual had sufficient mental capacity at the time the estate-planning document was signed.  Even if the person lacked mental capacity before and after the signing, if the person had sufficient mental capacity at the precise time it was signed, the estate-planning document will be upheld. 
How do you prove lack of mental capacity?
  • In lack-of-capacity litigation, it will be highly relevant whether the individual who made the will or trust was diagnosed with any mental illness, such as dementia or Alzheimer’s disease; whether the individual was suffering from extreme pain or weakness; whether the individual was taking any medication with the potential to cause side effects; and whether the individual’s medical records reflect mental impairments.
  • The doctors who treated the individual will be key witnesses, as will be those who had the opportunity to observe the individual’s conduct, statements and thought processes.  The parties to the litigation may retain expert medical witnesses to provide opinions.  The opinions of the attorney who drafted the challenged document, as well as persons who witnessed or notarized the document, will also be important.


What is undue influence?
  • It is a claim brought to “undo” an estate-planning document, gift, or other transfer of property.
  • To establish undue influence it must be proven that the person was subjected to “threats, misrepresentation, undue flattery, fraud, or physical or moral coercion” sufficient to “overpower volition, destroy free agency and impel” the person to act “against his inclination and free will.”
How is undue influence proven?
  • Because undue influence typically happens behind closed doors, Michigan has established a presumption of undue influence if the evidence establishes:  (1) the existence of a confidential or fiduciary relationship between the person transferring the property through the transaction and the fiduciary;  (2) the fiduciary benefits from the transaction; and (3) the fiduciary had an opportunity to influence the person’s decision in that transaction.
  • If the presumption is satisfied, then the burden shifts to the fiduciary to prove there was no undue influence.
  • If the fiduciary fails to rebut the presumption, then the interested person challenging the transaction wins and the transaction will be undone.

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