Probate and Estate Planning
What Procedures Can Be Utilized to Transfer Assets of a Decedent Under EPIC?
When a client approaches an attorney on or after April 1, 2000, to discuss the transfer of assets of a decedent, one of the first major decisions will be to determine what procedure to utilize under the new Estates and Protected Individuals Code (EPIC). The goal of this article is to present the procedures an attorney should generally consider by comparing the old law (Revised Probate Code) and the new law (EPIC). Admittedly, all situations an attorney encounters will not be addressed in this article, but many of the usual situations will be discussed.
In order to avoid confusion, statutory cites of Michigan Compiled Laws Annotated (MCLA) will be used to identify the statute in effect prior to April 1, 2000. The provisions from EPIC will be identified as ‘‘EPIC,’’ with the statutory cites appearing in the footnotes. For purposes of this article, some familiarity with the current law, the RPC, is assumed.
A common question asked of probate attorneys involves transfer of a decedent’s vehicles. Often, a widow contacts an attorney after her husband’s death and discloses that all assets are joint except for some vehicles. The procedure for transferring a decedent’s vehicles is one provision that has not been changed by EPIC. Thus, the transfer of vehicles of a decedent to a spouse or heirs, where the total value of the vehicles is less than $60,000 and where no letters of administration or letters of authority are otherwise necessary, is still a procedure that can be utilized under MCLA 257.236. Therefore, if the assets in the name of the decedent fall within this provision, an attorney can still advise the spouse or heir to take a death certificate and the titles of the vehicles to a Secretary of State office to transfer the vehicles.
Another common question an attorney is asked concerns opening a decedent’s safe deposit box before a probate estate is commenced. The procedure for opening a safe deposit box under MCLA 700.609 now appears as EPIC 25171, which quotes the Revised Probate Code almost verbatim.
However, there is an important procedural change under EPIC for opening the safe deposit box of a decedent who dies after October 1, 1993. Where the safe deposit box is opened only to determine if a will or a deed to a burial plot is in the box, both MCLA 700.609 and EPIC 2517 provide that any will or deed to a burial plot, as well as a written statement that no other items were removed from the safe deposit box, must be delivered to the probate register or a deputy probate register.
Under MCLA 700.609, the person who delivers these items is the person named in the order. The Court Forms Committee has interpreted EPIC 2517 in the proposed form, entitled ‘‘Petition and Order to Open Safe Deposit Box,’’ to require the lessor to deliver to the probate register or a deputy probate register any will or deed to a burial plot found in a decedent’s safe deposit box, as well as the written statement that no other items were removed from the box. Thus, this responsibility will rest with the institution rather than an individual person.
Another issue often encountered by attorneys is nonprobate transfers. Nonprobate transfers on death are defined in EPIC 6101(1).2 Generally, it provides that any asset with a beneficiary designation is nontestamentary in nature and passes to the beneficiary without probate and without any interference from the personal representative.
Nonprobate assets include beneficiary designations on securities under EPIC 6101(1). The majority of the provisions found in MCLA 451.471 to 451.480 regarding registration of securities in beneficiary form are carried over to EPIC 6301 to 63103 almost verbatim. One difference between the two acts is that EPIC gives greater flexibility to the registering entity regarding discharge from claims to a security with a beneficiary designation.
Under MCLA 451.478(4), the registering entity is discharged from claims to a security with a beneficiary designation only if it relies on the registration and an affidavit of the personal representative of the deceased owner. Under EPIC 6308(3),4 the registering entity can be discharged from such claims by relying on the registration and the sworn statement of the personal representative, the beneficiary or the beneficiary’s representative, or ‘‘other information available to the registering entity.’’ In other words, if a beneficiary is named on a stock certificate, the beneficiary can have the stock transferred without any interference from the personal representative, and the registering entity is protected from claims.
Additional changes in the law regarding nonprobate transfers are made by EPIC if the circumstances involve special issues such as divorce, homicide, or failure to survive the decedent by 120 hours. If any of these issues are encountered, the attorney should review EPIC 2702 and 2802 to 2809.5 Another change in the law governing nonprobate transfers appears in EPIC 3805(3),6 which provides that nonprobate assets, which include assets passing pursuant to beneficiary designations, may be used to pay creditor claims against an estate, unless the will provides otherwise. Obviously, beneficiary designations will not be handled as easily under EPIC as they were handled under prior law.
COLLECTION OF PROPERTY WITHOUT PROBATE ADMINISTRATION
Often, assets that appear to be probate assets can be transferred without probate administration. Once again, many of the EPIC provisions involving collection of property without probate administration are similar to the Revised Probate Code. Under MCLA 700.103, a hospital, convalescent home, morgue, or law enforcement agency holding less than $100 in cash and apparel of a decedent may give those items to a person who presents an affidavit stating that the person is the spouse, child, or parent of the decedent and an estate is not pending. This provision is basically carried over as EPIC 3981,7 with the exception that the amount of the decedent’s cash the institution can hold and still utilize this provision is increased from $100 to $500. Since this amount is not subject to the cost of living adjustment of EPIC 1210,8 this value should not change.
Often, the value of the assets of the decedent that must be transferred is so small that the assets can be transferred without probate administration. The provision for transfer of assets for estates valued at less than $15,000 under MCLA 700.102 has been brought over almost verbatim into EPIC 3982.9 In general, if an estate is valued at less than $15,000 and the funeral bill has been paid, the assets will first be assigned to reimburse the person who paid the funeral bill, with the balance of the assets distributed to the spouse, or if there is no spouse, the balance of the assets distributed to the heirs.
One change in EPIC is that an adult heir who receives property under this procedure is responsible for an unsatisfied debt of the decedent for up to 63 days after the order has been entered rather than up to 60 days as provided by MCLA 700.102. Furthermore, the amount of $15,000 may change since it is subject to the cost of living adjustment provided in EPIC 1210.10
A new provision in EPIC, which may be utilized rather than the small estate procedure described above, provides for collection of personal property of a resident decedent by affidavit. Under MCLA 700.232 and 700.233, payment of a debt or delivery of property to a foreign fiduciary of a nonresident decedent is allowed upon proof of appointment and an affidavit.
The provisions in EPIC 3983 and 398411 extend this procedure to Michigan decedents under certain conditions. If an estate does not include real property, and the net estate does not exceed $15,000, a person claiming to be a successor of a decedent can present a sworn statement that complies with the statute and a death certificate to an entity holding assets of the decedent and the entity shall turn over those assets to the successor.
The sworn statement must provide that the estate does not include real property, and the value of the net estate does not exceed $15,000 as adjusted for cost of living, that 28 days have passed since the decedent’s death, that an application or petition for appointment of a personal representative is not pending or has not been granted, and that the claiming successor is entitled to payment and delivery of the property. The sworn statement must also list the name and address of each person entitled to a share of the property and the portion each person is entitled to. It is not clear who a successor to a decedent would be, but it should be safe to assume that the successor would be an heir of the decedent.
For example, this procedure can be utilized if the decedent is a widow and the only probate asset to be transferred is a bank account with less than $15,000 in it. Twenty-eight days after death, a child of the decedent can present the bank with a death certificate and sworn statement as described in the statute and the bank must turn over the bank account to the child. This is a simple procedure that has been utilized by other states without problems.
If all the assets of the decedent cannot be transferred utilizing the above procedures, a probate estate will have to be commenced. Assets can be probated under EPIC by supervised or unsupervised administration.
Just as the Revised Probate Code provides basically for two types of probate, independent and supervised, EPIC provides for basically two types of administration, unsupervised and supervised. Unsupervised administration is not defined in EPIC, but it is described in the proposed court rules. Generally, unsupervised administration is similar to independent probate under the Revised Probate Code.12 Of course there are exceptions, but unsupervised administration can be utilized without court hearings.
Unsupervised administration is commenced with either informal or formal proceedings.13 Proceedings are not types of probate but involve filing an application or a petition as defined in EPIC 1106(n).14 Informal proceedings involve filing an application for informal probate and/or appointment proceedings with the probate register without a court hearing, as provided in EPIC 1105(b), 3301 to 3311.15 Most attorneys will normally file an application for both informal probate and informal appointment proceedings since the attorney normally wants to probate a will and appoint a personal representative to handle the probate (appointment proceedings). However, EPIC does allow an attorney to apply for either informal probate or informal appointment of a personal representative.
The obvious question is why would someone want to file for only one of these. An instance where an attorney would want to only apply for informal probate is where the sole purpose of the probate is to utilize a power of appointment in a will. An instance where an attorney would want to only apply for appointment of a personal representative is where the sole purpose is to investigate a wrongful death action.
The problem with using informal proceedings to commence unsupervised administration is that there is no determination of testacy or heirs unless the estate is closed with a formal proceeding under EPIC 3952,16 which would involve a court hearing. Admittedly, unsupervised administration can proceed with no court hearings, with the estate being closed by filing a sworn statement under EPIC 3954.17 However, a cautious attorney will have a court hearing either at the beginning or end of the administration for protection with regard to these issues.
The preferred method to commence unsupervised administration is to file a petition for formal testacy and appointment proceedings pursuant to EPIC 3401 to 341518 so that testacy and heirs are adjudicated. Once again, a separate petition may be filed for either formal testacy proceedings or formal appointment proceedings for the same reasons discussed above.
Most attorneys will petition for both testacy and appointment proceedings under EPIC 3402.19 If there is a formal proceeding, the court will make a determination as to testacy and heirs and appoint a personal representative. Once the hearing has occurred, the process can proceed as unsupervised administration with no further involvement with the court, and in a manner similar to independent probate under the Revised Probate Code. See proposed MCR 5.300 et seq. for details about the procedure for unsupervised administration.
Supervised administration, as described in EPIC 3501,20 is similar to supervised probate under the Revised Probate Code.21 If it appears that there will be problems with an estate, supervised administration will be appropriate under EPIC 3501 to 3505.22 Supervised administration is commenced with a formal proceeding pursuant to proposed MCR 5.310(B) and then proceeds similarly to supervised probate as found in the Revised Probate Code. Under the current proposed court forms, the same petition will be utilized when filing a petition for formal proceedings requesting either supervised or unsupervised administration. See proposed MCR 5.310 for details about the procedure for supervised administration.
As many attorneys know, summary proceedings are an efficient way to probate certain types of estates. The special provision in MCLA 700.101, known as a small estate or a spousal 101, was not brought over to EPIC as a separate provision. However, a similar procedure for summary proceedings is set forth in EPIC 3987 and 3988.23 The main difference between MCLA 700.101 and EPIC, with regard to summary proceedings, is that involvement by the court is not required under EPIC.
EPIC 398724 is similar to MCLA 700.325. It allows summary proceedings if the inventory indicates that the value of the estate, less liens and encumbrances, does not exceed the allowances, exempt property, and reasonable expenses. If these conditions exist, the personal representative may distribute the estate and file a sworn statement without giving notice to creditors. This procedure is not available if the personal representative is prohibited from utilizing summary proceedings by court order or if the estate is supervised.
The sworn statement required by EPIC 398825 is similar to the closing statement described in MCLA 700.326. However, EPIC 3988 has two additional provisions that give the same effect to the sworn statement filed in a summary proceeding as the sworn statement filed in an unsupervised administration.
Many of the procedures for transferring assets of a decedent in the Revised Probate Code have not been radically changed by EPIC, such as the transfer of vehicles, transfer of cash and wearing apparel to heirs, small estates valued at less than $15,000, and summary proceedings. There have been some important changes in procedures under EPIC, particularly affecting opening a safe deposit box and nonprobate transfers. There have been radical changes in terms under EPIC, especially with regard to unsupervised and supervised administration, and there have been new concepts introduced by EPIC, such as the transfer of assets upon presentation of a death certificate and a sworn statement.
An attorney familiar with the Revised Probate Code should have few problems in determining which procedure to utilize to transfer assets under EPIC, so long as the attorney reviews the new statute and the new court rules before proceeding. n
3MCLA 700.6301 to 700.6310.
5MCLA 700.2702, 700.2802 to 700.2809.
11MCLA 700.3983 and 700.3984.
12MCLA 700.301 et seq.
13Proposed MCR 5.302.
15MCLA 700.1105(b), 700.3301 to 700.3311.
18MCLA 700.3401 to 700.3415.
21MCLA 700.351 et seq.
22MCLA 700.3501 to 700.3505.
23MCLA 700.3987 and 700.3988.