For the last two decades, probate practitioners and the public have benefited from Michigan’s Estates and Protected Individuals Code (EPIC).1 This article outlines the EPIC Omnibus, which is the SBM Probate and Estate Planning Section’s proposal to update EPIC and its sister statutes that routinely impact probate practice: the Michigan Trust Code,2 Uniform Transfers to Minors Act,3 Motor Vehicle Code,4 and Natural Resources and Environmental Protection Act.5
THE PROBATE AND ESTATE PLANNING SECTION AND EPIC OMNIBUS
EPIC, which was enacted in 1998 and took effect in 2000, replaced Michigan’s cobbled-together Revised Probate Code.6 It adapts the Uniform Probate Code (UPC)7 to Michigan’s needs and succinctly articulates the law of wills, decedent estates, trusts, nontestamentary transfers on death, management of incapacitated persons’ affairs, and most probate court proceedings.
By 2015, appellate courts had regularly interpreted EPIC and practitioners had had ample opportunity to find potential areas of clarification or enhancement. Further, the Uniform Law Commission had published revisions that improved upon parts of the UPC.
Based on these developments, the Probate and Estate Planning Section Council tasked its Legislation Development and Drafting Committee with reviewing the code and proposing a comprehensive set of amendments. The committee reviewed the code section by section, surveyed appellate cases interpreting it, and canvassed section members. During this process, the committee also identified probate-related statutes outside of EPIC that would benefit from cost-of-living adjustments.
The resulting draft legislation,8 referred to as the EPIC Omnibus or Omnibus, has been introduced in two sessions of the Michigan Legislature, first as 2018 House Bills 6467, 6468, 6470, and 6471,9 and then as 2021 House Bills 4898, 4899, 4900, and 4901.10 The latter package narrowly missed enactment in the final days of the session. Section leaders are optimistic about the package’s reintroduction and passage during the current legislative session.
OMNIBUS CHANGES TO EPIC
The Omnibus would change dozens of details in EPIC and its sister statutes, but it would primarily:
- Update financial thresholds set in the law and subject additional thresholds to periodic inflationary adjustments. The effect of most of these threshold changes is that citizens and lawyers will not have to file probate motions and petitions as often.
- Create standby guardianship to ensure legally incapacitated individuals are not endangered by a guardianship gap due to their guardians’ illness, absence, or death.
- Clarify and improve notice rules that can impact the administration, modification, and termination of trusts.
- Enforce attorney rules of professional conduct by voiding inappropriate gifts included in estate planning instruments prepared by lawyers. This is commonly referred to as the Mardigian fix.11
- Modernize trust disclosure rules to allow trusts to be administered on a confidential basis for a limited period.
- Update patient advocate rules to accommodate the appointment of multiple co-advocates and the increased reliance on nurse practitioners as primary care providers.
- Make numerous technical fixes and improvements including clarifying ambiguous statutory definitions, clarifying the circumstances under which a court may reopen a decedent estate, adopting modernized versions of “pet trust” and “purpose trust” rules, and confirming that certain Michigan trusts can be used for estate and gift tax planning purposes.
The balance of this article details the first six items on the list above.
INCREASING STATUTORY THRESHOLDS AND IMPOSING INFLATION ADJUSTMENTS
EPIC’s drafters recognized that the costs of judicial intervention sometimes outweigh its benefits, so it allows the public to transfer otherwise probated assets without court filings. The section council concluded that the public would benefit by further reducing its reliance on courts to resolve some probate matters. The Omnibus would change the following thresholds:
||Threshold for demanding that the personal representative obtain a bond
||Maximum value of unclaimed assets that a personal representative may hold without depositing them to the county treasurer
||Minimum service charge by the county treasurer for holding unclaimed funds
||Maximum sum that the personal representative may distribute to persons under a disability in a year without appointment of a conservator or protective order
||Maximum assets of decedent that may be transferred using
a petition and order of assignment (small estate order)
||Maximum personal property that may be transferred using an affidavit of decedent’s successor (small estate affidavit)
||Maximum payment or delivery to a person for the benefit of a minor without having to appoint a conservator
||Release of cash and wearing apparel to a decedent’s family
members (e.g., funeral homes, police, hospitals, etc.)
||Maximum cumulative value of vehicles that the Secretary of State may transfer before the decedent’s successors must open an estate
||Maximum cumulative value of watercraft that the Secretary of State may transfer before the decedent’s successors must open an estate
||Maximum payment that a personal representative or trustee may transfer to an account under the Uniform Transfer to Minors Act
*As further adjusted by liens against real estate
Some thresholds in EPIC, such as those for small estate matters, are already subject to annual inflation adjustments under MCL 700.1210. The Omnibus would subject all of the above thresholds to this annual adjustment.
The section proposed these thresholds in 2019 prior to recent inflationary pressures. The section council is therefore considering further increases to these thresholds as well as those for transferring small estates by petition (under MCL 700.3982) and affidavit (under MCL 700.3983).
CREATING STANDBY GUARDIANSHIP FOR LEGALLY INCAPACITATED INDIVIDUALS
For years, Michigan’s Mental Health Code12 has allowed designation of standby guardians for persons with developmental disabilities.13 This helps ensure continuity in the protection of vulnerable persons. The Omnibus offers a similar tool for use in guardianships for legally incapacitated adults.
Unlike the Mental Health Code, the Omnibus expressly describes the mechanisms of designation, acceptance, and transition into serving as guardian. The Omnibus would also broadly protect third parties who rely on a standby guardian’s representation that she or he has authority to act. The Omnibus proposes numerous coordinating changes to Article V, Part 3 of EPIC14 by integrating standby guardianship into existing statutory frameworks for parental nominations of guardians in their wills, notices incidents to guardianship proceedings, nominations of and objections to guardians, and reports on the condition of protected persons.
BRIGHT-LINE RULES TO VOID ETHICALLY IMPERMISSIBLE GIFTS TO LAWYER-DRAFTERS
In re Mardigian Estate concerned a challenge to an estate plan in which the decedent made more than $14 million in gifts to the lawyer-drafter and the lawyer-drafter’s family. The Supreme Court ruled that a lawyer-drafter’s violation of the Michigan Rules of Professional Conduct did not necessarily void the estate plan. Instead, it ruled that in situations where the lawyer-drafter has drafted self-benefiting governing instruments, those instruments should be evaluated under the law of undue influence.
Under the Omnibus, any part of a governing instrument that directly or indirectly makes a “substantial gift” (that is, one of $5,000 or more) to its lawyer-drafter or persons related to the lawyer-drafter would be void. The proposal would not apply to gifts from the lawyer-drafter’s family members to him or her. Nominations to serve as a fiduciary would not constitute substantial gifts under the bill.
REDUCING NOTICE BURDENS ASSOCIATED WITH WIPEOUT BENEFICIARIES AND PERSONS WHO COULD CLAIM THROUGH HOLDERS OF POWERS OF APPOINTMENT
The Michigan Trust Code offers helpful tools for resolving trust-related difficulties including nonjudicial settlement agreements15 and representation rules.16 The presence of wipeout beneficiaries — often charities — can prevent effective use of these tools.
The Omnibus seeks to expand these tools’ use. The definition of “charitable trust”17 would be narrowed, applying only to trusts for which the charitable purpose is a “material purpose.” The definition of “qualified trust beneficiary”18 would be similarly proscribed, applying only to those individuals whose benefit is a material purpose of the trust. A wipeout beneficiary may later become a qualified trust beneficiary if there are no remaining qualified trust beneficiaries ahead of them in line. Relatedly, the bills would amend MCL 700.7302 to clarify when the holder of a power of appointment may bind potential appointees under the representation rules.
AUTHORIZING LIMITED NONDISCLOSURE PERIODS FOR TRUSTS
The Michigan Trust Code requires that the trustee “provide beneficiaries with the terms of the trust and information about the trust’s property, and ... notify qualified trust beneficiaries of an irrevocable trust of the existence of the trust and the identity of the trustee.”19 This mandate cannot be waived. Therefore, a settlor cannot create a trust (or terms of a trust) that are confidential from its beneficiaries for any meaningful amount of time.
The Omnibus was drafted to recognize that settlors sometimes have sound reasons for keeping a trust agreement, its terms, or information regarding the extent of the trust estate confidential for a meaningful period. The Omnibus would allow a settlor to create a noncharitable trust under which the trustee kept certain “prime disclosure information”20 confidential from one or more beneficiaries for a nondisclosure period of up to 25 years. This framework acknowledges that it may become impracticable, undesirable, or illegal under other applicable law to avoid disclosure; as such, the trustee (or holder of the right to receive confidential information) could not be held liable for sharing primary disclosure information with the beneficiaries. The only permitted remedy for such a disclosure would be the fiduciary’s removal. The trust protectors or other persons who hold the right to receive prime disclosure information during the nondisclosure period would have the same notice and standing rights as qualified trust beneficiaries under trusts without nondisclosure terms.
ADDRESSING COMMON-USE CASES FOR PATIENT ADVOCATE DESIGNATIONS
The Omnibus aims to address evolving needs surrounding patient advocate designations. It would:
- Address the effect of more than one person serving as advocate by amending MCL 700.5506. It would relieve third parties of inquiring into a co-advocate’s authority to act alone. It would also allow a designation to specify the process by which an advocate (or multiple co-advocates) can make decisions.
- Acknowledge a patient’s ability to lay out decision-making principles by amending MCL 700.5507.
- Allow certain nurse practitioners and physician assistants to certify that the patient is ill enough for the advocate to have authority to serve.
- Expand the reliance protections afforded medical providers by clarifying that a provider need not confirm that an advocate has complied with the patient’s instructions.
The EPIC Omnibus should solve practical difficulties that attorneys encounter and offer new planning opportunities. The best way to monitor the efforts to pass this proposal is joining the Probate and Estate Planning Section and either attend its council meetings or read the council meeting minutes at connect.michbar.org/probate/home.