It’s been awhile since there’s been something to write about. So when the Court of Appeals came out with three unpublished opinions on probate matters, I figured I would go with it.
The Ineffective Beneficiary Designation
Joseph came back from his job in Australia to die in the U.S.. While in Australia he accumulates a retirement account through his employment which has a balance of about $300,000. He names his father and an aunt as beneficiaries on that account.
In September 2011, he is living with his Dad and creates a will leaving residue to Dad. In October 2011 he moves to Michigan where his mother lives. Shortly after the move he signs a new will leaving the residue of his estate to two nieces.
In November 2011 he dies.
By some seemingly unique rules regarding this Australian retirement account, the Trustee of the account is not obligated to follow the beneficiary designation, and decides to make the account balance payable to his estate.
Dad challenges the October will on undue influence and lack of capacity. The trial court dismisses both challenges on summary disposition. The record seems to lack any evidence for undue influence, but the lack of capacity issue is more curious.
Among other things, in support of their motion for summary disposition, Appellee filed affidavits from a doctor, a lawyer, and a social worker all indicating that they were prepared to testify that on the date of the will the Decedent had the capacity to understand what he was doing. Dad/Appellant filed, among other things, the beneficiary designation on the Australian retirement account along with his own affidavit indicating that the Decedent had become increasingly confused about the existence of this asset during his illness.
I find the COA’s analysis of MCL 700.2501 troubling. In the opinion it says:
It is not clear from the record the extent to which the decedent understood that if the Australian trustee did not comply with his beneficiary nominations, the death benefit arising from his ownership of the Superannuation Fund could become an asset of his probate estate. However, the inquiry regarding testamentary capacity is only concerned with whether the testator “has the ability to understand” the general nature of the act of signing a will. MCL 700.2501(2)(d) (emphasis added).
Under the circumstances, the trial court did not err by concluding that appellant failed to establish a genuine issue of material fact regarding whether the decedent had “the ability to understand in a reasonable manner the general nature and effect of his or her act in signing the will.” MCL 700.2501(2)(d).
It seems to me there is at least a triable issue here as to whether in fact the Decedent understood the nature of his estate, and more importantly, the effect of his will. Clearly, it would not be unreasonable for a fact-finder to conclude that he died believing that the beneficiary designation directed his retirement account to his aunt and father, and that the will only controlled the disposition of his non-probate assets. Help me out: Isn’t that the “general effect” of his will?
Luckily this is an unpublished decision. I also note that the father did not plead constructive trust, which might have been a valuable alternative cause of action on these facts.
Creditors, Pension Plans, and Sheep
This case presents another retirement account issue.
Prior to the death of Ed Sr., one of his children, “Respondent” had stolen money from his estate while serving as conservator, and there was a judgment against that child for $225,000. When Dad died, Respondent was the beneficiary of an annuity. The issue in this case was whether MCL 600.6023 prevented the estate from recovering the judgment against bad child’s interest in the annuity.
The analysis is complex, but ultimately, and not surprisingly, the trial court found that the annuity funds were subject to collection, and the Court of Appeals affirmed. If you have retirement accounts payable to creditors of an estate, the opinion is worth reading. MCL 600.6023 is an important statute in the context of creditor protections.
And the real test of a probate practitioner: Do you know what farm animals are exempt under MCL 600.6023? The answer is found in subsection (d), which says:
(d) To each householder, 10 sheep, 2 cows, 5 swine, 100 hens, 5 roosters, and a sufficient quantity of hay and grain, growing or otherwise, for properly keeping the animals and poultry for 6 months.
Convenience Accounts and Convenient Testimony
The record of this case suggests a lack of sophisticated lawyering. This is another joint accounts case. In this case, Dad makes Child A joint on accounts. The rest of the kids claim convenience account. The trial court finds it is a convenience account and COA upholds trial court’s decision.
Non-joint owning children and a family friend testify that Dad says he set up a “convenience account” with Child A, but checks box that says she gets it if she survives. This bothers the judge who senses that if Dad was so sophisticated that he used a legal term – “convenience account” – to explain what he intended, why would he then check a box that says otherwise?
In the end however, the trial court finds that the challengers met their burden of presenting clear and convincing evidence that this was a convenience account, and the COA affirms.
In its decision, the COA says: “We have been provided with no caselaw suggesting that the self-serving testimony of heirs challenging the ownership of a joint account must be excluded.” The COA also notes: “The record evidence is largely self-serving hearsay, admitted without objection.” (OUCH)
Bonus Post: Another Change in GA/CA PPA Deduction
DHHS has released a proposed policy change which, assuming it takes effect, will increase the deduction allowed from a Medicaid beneficiary’s patient-pay amount to $95 per month for a guardianship/conservatorship fee. Starts October 1. For reference, the deduction was $60 forever, and was increased to $83 earlier this year. Two bumps in a year – government waste and excess continues unabated (joking).
The policy notice says
Issued: September 1, 2017 (Proposed)
Subject: Increase to Guardian/Conservator Income Deduction
Effective: October 1, 2017 (Proposed)
Programs Affected: Group 2 Under 21, Caretaker Relative, Supplemental Security Income (SSI)-Related Medicaid
Effective October 1, 2017, the Michigan Department of Health and Human Services (MDHHS) may deduct up to $95 per month as an allowable expense against a beneficiary’s income when determining medical services eligibility and patient pay amounts if the beneficiary pays a court- appointed guardian/conservator.
The fee must be verified as paid by a fiscal group member. Guardianship/conservator expenses include:
- Basic fee
- Other costs of performing guardianship/conservator duties