Inheritance & Estate Law in Michigan

Estate laws set out rules and procedures for the disposition of property owned by someone who dies. In Michigan, different laws apply depending on whether the deceased left a valid will. If there was a valid will, the entire estate property passes as specified in the terms of that will. If not, the estate passes to close family members under the Michigan laws of intestate succession.

Anyone living in Michigan should become familiar with the state's estate laws, including the procedures for probating the estate, especially when it comes to estate planning.

When a person dies in Michigan, all of the money and property they own and the debts they owe at death are part of their estate. Michigan estate law is a compilation of the procedures by which the debts of the estate are paid and the assets of the state transferred to beneficiaries or heirs.

The legal proceeding that decides all issues involved in a decedent's estate is termed probate. Probate is a court-supervised process where a Michigan court reviews and adjudicates all issues of a decedent's estate. This process is different depending on whether or not the person who died had prepared and left behind a valid legal will.

Michigan probate procedure involves many steps that must be undertaken, usually by the executor, termed the personal representative. These range from determining if the deceased left a will to distributing the estate assets to beneficiaries and/or heirs. The probate court process resolves a wide range of issues, including:

• Determining whether the deceased drew up a will.
• Locating the will if the deceased made one.
  
• Finding the persons who witnessed the will.
• Court hearing and ruling on any will challenges.
• Adjudicating the validity of a will.
• Determining who the heirs are if no valid will is found.
• Appointing someone to serve as the personal representative for the estate.
• Identifying and finding estate probate assets.
• Transferring the probate assets to the personal representative or the administrator.
• Calculating the value of the probate property to see if any shortcut procedures apply.
• Compiling a complete list of probate debts.
• Determining whether claimed debts are legitimate.
• Locating beneficiaries of a will or determining and locating heirs of the deceased.
• Converting assets to cash, if necessary, to pay estate debts.
• Managing any ongoing businesses of the estate during probate.
• Completing estate tax forms and paying any taxes due.
• Distributing property to beneficiaries or heirs.

When a person dies in Michigan, most of their cash, bank accounts, retirement accounts, real estate and personal property are probate property. That is the term for the assets of an estate that must go through the probate proceeding. It includes all assets that the deceased owned by themselves, rather than held jointly with someone else.

Assets that a deceased person owned jointly with someone else may or may not be probate property. If they are held in some type of tenancy with the right of survivorship, the property passes directly to the survivor after one owner dies.

In the same way, financial accounts or insurance policies that have a named beneficiary, like life insurance policies and payable-on-death (POD) investment accounts, pass to the named beneficiary when the person dies. This happens automatically and outside of probate.

Michigan law allows an individual to add a transfer-on-death (TOD) designation to certain assets. These include stocks, bonds and other financial accounts. This is an extremely popular way for Michigan residents to hold their investment accounts.

Though this TOD designation is not possible in Michigan for real property, essentially the same thing can be done by adding survivorship rights to joint tenancies and community property.

Michigan also recognizes other types of non-probate assets. These include:

• Bank, savings or investment accounts for which the decedent specified a payable-on-death beneficiary.
• Real property held in joint tenancy by the deceased and another individual.
• All life insurance policy proceeds if the named beneficiary is not the estate.
• Retirement plans payable to a named beneficiary.
• Cars, trucks and boats registered for transfer-on-death.

The issue of whether an estate must be probated in Michigan is not impacted by the existence of a will or the lack of one. In either case, the cash, property and other assets held by the deceased at the time of death must pass through a legal process to transfer property to living beneficiaries and/or heirs. That process is probate.

When a resident of Michigan dies, leaving a valid will, the estate laws of Michigan require that the instructions in the will be followed to the extent possible. For example, the court will almost always appoint the person named in a will as personal representative to that post. Obviously, if they are dead or refuse, that is not possible.

Likewise, during probate, it is the inheritance specifications set out in the will that control distribution of assets to the maximum extent possible. These people or organizations named in a will are termed "beneficiaries," and those who inherit without a will are termed "heirs."

For the most part, the steps of probate are the same in Michigan with or without a will, but there are a few important differences. First is the appointment of someone to guide the intestate estate through probate. If there’s no will, the deceased has not selected anyone to manage the probate process, so the court must appoint a personal representative.

Michigan courts have established an informal hierarchy of family members who get priority if they wish to serve as the personal representative when no personal representative is named in the will.

The surviving spouse of the decedent is first in line, followed by an adult child of the deceased. If the decedent didn’t leave a surviving spouse or children, or if the probate court judge finds these people are unsuitable, the judge will look to siblings or more distant relatives.

As a last resort, the court can allow a creditor of the deceased to serve as a personal representative. Note that, under Michigan law, a creditor can nominate a representative to open probate 42 days after the date of death if no one else has been appointed.

Creditors don't usually stand to inherit anything but do have a stake in the estate because of an outstanding debt. Once a debtor dies, probate is the only way that a decedent’s creditors can get paid.

If a deceased passes intestate – without having prepared a will – they've missed the chance to name the beneficiaries who take their assets. Instead, the court must determine who should inherit. This is not done by whim or instinct, but rather under Michigan's intestacy laws. These laws generally set out the order in which the next-of-kin will inherit by how close the relationship is.

Michigan puts the surviving spouse and the deceased's children and descendants on the top of the list. (Note that grandchildren or great-grandchildren only inherit in their parent's place if the decedent's child who is their parent does not survive.)

When there’s no surviving spouse, the decedent’s children or the children of any deceased children inherit everything. But if there are no surviving children or descendants, the inheritance moves down the list, in this order:

• Decedent's parents.
• Decedent's siblings.
• Decedent's nieces and nephews.
• Decedent's grandparents.
• Decedent's aunts, uncles and cousins.
  

The next in line to inherit cannot inherit if anyone higher on the list is still living.

The question of who gets what as heirs depends on what relatives are still alive when the decedent dies.

• Surviving spouse: In Michigan, if a decedent leaves only a surviving spouse, they are the sole heir and inherit everything.
  

• Surviving spouse but no living parents or descendants: A spouse inherits everything.

• Surviving spouse and descendants: A surviving spouse receives $150,000 and half the balance of the estate if the spouse and the decedent had any children together; the children receive the other half of the estate. But if the decedent had children in another relationship, the spouse inherits only the first $100,000 and half the remainder of the estate and the remainder is shared equally by all surviving children.

• Surviving spouse but no descendants: If a decedent leaves a spouse and at least one parent but no descendants, the spouse takes the first $150,000 of the estate, then 75 percent of the rest. The parent or parents take the remaining 25 percent.
  

• Decedent leaves no living relatives: When someone dies without any living relatives or none can be located, the estate will pass to the state of Michigan in a procedure called escheat.
  

Michigan recognizes informal, formal and summary probate for small estates.

Most probates in Michigan are informal probates that take place under the supervision of a probate register rather than a probate court judge. This is the fastest and easiest way to get through probate. The proceeding goes through these steps:

• Probate register appoints a personal representative

who is given legal authority to act on behalf of the estate.

• The personal representative

notifies all beneficiaries named in the will, if there is one, or all heirs, if there is no will. They also provide written notice to the deceased’s known creditors and post a notice in the newspaper for any unknown creditors.

• The personal representative

files proof of these notices with the court.

The personal representative

prepares an inventory of all the deceased’s assets, including their value. If necessary, they get the assets appraised to include an accurate valuation.

• The personal representative

pays those creditors with valid claims against the estate, and pays estate and individual taxes owed by the decedent.

• The personal representative

submits a final accounting and closing statement to the court and transfers the estate’s property to its beneficiaries.

A formal proceeding involves the same steps as an informal probate. However, in formal probates the personal representative must obtain formal permission from a probate judge before taking certain actions.

This means that an actual probate case must be opened and docketed with the court. In unsupervised formal probate, only a few actions require court permission like paying debts or selling real property.

When is formal supervised probate necessary? It occurs when disputes arise among beneficiaries or heirs. In this type of controversial probate, the court supervises each step.

When an estate has a very limited value, Michigan does not require court supervision or involvement. Whether an estate qualifies as small for this purpose depends on its value.

This changes, sometimes annually with the current code in the year of death applying. For example, if a person dies in 2022 an estate must be valued at $25,000 or less to be small. Note that this cannot include any real property.

Michigan does not require much in the way of court supervision or involvement in small estate/summary probate. A family member can file the appropriate forms with the court, wait 28 days, then distribute the assets to heirs or beneficiaries by affidavit.