Michigan’s default rules for an estate were written with a first marriage in mind, and they change their arithmetic the moment a family includes children who belong to only one spouse. The changes are not subtle. The same estate, with the same surviving spouse, divides differently depending on whose children the decedent’s children are, and a stepchild who was never adopted is not in the calculation at all.

MCL 700.2102 sets the surviving spouse’s intestate share in six scenarios, and four of them turn on whether the decedent’s descendants are also the spouse’s. The base figures in the section are $150,000 and $100,000, each plus a fraction of the balance, and they are adjusted for inflation under MCL 700.1210, so the current-year amounts are higher than the text.

The Spouse’s Share Shrinks as the Children Diverge

Where every surviving descendant of the decedent is also a descendant of the surviving spouse, and the spouse has no other descendants, the spouse takes the first $150,000, adjusted, plus half of the balance. The same figure applies where the descendants are all shared but the spouse has descendants of their own who are not the decedent’s.

Where one or more, but not all, of the decedent’s surviving descendants are not descendants of the surviving spouse, the spouse takes the first $150,000, adjusted, plus half of the balance. Where none of the decedent’s surviving descendants are descendants of the surviving spouse, the first figure drops to $100,000, adjusted, plus half of the balance.

The balance in each case passes under MCL 700.2103 to the decedent’s descendants by representation. The decedent’s children from a prior relationship take that share equally with any shared children. The spouse’s children from a prior relationship take nothing under this section, because they are not the decedent’s descendants.

A Stepchild Is Not a Descendant

Section 2103 passes the non-spousal share to the decedent’s descendants, and the word is doing precise work. A child the decedent raised from infancy, supported through college, and referred to as a son or daughter is not a descendant of the decedent unless the decedent adopted that child. Without an adoption, the stepchild is outside intestate succession entirely.

The adoption code confirms the point from the other direction. Under MCL 710.60, after an order of adoption there is no distinction between the rights of natural progeny and adopted persons, and the adopted person becomes an heir at law of the adopting parent. The order is what creates the status, and nothing short of it does.

A blended family that intends stepchildren to inherit has two routes, and only two. One is adoption, including adult adoption. The other is a will or trust that names them, because a document can give a stepchild what the intestacy statute will not. Our Michigan wills page covers what a will can direct that the default rules cannot.

A Will Signed Before the Marriage Is Partly Protected

A common blended-family fact pattern is a will signed during a first marriage, or between marriages, followed by a remarriage with no new will. Under MCL 700.2301, a spouse who married the testator after the will was executed is entitled to an intestate share of the estate, which would ordinarily override much of the old will.

The section carves out what the omitted spouse may not reach. The share is calculated only against the portion of the estate that is not devised to or in trust for a child of the testator born before the marriage who is not the surviving spouse’s child, or to a descendant of such a child. Property left to the first family’s children stays with them.

That carve-out is the statute’s own recognition of the blended-family problem. A parent who left everything to the children of a first marriage, then remarried without updating the will, has not exposed those devises to the new spouse’s omitted-spouse claim. The claim reaches whatever else is in the estate, subject to exceptions in subsection (2) that turn on the circumstances of the will and the marriage.

A Child Born After the Will Is Handled Separately

The mirror provision, MCL 700.2302, addresses a child born or adopted after the will was signed and not provided for in it. Where the testator had no child living when the will was executed, the omitted child takes what they would have received under intestacy, unless the will left all or substantially all of the estate to the omitted child’s other parent, who survives and takes under the will.

Where the testator did have children living and devised property to them, the omitted child’s share is limited to those devises. The child takes the share they would have received had the testator included all omitted children with the children who were provided for and given each an equal share, and the existing children’s devises abate ratably to make room.

In a blended family that provision decides whether a child of the second marriage shares in what was left to children of the first, and the answer depends on whether the will devised to those earlier children at all. It is a question a will can settle in a sentence, and one that intestacy and the omitted-child rules settle in ways the parent may not have chosen. We talk these questions through with you. Call us at (800) 525-6386.

Before the Second Marriage Changes the Plan

Every one of these provisions is a default that a signed document displaces, which is why a blended family’s plan is less about choosing a strategy than about not leaving the choice to the statute. At Neumann Law Group, we prepare wills and trusts for second-marriage and blended families as part of our Michigan estate planning practice, alongside the Michigan trust administration that follows. If you would like us to look at your situation, call (800) 525-6386 or contact us through our website.

Families put a Northern Michigan cottage into a trust or a limited liability company to share it across a generation without a partition suit. The structure solves the ownership problem well. It also moves the property under a different set of uncapping rules than a deed to a child, and the rules for an entity contain no relative exemption at all.

The provision is MCL 211.27a(7)(h). A conveyance of an ownership interest in a corporation, partnership, limited liability company, or other legal entity is a transfer of ownership of the property the entity holds where the interest conveyed is more than 50 percent of the entity. A cottage held by an LLC uncaps when more than half the membership interests change hands, whoever the members are.

The Entity Rule Counts Interests, Not Relatives

The relative exemption that protects a direct transfer to a child, at subdivision (u), lives in a different part of the section from the entity rule and does not reach into it. Subdivision (h) asks one question, which is whether more than 50 percent of the ownership interest was conveyed. It does not ask who received it.

The practical consequence surprises families who formed the LLC precisely to keep the cottage in the family. Parents who hold all the membership interests and transfer them to three children have conveyed 100 percent of the entity. The property uncaps, and the fact that every transferee is a child changes nothing under this subdivision.

Cumulative transfers are treated the same way. The statute measures the interest conveyed, and a series of smaller conveyances that together exceed half the entity is what the assessor will examine, which is why the timing of gifts of membership interests is a tax question rather than only a family one. Our Michigan cottage succession page sets out how the ownership structures themselves are drafted.

The Entity Has Its Own Notice Duty

Subdivision (h) attaches a filing obligation to the entity rather than to the members. Unless notification has already been provided under subsection (10), the corporation, partnership, limited liability company, or other legal entity must notify the assessing officer on a form provided by the State Tax Commission not more than 45 days after a conveyance of an ownership interest that constitutes a transfer of ownership.

That duty is easy to miss because nothing is recorded with the register of deeds when membership interests move. A deed triggers the monthly report the register of deeds sends to the assessor under subsection (10). An assignment of LLC interests sitting in a company binder triggers nothing external, and the entity’s own 45-day filing is the only thing that surfaces it.

An entity that misses the filing has not avoided the uncapping. It has delayed the assessor’s knowledge of it, and the assessment, when it comes, reaches back to when the transfer occurred.

A Trust Is Treated More Generously

The same section handles trusts differently, and the difference is the reason a cottage trust and a cottage LLC are not interchangeable on this issue. Beginning December 31, 2014, a conveyance of residential real property to a trust is not a transfer of ownership where the settlor or the settlor’s spouse conveys it and the sole present beneficiary or beneficiaries are the settlor’s or the settlor’s spouse’s mother, father, brother, sister, son, daughter, adopted son, adopted daughter, grandson, or granddaughter, and the property is not used for any commercial purpose afterward.

The trust provisions carry the relative list through each stage. A distribution of residential real property out of a trust to a listed relative is not a transfer of ownership. A change that adds or substitutes a listed relative as beneficiary is not a transfer of ownership. A distribution from a decedent’s estate to a listed relative is not one either. In each case the same non-commercial use condition applies, with proof to be furnished within 30 days on request and a $200 fine for failing to.

The LLC has none of that. The family that wants the sharing mechanics of an entity and the uncapping treatment of a trust is choosing between two statutory regimes, and the choice is made when the deed into the structure is signed.

The Commercial-Use Condition Reaches Rentals

Every relative exemption in the section, including the trust versions, is conditioned on the residential real property not being used for any commercial purpose following the conveyance. A cottage that the family rents to strangers for part of the season has a commercial use, and the exemption that depended on its absence is gone.

That condition interacts badly with the most common reason families share a cottage’s costs. Renting the property for a few weeks to cover taxes and upkeep is ordinary, and it is exactly the use the statute names. A structure drafted to preserve the cap has to be run in a way that preserves it too.

Whether a cottage should sit in a trust, an LLC, or a trust that owns an LLC is decided by weighing the sharing mechanics against subdivision (h), and that weighing is cheap before the deed is signed and expensive after. If that is where your situation sits, call us at (800) 525-6386.

Before the Cottage Goes Into an Entity

The entity form solves a real problem and creates a specific tax exposure, and the two have to be weighed together rather than in sequence. We build cottage succession structures at Neumann Law Group for families on Torch Lake, Glen Lake, Crystal Lake, and across Northern Michigan as part of our Michigan estate planning practice. Call our office at (800) 525-6386, or contact us online, and we will talk it through with you.

Lists of estate planning mistakes tend to be lists of things that are unwise. The ones that actually cost Northern Michigan families money are narrower than that, because each corresponds to a specific sentence in a Michigan statute that produces a specific bad result. Five of those sentences come up more than the rest.

None of the five requires a bad plan. Each can happen to a family with a competent set of documents, because the failure lives in execution, in a filing, or in a use of the property after the documents were signed, and the statute does not care what was intended.

Signing a Healthcare Document With the Wrong Witnesses

A patient advocate designation must be signed in the presence of two witnesses, and MCL 700.5506(4) lists who may not serve. The list includes the patient’s spouse, parent, child, grandchild, sibling, presumptive heir, and known devisee, along with the patient’s physician, the named advocate, and employees of the patient’s insurer, treating facility, or home for the aged.

The people most likely to be in the room when a parent signs are exactly the people the statute disqualifies. A designation witnessed by two adult children is not a designation with a technical flaw. It is a document that fails the execution requirement, and the family will discover that at the moment it is needed.

Two neighbors, or two staff members from the drafting office, satisfy the section. The fix costs nothing at signing and cannot be applied afterward.

Moving Cottage LLC Interests to the Children

A family that put the cottage into a limited liability company to share it has moved the property under MCL 211.27a(7)(h). Under that subdivision, a conveyance of more than 50 percent of the ownership interest in the entity is a transfer of ownership of the property the entity holds, and the property’s taxable value uncaps.

The relative exemption that protects a deed from parent to child lives in a different subdivision and does not reach into this one. Parents who assign all of the membership interests to their children have conveyed the whole entity, and the cottage uncaps regardless of who received the interests.

The entity also owes its own notice to the assessor within 45 days of a qualifying conveyance. Nothing is recorded when membership interests move, so the filing is the only thing that surfaces the transfer, and missing it delays the assessment rather than avoiding it. Our Michigan cottage succession page covers the alternatives to an entity for families who want the sharing without the exposure.

Signing a Trust and Never Funding It

A revocable trust governs only what has been retitled into it. That is not a drafting principle but a consequence of how the Michigan Trust Code operates, and the presumption of revocability under MCL 700.7602 is what keeps the settlor in control and also makes the settlor the one who has to move the assets.

An unfunded trust avoids nothing. The house still in the settlor’s name passes through probate. The account never retitled passes by beneficiary designation or by intestacy. The trust’s provisions apply to an empty container, and the successor trustee has nothing to administer.

Funding is a records exercise. Deeds are recorded, accounts are retitled, and beneficiary designations are conformed, and each step leaves a document that shows it was done. A trust folder with no such documents in it is the most common way a well-drafted plan turns out to have done nothing.

Skipping the Property Transfer Affidavit

Every transferee of Michigan real property owes a filing under MCL 211.27a(10). The buyer, grantee, or other transferee must notify the local assessing office of the transfer within 45 days, on a form prescribed by the State Tax Commission, stating the parties, the date, the consideration, and the parcel identification number or legal description.

The affidavit is owed whether or not an exemption from uncapping is claimed. A child who takes the family home under the relative exemption still files it. A remainder beneficiary under a Lady Bird deed still files it. The exemption is a reason the taxable value does not reset, not a reason the transfer goes unreported.

The register of deeds reports recorded transfers to the assessor monthly, so a recorded deed will surface on its own. The affidavit is what starts the assessor’s file correctly, and a transfer that surfaces without it starts from the wrong assumptions.

Planning Around a Small-Estate Figure That Moved

Michigan lets a small estate bypass full administration, by sworn statement under MCL 700.3983 or by court order under MCL 700.3982. For years the threshold was $25,000, and a great deal of family planning still assumes it.

Both sections now read $50,000, adjusted for inflation under MCL 700.1210, and the current-year figure is higher than the base. A family that arranged its affairs to keep the probate estate under a number that no longer governs has either done unnecessary work or, more often, has assumed an estate needs full administration when it qualifies for the simpler route.

Each of the five is visible on paper before it does any harm. A designation shows its witnesses, an entity shows its members, a trust shows what it holds, a transfer shows whether the affidavit was filed, and an estate shows its size against the current threshold. Call our office at (800) 525-6386 and we will walk through it with you.

Checking a Plan Against the Five

A plan review that reads the documents against these five sections takes less time than any one of them takes to unwind, and most families have never had one. We review existing plans at Neumann Law Group as part of our Michigan estate planning practice for clients across Northern Michigan and statewide. Call us at (800) 525-6386 or contact our office to arrange a consultation.

The claim made for a Lady Bird deed is that it keeps a home out of probate, off the Medicaid ledger, and under the property tax cap all at once. Each of those results has a statutory reason, and the reasons are more specific than the marketing. Knowing where each one comes from is what lets a family rely on the deed rather than hope about it.

The Medicaid result rests on a definition. Under MCL 400.112h(a), the estate that Michigan’s Medicaid estate recovery program may reach means all property and other assets included within an individual’s estate that is subject to probate administration under Article III of the Estates and Protected Individuals Code. Property that never enters probate is outside that definition.

The Probate Estate Is the Whole Reach

Michigan’s recovery program was established under MCL 400.112g to comply with the federal requirement in section 1917 of Title XIX, and it operates against the estate as the state defines it. The state chose the probate estate. A home that passes at death by operation of a recorded deed, rather than through a personal representative, is not administered under Article III and is not within the definition.

That is the mechanism, and it is worth stating as a mechanism rather than as a feature. A Lady Bird deed reserves a life estate to the owner with the power to sell, mortgage, or revoke, and names a remainder beneficiary who takes at death. The remainder passes by the deed. Nothing about it is administered in probate, so nothing about it is in the estate the program may reach.

The same definition explains why an ordinary life estate deed behaves differently on the Medicaid side. A life estate given away without the retained powers is a completed transfer during life, and transfers during life are analyzed under the eligibility rules and the lookback rather than under recovery. Our Michigan Medicaid planning page covers that separate analysis.

What the Statute Says About Planning Around Recovery

The recovery statute is candid about estate planning, and the candor is worth reading before relying on any device. Among the hardship provisions the department was directed to define, MCL 400.112g(3)(e)(iii) requires a rebuttable presumption that no hardship exists if the hardship resulted from estate planning methods under which assets were diverted in order to avoid estate recovery.

That presumption operates on hardship waivers, which are requests to excuse recovery from an estate the program can otherwise reach. It does not enlarge the definition of the estate. A Lady Bird deed does not ask for a hardship waiver, because the home was never in the recoverable estate to begin with, and the presumption has nothing to attach to.

The other hardship exemptions the section names are worth knowing for the families who do face recovery. They include the portion of a homestead’s value equal to or less than 50 percent of the average home price in the county at the recipient’s death, and the primary income-producing asset of survivors, such as a family farm or business. The department may not pursue recovery where the cost exceeds what is recoverable or where recovery is not in the state’s economic interest.

The Subdivision Written for a Retained Life Estate

The property tax result comes from a subdivision written for exactly this deed. MCL 211.27a(7)(d) addresses what happens when a life estate the transferor kept for themselves ends, and it says that the resulting transfer of the remainder is not a transfer of ownership, provided the person taking it is one of the relatives the section lists and the home stays out of commercial use. The subdivision has applied since December 31, 2014, and without it the end of a life estate would reset the taxable value like any other change of hands.

A Lady Bird deed is a retained life estate, and the remainder passing at death is the expiration the subdivision describes. Where the beneficiary is on the list and the use stays residential, the taxable value does not reset. Where the beneficiary is a niece or a friend, it does, and the deed’s other advantages remain while that one does not.

Nothing has to be filed to claim the exemption, but it can be tested. An assessor or the Department of Treasury may ask the remainder beneficiary to prove the relationship and the residential use, and the answer is due within 30 days on pain of a $200 fine. A copy of the recorded deed and a birth or adoption record are the usual proof, and both are simpler to gather while the parent is alive than after.

What the Deed Leaves Untouched

A Lady Bird deed changes what happens to one parcel at death. It does not change eligibility for benefits during life, because the owner keeps full control of the property and the retained powers are what make it not a completed gift. A family that expects the deed to reduce countable assets for an application has misunderstood which side of the ledger it works on.

Nor does it govern anything the owner holds outside the deed. Bank accounts, vehicles, and any real property not conveyed pass under a will or a trust or by intestacy, and whatever enters probate from those sources is within the recoverable estate under the same definition.

The deed’s value is exact. It keeps one property out of the probate estate, and Michigan’s recovery program reaches only the probate estate. Everything else in a plan has to be handled by everything else in the plan. If that is where your situation sits, call us at (800) 525-6386.

When the Language of the Deed Decides the Result

Whether a particular deed carries the retained powers that make it a Lady Bird deed, rather than an ordinary life estate, is a question of its language, and the two produce opposite Medicaid results. We prepare and review Michigan Lady Bird deeds at Neumann Law Group as part of our Michigan estate planning practice across Northern Michigan and statewide. Call our office at (800) 525-6386, or contact us online, and we will talk it through with you.

Most writing about protecting assets from Medicaid concerns what a family does in advance. Less is written about what Michigan protects after the fact, for a family that did no planning at all, and the statute that created the estate recovery program contains a list. The list is not generous, but it is specific, and it applies whether or not anyone thought about it in time.

MCL 400.112g(3)(e) directed the department to define hardship for purposes of exempting an estate from recovery, and it named what the definition had to include at a minimum. It also required the department to give every individual enrolling in Medicaid for long-term care written materials explaining how to apply for a hardship waiver, which is a document most families never see because nobody points to it.

Homestead Value Up to Half the County Average

The first required category is a portion of the recipient’s homestead. The exemption reaches the portion of the homestead’s value that is equal to or less than 50 percent of the average price of a home in the county where the homestead is located, as of the date of the recipient’s death.

The measure is local rather than statewide, and the date is the date of death. A modest house in a county with a high average home price may fall entirely within the exemption, while the same house in a county with a low average may not. The comparison is to the county’s average, not to the state’s or to the house’s own assessed value.

The exemption applies to a portion of value rather than to the property as a whole. Where the home is worth more than half the county average, the excess remains within reach, and the family’s position depends on what else is in the estate and on the other categories below. Our Michigan Medicaid planning page covers the eligibility rules that operate before any of this.

A Family Farm or Business Counts on Its Own Terms

The second required category is the portion of an estate that is the primary income-producing asset of the survivors. The statute names a family farm or business as examples rather than as the whole category, so the question is whether the asset is what the survivors live on.

That framing matters in a region where a cherry orchard, a small marina, or a seasonal rental operation is both the estate’s largest asset and the household’s income. An asset that fits the description is exempt as a hardship category without any showing beyond that fact.

The department was also directed to establish circumstances under which it may review requests for exemption in cases that do not meet the hardship definition at all, and to implement the federal requirement that heirs not be unreasonably harmed by the program. Those are discretionary avenues rather than entitlements, but they exist in the statute and a request may be made under them.

The Presumption Against Planned Diversion

The same subsection carries the provision that cuts the other way, and it is worth reading before relying on any of the above. The hardship definition must include a rebuttable presumption that no hardship exists if the hardship resulted from estate planning methods under which assets were diverted in order to avoid estate recovery.

The presumption is rebuttable, so it can be answered, and it attaches to hardship that resulted from diversion rather than to every family that ever consulted a lawyer. A family whose hardship arises from ordinary circumstances is not within it. A family that moved assets out of reach and then claims the remainder is a hardship is exactly who it was written for.

The presumption operates on waivers. It does not enlarge what the program can reach in the first place, which under MCL 400.112h(a) is the estate subject to probate administration under Article III of the Estates and Protected Individuals Code. Property that passes outside probate, by deed or by beneficiary designation, is not in the recoverable estate and does not need a waiver to stay out of it.

Two Limits That Are Not Waivers

Subsection (4) places a floor under the program that operates without any application. The department shall not seek recovery if the costs of recovery exceed the amount of recovery available, or if the recovery is not in the best economic interest of the state. A small estate may be outside the program’s reach on economics alone.

Subsection (2)(b) caps what may be recovered. Amounts subject to recovery shall not exceed the cost of providing the medical services, and settlements are to take into account the best interests of the recipient’s survivors. The program collects what it paid, not the value of the estate.

Those two provisions, together with the probate-estate definition, describe the actual outer boundary of Michigan’s recovery. The hardship categories operate inside that boundary, for estates the program can otherwise reach. Which of the two a family is dealing with is the first thing to establish when a recovery notice arrives, and it is a question the notice itself will not answer. We are glad to look at it with you before anything is filed. Call us at (800) 525-6386.

If a Recovery Notice Has Already Arrived

A notice from the recovery program is the beginning of a process with categories, presumptions, and economic limits written into it, and a family that reads it as a bill has skipped every one of them. At Neumann Law Group, we handle recovery questions alongside our Michigan estate planning practice for families across Northern Michigan and statewide, including the Michigan probate administration the program attaches to. We are happy to talk it through with you. Call (800) 525-6386 or contact our office.

Michigan has no living will statute. The document that does that work here is the patient advocate designation, and it does it by appointing a person rather than by stating instructions, which means the person’s authority is what the statute regulates. The regulation is specific about the one decision families most need the document for.

MCL 700.5509(1)(e) provides that a patient advocate may make a decision to withhold or withdraw treatment that would allow a patient to die only if the patient has expressed in a clear and convincing manner that the advocate is authorized to make such a decision, and that the patient acknowledges that such a decision could or would allow the patient’s death. A designation that names an advocate and stops there does not confer that power.

The Authorization Has to Be in the Document

The standard is clear and convincing, and the subject is the patient’s own expression. What a family member believes the patient would have wanted is not the test. What the patient expressed, in a manner that meets the standard, is, and the practical place for that expression is the designation itself, in language that names the decision and acknowledges its consequence.

The two halves of the subsection are separate requirements. The patient must have authorized the advocate to make the decision, and the patient must have acknowledged that the decision could or would allow death. A form that grants broad authority without the acknowledgment is short by one element.

The same statute lets a designation carry a statement of the patient’s desires on care, custody, and treatment under MCL 700.5507, along with instructions about how the advocate is to decide. That statement is where the clear and convincing expression is written, and our Michigan durable power of attorney page explains how the financial and healthcare documents are drafted alongside one another.

The Other Limits the Statute Imposes

The advocate acts under the standards of care applicable to fiduciaries and must take reasonable steps to follow the desires, instructions, or guidelines the patient gave while able to participate, whether given orally or in the designation. An advocate may not exercise powers the patient could not have exercised on the patient’s own behalf.

Two limits are absolute. The designation cannot be used to withhold or withdraw treatment from a pregnant patient where doing so would result in the patient’s death. And an advocate may not delegate the powers to another individual without the patient’s prior authorization, so a designated advocate who becomes unavailable does not hand the role to someone else unless the document provides for it.

Mental health decisions carry their own clear and convincing requirement. The advocate may consent to forced administration of medication or to inpatient hospitalization, other than as a formal voluntary patient, only if the patient expressed in a clear and convincing manner that the advocate is authorized to consent to that treatment. Hospice care may be chosen without a separate expression.

The Authority Switches On, and Switches Off

None of these powers is exercisable at signing. Under MCL 700.5508, the advocate’s authority begins only when the patient is unable to participate in treatment decisions, and that inability is determined by the attending physician together with another physician or a licensed psychologist, on examination, in writing, entered in the medical record, and reviewed at least annually.

A dispute about that determination has a fast statutory track. A petition may be filed in the court of the county where the patient resides or is located, the court appoints a guardian ad litem for the patient, a hearing is held as soon as possible and not later than seven days after the petition is received, and the court decides as soon as possible and not later than seven days after the hearing.

The authority also ends on its own. Under MCL 700.5509(2), a designation is suspended when the patient regains the ability to participate in decisions, and it stays suspended for as long as the patient is able to. A later determination of inability revives it. The document does not transfer decision-making permanently, only for the period the patient cannot decide.

Who May Witness It

The execution rules in MCL 700.5506 are where designations most often fail on paper. The document must be in writing, signed, dated, executed voluntarily, witnessed by two people, and made part of the medical record before it is implemented. The witness list is long and specific.

A witness may not be the patient’s spouse, parent, child, grandchild, sibling, presumptive heir, or known devisee at the time of witnessing, and may not be the patient’s physician or the patient advocate. Nor may a witness be an employee of a life or health insurance provider for the patient, of a health facility treating the patient, of a home for the aged where the patient resides, or of a community mental health program or hospital providing the patient mental health services. A witness may not sign unless the patient appears to be of sound mind and under no duress, fraud, or undue influence.

A designation signed at a kitchen table with two adult children as witnesses has two disqualified witnesses. The document fails on a formality that would have taken two neighbors to satisfy. One call is usually enough for us to tell you where things stand. Call us at (800) 525-6386.

Writing the Authorization the Statute Requires

The difference between a designation that works at the bedside and one that does not is usually a sentence, and the statute says what the sentence has to accomplish. We draft patient advocate designations at Neumann Law Group as part of our Michigan estate planning work for clients across Northern Michigan and statewide. We are glad to talk through any of these questions. Call (800) 525-6386 or send us a message and we will get back to you.

Michigan caps the growth of a property’s taxable value while the same owner holds it and lifts that cap when ownership transfers. The exemption that lets a family home pass to the next generation without that reset is often described loosely, and the loose description leaves out the two conditions the statute actually imposes and the list of relatives it actually names.

The provision is MCL 211.27a(7)(u). Beginning December 31, 2014, a transfer of residential real property is not a transfer of ownership where the transferee is the transferor’s or the transferor’s spouse’s mother, father, brother, sister, son, daughter, adopted son, adopted daughter, grandson, or granddaughter, and the residential real property is not used for any commercial purpose following the conveyance.

The List Is Closed, and It Runs Through the Spouse

The relatives are named, and the names are the whole list. Parents, siblings, children, adopted children, and grandchildren qualify. A niece, a nephew, an aunt, a cousin, or a great-grandchild does not, and a transfer to any of them uncaps the property whatever the family’s intent.

The list runs through the transferor’s spouse as well as the transferor. A transfer to a stepchild, a brother-in-law, or a father-in-law fits the exemption because the statute reaches the transferor’s spouse’s son, brother, or father. That extension is easy to miss and it materially widens who can take a house under the cap.

An earlier version of the exemption, in subdivision (t), applied only from December 31, 2013 through December 30, 2014 and reached only relatives related by blood or affinity to the first degree. Material written against that version describes a narrower rule than the one that has governed since. Our Michigan estate planning attorneys work from the current subdivision.

Two Conditions, One Proof Period, One Fine

The second condition is use. The residential real property must not be used for any commercial purpose following the conveyance. A child who inherits a house under the cap and then rents it out has changed the use the exemption depends on, and the assessor is entitled to treat the transfer accordingly.

The statute then supplies a verification mechanism rather than a filing deadline. On request by the Department of Treasury or the assessor, the transferee must furnish proof within 30 days that the requirements of the subdivision are met. A transferee who fails to comply with that request is subject to a fine of $200.

That is a different obligation from the property transfer affidavit that every transferee owes under subsection (10), which must reach the local assessing office within 45 days of a transfer of ownership on a form stating the parties, the date, the consideration, and the parcel. The affidavit is filed whether or not an exemption is claimed. The 30-day proof is furnished only when someone asks for it.

Where a Retained Life Estate Fits

A separate subdivision addresses the family that keeps the parent on the deed for life. Under MCL 211.27a(7)(d), beginning December 31, 2014, a transfer of that portion of residential real property that had been subject to a life estate or life lease retained by the transferor, resulting from the expiration or termination of that life estate, is not a transfer of ownership where the transferee is one of the same listed relatives and the property is not used for any commercial purpose afterward.

The provision matters because a retained life estate is exactly what a Lady Bird deed creates. The remainder interest passing at the parent’s death is the transfer this subdivision exempts, on the same relative list and the same use condition, with the same 30-day proof and $200 fine.

Without that subdivision the end of a life estate would be a transfer like any other. With it, a deed that keeps the parent in control for life and passes the house to a child at death does so under the cap.

A Trust or Entity Has Its Own Rules

The relative list appears again inside the subdivisions governing trusts and estates, with the same December 31, 2014 start. A conveyance of residential real property to a trust is exempt where the sole present beneficiary or beneficiaries are on the list. A distribution out of a trust to a listed relative is exempt. A change of beneficiary that adds or substitutes a listed relative is exempt. And a distribution from a decedent’s estate to a listed relative is exempt. In each case the non-commercial use condition applies.

Holding the property in a company is treated differently. Under subdivision (h), a conveyance of more than 50 percent of the ownership interest in a corporation, partnership, limited liability company, or other legal entity is itself a transfer of ownership of the property the entity holds, and the entity must notify the assessor within 45 days unless the transferee already has. There is no relative exemption inside subdivision (h).

The exemption letter is the first thing to check on any deed or trust distribution to a family member, because the conditions differ by subdivision and an assessor reads the one that applies. One call is usually enough for us to tell you where things stand. Call us at (800) 525-6386.

Before Recording a Transfer to a Relative

Which subdivision governs, who is on the list, and what the property will be used for afterward are the three questions that decide whether the cap survives, and all three can be answered before anything is recorded. We prepare deeds and trust transfers at Neumann Law Group for families across Northern Michigan and statewide, including Lady Bird deeds that rely on the life-estate subdivision. We are glad to talk through any of these questions. Call (800) 525-6386 or send us a message and we will get back to you.

The question of whether a family needs a will or a trust is usually answered by describing what each does. A different way in is to look at how each is made valid, because the two instruments are governed by separate parts of the Estates and Protected Individuals Code with separate formalities, and those formalities explain a good deal about when each one is the right tool.

A will is valid under MCL 700.2502(1) only if it is in writing, signed by the testator or in the testator’s name by another individual in the testator’s conscious presence and at the testator’s direction, and signed by at least two individuals, each within a reasonable time after witnessing the signing or the testator’s acknowledgment of the signature or of the will. A revocable trust is governed by the Michigan Trust Code, and its defining rule under MCL 700.7602 concerns revocability rather than witnesses.

Two Witnesses, Signing Within a Reasonable Time

The will formalities are strict about people and looser about timing than families expect. Two witnesses are required, and each must have witnessed either the signing itself or the testator’s acknowledgment of it. Acknowledgment counts, which means a testator who signed alone can validate the will by acknowledging the signature to two people who then sign.

The witnesses sign within a reasonable time after witnessing, rather than in the same sitting. That phrase is deliberately flexible, and it is also where a will can fail if the witnesses’ signatures are added long afterward without any record of when the witnessing occurred.

A will that does not meet those requirements can survive on a different footing. Under subsection (2), a document is valid as a holographic will, whether or not witnessed, if it is dated and if the testator’s signature and the document’s material portions are in the testator’s own handwriting. Subsection (3) allows intent that the document is a will to be shown by extrinsic evidence, including, for a holographic will, portions of the document that are not in the testator’s handwriting. Our Michigan wills page covers the statutory will form and what a will does at death.

A Trust Is Presumed Revocable, With a Date Attached

The trust rule runs the other direction. Under MCL 700.7602(1), unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend it. Silence produces a revocable trust, which reverses the assumption clients bring from states where the default is the opposite.

The presumption has a starting date and exceptions. It does not apply to a trust created under an instrument executed before April 1, 2010, nor to a trust created by the exercise of certain powers of appointment or of a power held by a trustee in a fiduciary capacity. An older trust is read under the rule that governed when it was signed, which is one reason a trust drafted decades ago is worth reading rather than assuming.

Where a revocable trust is created or funded by more than one settlor, the section sets out how revocation and amendment work between them. Those rules matter for married couples with a joint trust, and they differ depending on whether the property in question is community property or not.

What the Difference in Formalities Is Telling You

A will is an instrument that speaks at death, and the witness requirement exists because the person who signed it will not be available to say what they meant. The formalities substitute for the testator’s testimony. A revocable trust is an instrument the settlor lives with, amends, and often serves as trustee of, and the law’s attention goes to whether it can be changed rather than to who watched it be signed.

That difference is also why the trust’s usefulness during life is the thing a will cannot match. A funded revocable trust has a trustee, and a successor trustee, in place while the settlor is alive, so incapacity is handled inside the instrument. A will does nothing until death, and the period before it is covered by other documents entirely.

The word funded is the one that decides whether any of that works. A trust holds only what has been retitled into it, and an unfunded trust manages nothing and avoids nothing, whatever its drafting. The presumption of revocability keeps the settlor in control, and it also means the settlor is the one who has to move the assets in. Our Michigan trust administration page covers what a trustee does once the settlor cannot.

Most Families End Up With Both

The choice is rarely one or the other in practice, and the formalities are part of the reason. A trust that has been funded governs the assets in it, and a will disposes of whatever was not retitled, including assets acquired after the trust was signed and never moved. A will that pours over into the trust is the ordinary way those two facts are reconciled.

Each instrument is then executed under its own rule. The will is signed with two qualifying witnesses. The trust is signed with attention to whether it says it is irrevocable, whether it predates April 1, 2010, and whether the assets it is meant to govern actually carry its name.

Which instrument a family needs first depends on what they own and how it is titled, and that is a question a title search and an account list answer faster than a description of the law does. We talk these questions through with you. Call us at (800) 525-6386.

Choosing the Instrument, Then Executing It Correctly

A will with the wrong witnesses and a trust with nothing in it fail in the same practical way, and both failures are visible at signing to anyone reading the statute. At Neumann Law Group, we prepare wills and revocable trusts for families across Northern Michigan and statewide as part of our Michigan estate planning practice. If you would like us to look at your situation, call (800) 525-6386 or contact us through our website.