- Call 24/7 (800) 525-6386 Tap Here to Call Us
Five Michigan Estate Planning Mistakes Written Into the Statute
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.