PR Appointment for Estate with No Assets

Here’s a case that’s worth filing away for those who do probate litigation and estate administration. It’s unpublished, but addresses an issue that comes up not infrequently.  The holding is that a probate court cannot deny a petition to appoint a personal representative on the grounds that the estate has no assets.

In In Re Estate of Janet Kapp (click on name to read case), the trial court denied a petition to appoint a personal representative on the grounds that there were no known assets to be administered. The COA reversed and remanded, holding that there is no basis in EPIC to support the trial court’s decision.  The COA says:

Instead, the court concluded that the appointment of a personal representative was unnecessary because there were no assets in the estate to probate.  In doing so, however, the probate court did not cite statutory authority that allows a court to deny the appointment of a nominated personal representative on those grounds.  To the contrary, a court rule provides that personal representatives do not need to provide notice to creditors when “[t]he estate has no assets[.]” MCR 5.208(D)(3)(a). It follows that personal representatives can be appointed even when the estate has no assets.

There are many reasons to open an estate which have nothing to do with distribution of assets. This is a good decision, and although unpublished, should provide an outline for the argument when attorneys are faced with this misunderstanding in their cases.

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Medicaid Planners Get Rare Win from COA

The Michigan Court of Appeals has issued an opinion regarding the appropriateness of using probate court protective orders to obtain spousal support orders in situations where such orders impact the calculation of a nursing home resident’s Medicaid “patient pay amount.” The outcome is 80% good for planners, and as such is a refreshing break from the series of punishing COA opinions that have been issued in recent years with respect to Medicaid planning cases.

The case is published, lengthy and involved. Click here to read the combined cases of In Re Joseph VanSach Jr., and In Re Jerome R. Bockes.

For the uninitiated, a “patient pay amount” is the portion of a person’s income that is required to be paid to toward their care when they are in a nursing home receiving long term care Medicaid benefits. The exact amount is a function of Michigan Department of Health and Human Services (DHHS) policy, which provides a formula for calculating the patient pay amount.  When the nursing home Medicaid beneficiary is married, that formula allows for diversion of income to the “community spouse.” DHHS policy also provides that where a court order directs payment from the nursing home resident to the community spouse, that court order supersedes the formula for determining the amount of income diverted.

In both of the cases before the COA, the local probate court ordered that 100% of the income of the nursing home resident would be paid to the community spouse for their support. These two decisions were appealed by DHHS, represented by the Michigan Attorney General, and the two cases were combined by the Court of Appeals.

The main argument of DHHS was that the probate court lacked jurisdiction to hear these cases. That argument was made on several grounds, all of which failed.  In this decision, the COA holds that probate courts have the authority to grant these orders and that in doing so those courts are not engaged in making DHHS eligibility determinations even though the clear purpose of obtaining such orders may be for that reason.  That’s a big win for the planners.

The COA also holds that the fact that these individuals may have had power of attorneys in place at the time of the petition does not preclude the probate court from getting involved. The COA reasons that the specific form of relief desired (a court order of support) would not be something that an agent acting under a POA could provide, and therefore the court does have jurisdiction to hear these matters.  This holding has potential applications beyond Medicaid planning matters.

After dismissing the primary jurisdictional challenge, the COA ventures into a discussion about how a probate court should decide these cases. The COA holds that in the two cases giving rise to the appeal, the probate courts erred in awarding 100% of the nursing home resident’s income to the community spouse, and vacates both orders and remands the cases.

The COA instructs Michigan’s probate courts that the burden is on the party seeking the order of support to show, by clear and convincing evidence, that the community spouse “needs” the additional income, that it is more than a “want,” and that in deciding whether or how much to award, the probate judge must consider the interests of the institutionalized Medicaid beneficiary and their obligation to contribute toward the costs of their own care. The discussion of this process goes on for several paragraphs, and includes several lengthy footnotes, using, at times, vague and clouded statements to explain how this balance should be struck.  In the end, the opinion seems to intentionally avoid the obvious conclusion that the institutionalized spouse has no real interest in paying anything more than they have to toward their care, as their care remains the same notwithstanding, and that in almost every case the interest of institutionalized spouse would be to divert as much income to support their spouse as possible.  The COA seems to want to direct the probate judge to consider public policy and the interest of the DHHS in making its decision – but they never say that – presumably because there would be not legal basis for doing so.

Importantly, the COA rejects the standard requested by DHHS of “exceptional circumstances resulting in significant financial duress.” But in the same footnote discussion, the COA goes on to say:

… as a matter of common sense, when an incapacitated person needs to be institutionalized to receive full-time medical care, it would be an unusual case for a community spouse’s circumstances to trump the institutionalized spouse’s need for use of his income to pay his medical expenses, particularly when the community spouse has the benefit of the CSMIA. In other words, an institutionalized spouse’s receipt of Medicaid, and a community spouse’s protection under the spousal impoverishment provisions, generally weighs against the entry of a support order.

The result of this case will require more effort in bringing these matters to probate courts in the future. Practitioners will want to establish a record that the probate judge can rely upon to conclude that the burden has been met.  As evidenced by the orders vacated in this appeal, a judge simply concluding that the request was “reasonable” is not good enough.

We should also recognize that while this case is about protective orders used to establish income diversion orders to benefit the community spouse, many of the same rules and standards would presumably apply to the other common use of protective orders in Medicaid planning: orders to establish a protected spousal amount.

In the end, these important planning tools (probate court protective orders) survived the COA and planners should celebrate this decision. It isn’t perfect, but in light of the COA’s prior decisions in this arena, it’s a lot more than might have been expected.

Representing the interests of the elder law bar (as appellees) in these two matters were two renowned elder law practitioners: CT’s own David Shaltz, and my friend and colleague Don Rosenberg.

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The Fix Is In

In the process of probate administration, there are certain “allowances” that are paid “off the top” before creditors and beneficiaries get what they have coming.   Among those is the exempt property allowance.  The exempt property allowance is currently $15,000.  It goes to the surviving spouse, but if there is no spouse surviving, it is divided among the surviving children.  Since 2000, it has gone to adult surviving children as well as minor children.

In 2015, the Michigan Court of Appeals issued a published opinion in the case of In Re Estate of Shelby Jean Jajuga (click on the name to read the case). Ms. Jajuga died leaving a will and one surviving child.  The will did not leave anything to the child, and expressly stated that the child should “inherit nothing.”  Notwithstanding this expression, the child made a claim for the exempt property allowance and it was granted.  The Court of Appeals concluded that this was ok, and affirmed what I think most practicing probate lawyers believed the law to be, which is that the child gets the allowance regardless of what the will says.

That result did not sit well with some people, and so legislation was introduced to change the outcome. That legislation recently became law.  Specifically, the change is in the language of MCL 700.2404(4).  Click on the statute to read it.

Because the outcome of Jajuga neither surprised nor offended me, I am not a fan of the fix. But as far as fixes go, I think this one is better than it might have been.  Notably, the way the change is written, it does not eliminate the exemption for children, nor limit it to minor children; but rather the exemption remains as it existed, but can be barred by language in a will expressly cutting out the child or children or by simply eliminating their right to an allowance.

Two observations:

When planning for small estates, lawyers may want to disable the exemption so that the exempt property allowance to a child or children does not significantly alter the resulting distribution where non-children (including descendants of deceased children) are takers. Of course this can perhaps be better addressed by simply defining beneficial interests to include an offset for any allowance received.  The risk of routinely disabling this allowance in wills is that in very small or insolvent estates, doing so would elevate creditors above children.

My second point relates to Medicaid estate recovery. In cases where assets mistakenly end up in probate for a decedent who received long term care Medicaid benefits, the exempt property allowance comes before the State of Michigan gets repaid for their estate recovery claim.  The way the fix is written, this remains true.  This will allow children in these cases to continue to have good reason to open the estate, and place them in a better bargaining position with the State with respect to settling estate recovery claims.

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Lost Wills – A Tough Row to Hoe

This juicy little soap opera out of Battle Creek starts where so many of such tales begin:  Dad is married but his children are from a prior relationship.  Then Dad dies.

Daughter Brooke actually goes through the pockets of the dead man looking for the keys to the gun safe where he kept his will – but too late!

The Court of Appeals describes the scene as follows:

Brooke Barksdale noted that when she arrived at the decedent’s home at approximately 11 a.m. on the day of the decedent’s death, petitioner’s son, Shawn, tried to stop her as Brooke Barksdale went to see the decedent’s body, and when she looked in the decedent’s pants pocket for his car keys, which also contained the keys to the gun safe, she could not find them.

And, upon further investigation, she sees that the door to the gun safe (which he always kept locked) stands open.  Before she can further investigate, Wife tells her to leave. Classic!

Wife petitions to open an estate intestate.  Kids counter with petition to admit a lost will.  Wife brings motion for summary disposition.  Kids submit affidavits of themselves and others that aver that Dad had a will he kept in the gun safe.  It named Brooke as Personal Representative.  The house went to Brian and the rest was distributed among his kids and grandkids in unknown proportions.  They aver that Dad discussed the will with them on numerous occasions, that he kept it locked in his gun safe, and that he had it out when he had Brooke sign various other legal documents related to his affairs.  They further aver that Wife was present during some of these conversations and that she verbally acknowledged the will’s existence on at least one occasion.

Trial Court grants summary disposition to Wife, saying that the proffered testimony is insufficient to withstand summary disposition because there is no evidence that the will was executed in conformity with the requirements of a valid will or holographic will under MCL 700.2502, or that it could be admitted as document intended to be a will under MCL 700.2503; and further that the terms remain too sketchy even with the recitations of the kids to meet their burden.  MCL 700.3402, MCL 700.3407.  Court of Appeals affirms.

The case is unpublished, so take it for what it’s worth.  And I think that what it is worth is that it sheds light on the challenges of probating a lost will when no copy can be found.

Takeaways from this case:

1.    Admitting a lost will when there is no draft or copy to be found is a tough row to hoe.

2.    It’s a good idea to keep your will someplace where people who might want to destroy it can’t do so after you die or become incompetent.

Read In Re Estate of Stuart Alister Warner by clicking on the name.  

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Civil Actions versus Proceedings in Probate Court

When starting a new litigation matter in probate court, a threshold issue is to determine whether the matter should be characterized as a probate “proceeding” or a “civil action.” There are significant differences between the two, including what court or courts it can be filed in; and what type of pleading, a petition or a summons and complaint, must be prepared.

Generally, a claim against a third party filed by a Trustee or Conservator would be a civil action; whereas things like surcharging a fiduciary, construing or modifying a trust, or seeking to invalidate a will or trust, would be a proceeding. The primary source distinguishing between the two is MCR 5.101.

This distinction is the issue in a newly released unpublished case from the Court of Appeals. In this case, a seasoned Oakland County public fiduciary, John Yun, was appointed conservator over the estate of a demented person who had apparently been exploited by a Mr. Hartman.  The conservator filed a petition for surcharge seeking recovery of assets that Hartman allegedly converted to himself before the conservatorship was created.  Mr. Yun followed the requirements of notice for a proceeding by mailing a copy of the petition and notice of hearing to Hartman.  Hartman did not show up for the hearing, and the trial court entered an order finding that he was liable for nearly $200,000.  Mr. Yun then brought a motion to have the order converted to a judgment.  Hartman objected, claiming that the process by which the order against him had been entered was defective as it should have been filed as a civil action and not a proceeding; and accordingly that he should have been served with a summons and complaint and not a petition.

Click here to read In Re Doreen Seklar.

In its opinion, the COA reviews the distinctions between a proceeding and civil action and concludes that the probate court was correct in allowing the order to enter through the proceedings process. In reaching this conclusion the COA relies on the proposition that Hartman was a “fiduciary.”  In fact, the protected person had created a power of attorney appointing Hartman as her agent, and a revocable trust nominating Hartman as successor Trustee.  These documents were all set aside by the probate court in its initial hearing.  But what troubles me about the case is that the COA holds that a person nominated as a successor trustee is a fiduciary for purposes of MCR 5.101.  It says:

Further, Hartman meets the definition of a fiduciary. First, the March 14, 2014, revocable trust named Hartman a successor trustee.

That seems like a stretch. And while I appreciate expediency, I worry that such rationale could be applied in similar and dissimilar situations with unanticipated outcomes.  While in this case, Hartman no doubt was aware of his nomination as a successor Trustee, apparently having had a large role in obtaining the estate planning documents, people are frequently nominated to such roles without ever being advised.  It seems potentially problematic to me to have a case that holds that a person who never accepted or acted in a nominated fiduciary role is a fiduciary for the purposes of being subject to a probate proceeding.

I am certainly not challenging Mr. Yun’s approach. He is highly experienced in this type of work, and he got the job done and did so very efficiently.  However, another approach to this case could have been to have the probate court order Hartman to account, and/or to simply have sued Hartman for conversion, fraud and other civil causes of action by filing a summons and complaint.

In any event this case highlights an issue that comes up regularly in probate litigation matters. For those interested in the topic, it’s worth a read.

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Section 2503 Grows Up

Kids in suits

This just in – pretty big news – and pretty interesting – the Michigan Court of Appeals holds, in a published opinion, that a draft of a will, prepared by a lawyer, but never signed by her client, could be a valid will. Click on the name to read In re Estate of Attia.

EPIC (the current probate code) was adopted in 2000. It was a big deal in the probate world.  And while most of it was simply clean up, update and clarification work, there were a few new twists that came in with the new code – a few hot topics at the seminars – new concepts that had everyone wondering: Where is this was coming from? – and Where is it going to go?  One of the hottest topics of the day was section 2503.  Section 2503 says, essentially, that even if a document fails to meet the technical requirements for execution of will, and even if it is not a holographic will, it may be treated as a valid will if it can be shown by clear and convincing evidence that the testator intended it to be his/her will.  Before section 2503, a will either met the statutory signature and witnessing requirements of the probate code, met the requirements of a holographic will, or it was out.  Click here to read MCL 700.2503.

The argument for 2503 was that where you have a document that was clearly intended to be a person’s will, and they simply failed to meet a technicality, that document should be given effect – it’s only fair. The argument against the change was that this is the exception that will swallow the rule – someday this will be used to offer any sort of document as a person’s will – and the litigation will be endless.  Did I hear a gulp?

So in Attia, it appears that lawyer met with client, prepared a draft, and scheduled a date for signing. But client died before the document was signed.  Child A submits the draft as the last will under 2503.  Trial court dismisses on summary disposition, says 2503 can’t possibly be construed to mean that an unsigned document can come in as a valid will – certainly the testator’s signature is not one of the technicalities that can be disregarded.  Court of Appeals says, 2503 says what it says, and that means that if it can be shown by clear and convincing evidence that this document was intended to be a will, the lack of a signature from the testator is not controlling, the matter cannot be dismissed as a matter of law, and the proponent gets a chance to try and prove intent.

Fascinatingly, Michigan appears to be the first state to address this issue head on. The opinion cites a New Jersey case, but even there the testator had made some handwritten notes.  In Attia it isn’t even clear, nor does it appear to be relevant, whether the testator ever even saw this document.

So, it took us 16+ years to get here, but it seems that section 2503 is feeling all growed up – and asking for the keys to the car.

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Show Me the Money

money

There’s a new published probate court case arising out of two matters in Jackson County. The case holds that if you don’t have any money, and even if you are on public benefits, you still have to pay an inventory fee so long as the estate has resources – but maybe not the filing fee. Not that interesting (to me), but it is a published probate opinion, so for what it’s worth, click here to read the case.

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The Love Dance of Arbutus and Lyle

Arbutus

In the woods of Keewenaw County, Lyle married Arbutus and they operated a little shop together. Lyle took a job with the park service which took him away from home for periods. In time, Lyle began having an affair with Susan.  Lyle and Susan carried on for years while Arbutus and Lyle were still married. When Lyle was with Arbutus, she accepted him notwithstanding her knowledge of his relationship with Susan.  Whether she was “ok with it” or not isn’t clear, but this was their life, their love.  In his later years, Lyle moved in with Susan.  For awhile after moving in with Susan, Lyle occasionally visited Arbutus, and she still accepted him back when he did.  But ultimately Lyle stopped coming by, and Arbutus made no effort to visit him at Susan’s home or otherwise contact him – even though she knew where they lived.  Neither Lyle nor Arbutus ever initiated divorce proceedings.

That’s the story in a new published probate case called Estate of Lyle Seth Peterson. Click on the name to read the case.

Coincidentally, in a recent post, “Messy Inheritance Case Makes Fun Reading,” we looked at the law regarding the rights of absent parents. This case is about the rights of an absent spouse.  Both cases remind us of the difficulties that arise when the law attempts to impose moral judgments in the context of probate law.

Michigan law provides that even if one spouse (the spouse who dies) has “cut out” the other spouse via their will, that surviving spouse can, notwithstanding, get a big chunk of the deceased spouse’s estate by “electing against” the will. So the law is that, at least with a will, it ain’t easy to cut out a person you are legally married to when you die. However, the statute at issue in this case [section 700.2202(2)] says that a spouse loses their ability to “elect against” the will if “any of the following” are true for at least one year before the death of their spouse:

(i) Was willfully absent from the decedent spouse.

(ii) Deserted the decedent spouse.

(iii) Willfully neglected or refused to provide support for the decedent spouse if required to do so by law.

In this case, there is no question that for more than a year prior to Lyle’s death, Lyle was living with Susan and had no contact with Arbutus, even though Arbutus knew where Lyle was.

The trial court says, Arbutus still was a surviving spouse because the evidence shows she would have accepted Lyle back if he had chosen to come around; and therefore she wasn’t “willfully” absent. Rather, only Lyle chose to be absent, and Arbutus just let him have his way. Essentially the Court of Appeals upholds the trial court with slightly more nuance to their rationale.

Let’s not kid ourselves. This is about Courts not wanting to punish a wife who stood by her philandering man; or alternatively, Courts becoming uncomfortable passing judgement on an alternative lifestyle that a couple old Yoopers chose to live.  Either way, the statute says that either desertion or willful absence triggers the penalty, both are not required.  Yet clearly these courts have gone to great length to read the statue to conclude that because Lyle abandoned Arbutus and not the other way around, Arbutus was not willfully absent, which is to say that the distinction between “deserting” and “willful absence” is now meaningless.

So takeaways here are maybe (1) Courts often go to great lengths to read the law in a way that allows them to grant the relief they think is fair; (2) Life and love are complicated things, and simple legal rules and definitions designed to capture moral conduct are inherently flawed.

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Roush III: Missed Opportunity and Unintended Consequences

I posted twice before on the Roush case. Click here and here for the background.

In short, the issue in this case is: When a person who has previously created a patient advocate designation is deemed unable to make their own medical decisions by two doctors, then revokes that patient advocate designation, are that person’s rights to make their own medical care decisions (a) immediately restored or (b) suspended until a court decides whether they can make their own decisions or whether a guardian needs to be appointed to make those decision for them?

By implication, the Court of Appeals, in an unpublished decision, came down on the side of “immediately restored.” The losing party then sought review from the Michigan Supreme Court, which took the matter seriously enough to request that the Elder Law and Disability Rights Section of the State Bar file an amicus brief, which they did; as did other interests including the Michigan Elder Justice Initiative.  This past Friday (May 6), the Michigan Supreme Court denied leave to appeal, leaving the Court of Appeals opinion in place.  For the moment, at least, a win for the “immediately restored” camp.

Michigan’s patient advocate law is curious in that it expressly provides that:

… even if the patient is unable to participate in medical treatment decisions, a patient may revoke a patient advocate designation at any time and in any manner by which he or she is able to communicate an intent to revoke the patient advocate designation. If there is a dispute as to the intent of the patient to revoke the patient advocate designation, the court may make a determination on the patient’s intent to revoke the patient advocate designation. If the revocation is not in writing, an individual who witnesses a revocation of a patient advocate designation shall describe in writing the circumstances of the revocation, must sign the writing, and shall notify, if possible, the patient advocate of the revocation. If the patient’s physician, mental health professional, or health facility has notice of the patient’s revocation of a patient advocate designation, the physician, mental health professional, or health facility shall note the revocation in the patient’s records and bedside chart and shall notify the patient advocate. MCL 700.5510(d)

It seems the Michigan Supreme Court would have done us all a favor by taking the case and clarifying the law on this point. Now the issue of when that revocation occurs, and what the responsibilities of the various parties are, remains illusive.  All we have is an implication, based on an unreported case that arose in the context of a motion for summary disposition.

I wonder about how institutions may react, and whether there will be unintended consequences of the Supreme Court’s decision to take a pass.

For instance, what if I run a facility that cares for persons with cognitive impairments, and one of my residents has been deemed unable to make their own medical treatment decisions, and that resident has been admitted to my facility by their patient advocate, and then what if that resident says “I want to go home”? Is that expression alone a revocation of the patient advocate designation triggering the patient’s right to leave? Or does the person have to actually say the magic words “I revoke my patient advocate designation?” Is “I want to go home” enough to trigger the obligation of the staff person to report the incident as contemplated by statute? Enough to require a hearing so that a “court may make a determination on the patient’s intent to revoke the patient advocate designation.”

If I am the facility facing the possibility of a false imprisonment lawsuit (which is how the Roush case started), I might want to act out of an abundance of caution. I might want to make sure no family member later testifies in a lawsuit against me that: “My mother told the staff she wanted to go home, and they kept her against her will.  I heard her say it in front of the staff several times.”

So, do facilities start demanding guardianships over all their impaired residents again, rolling back twenty years of progress? Do plaintiff’s attorneys start looking for these cases? Maybe I am thinking too much, which I admit I can do sometimes. But with family dynamics the way they are, and with care facilities in a defensive posture, as they are, I’m not sure.

So, in any event, to my way of thinking, by deciding not to take this important case, the Michigan Supreme Court missed an opportunity to help clarify this confusing area, and provide some direction the both the families and facilities that are trying to care for our loved ones.

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MFDA Chimes in on Funeral Rep Law

The Michigan Funeral Directors Association contacted the author of this blogsite and offered a different perspective with respect to, in fact, takes exception to, the conclusions offered in my prior post regarding the anticipated funeral representative law, and specifically with the proposition that the funeral representative will have a legal obligation to follow the known wishes of the decedent. Following is a legal opinion obtained by the MFDA on this issue:

Including “funeral representative” in the definition of “fiduciary” does not support the conclusion that a funeral representative would owe a fiduciary duty to the deceased person.  In other sections of the statute, EPIC expressly provides duties that a fiduciary owes, and to whom a fiduciary owes those duties.  EPIC does not impose a fiduciary duty to a deceased person.  Specifically, MCL 700.1212 provides that “[a] fiduciary stands in a position of confidence and trust with respect to each heir, devisee, beneficiary, protected individual, or ward for whom the person is a fiduciary” (emphasis added).  EPIC further provides that “[a] fiduciary shall invest and manage fiduciary assets solely in the interest of the beneficiaries.”  MCL 700.1506 (emphasis added).  Finally, EPIC enumerates remedies available in the event of a breach of fiduciary duties.  However, those remedies again only contemplate “[a] violation by a fiduciary of a duty the fiduciary owes to an heir, devisee, beneficiary, protected individual, or ward for whom the person is a fiduciary…” MCL 700.1308.

Nothing in EPIC discusses or otherwise imposes a fiduciary duty to a deceased individual.  This proposition is further buoyed by Senate Bill 551’s language that “a funeral representative… is presumed to have the right and power to make decisions about funeral arrangements and the handling, disposition, or disinterment of a decedent’s body, including, but not limited to, decisions about cremation, and the right to retrieve from the funeral establishment and possess cremated remains of the decedent immediately after cremation.”  MCL 700.3206(1).

Further, Senate Bill 551 specifically enumerates the order of who has priority in determining funeral arrangements and the disposition of the body.  A funeral representative has priority over all others (except service members whose remains are disposed of in accordance with federal statute).  MCL 700. 3206(3).  Importantly, MCL 700.3206(3) does not provide that a  funeral representative is beholden to any stated requests made by the deceased.

Finally, in outlining the powers of a personal representative, which is also defined as a fiduciary, EPIC makes following the written instructions of the decedent merely permissive, not required.  “Subject to sections 3206 to 3208, before or after appointment, a person named as personal representative in a will may carry out the decedent’s written instructions relating to the decedent’s body, funeral  and burial arrangements.”  MCL 700.3701 (emphasis added).  Clearly, if being included as a fiduciary under EPIC required following such instructions, this language would be both unnecessary and conflicting with that duty.

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