A. MINOR GUARDIANSHIP – JURISDICTION – VISITATION

In re ADW, - Mich App - ; - NW 2d – (2024), #368,361, rel’d 3\14\24

B. TRUSTS – DIVORCE – MARITAL ASSETS – BREACH OF FIDUCIARY DUTY\FRAUD

In re Lyden Trust, - Mich App - ; - NW 2d – (2024), #362,112, rel’d 4\4\24

Concurrence & Dissent

C. ADULT GUARDIANSHIP – DELEGATION OF POWERS\DUTIES

In re Malloy, - Mich - ; - NW 2d – (2024), #165,018, rel’d 5\28\24

D. TRUSTS – SETTLEMENT AGREEMENT – ENFORCEMENT\ INTERPRETATION

In re Conley Trust, - Mich App - ; - NW 2d – (2024), #366,180, rel’d 7\18\24

In re Conley Trust, - Mich App - ; - NW 2d – (2024), #366,180, rel’d 8\22\24

E. TRUSTS – CLAIMS – QUALIFIED PLAN\INSURANCE – SATISFACTION OF JUDGMENT

In re Fowler Estate, - Mich App - ; - NW 2d – (2024), #365,600, rel’d 7\18\24

In re Fowler Trust, - Mich App - ; - NW 2d – (2024), #365,603, #365,610, rel’d 7\18\24

F. DD GUARDIANSHIP – COGUARDIAN – REMOVAL

In re AMMB Guardianship, - Mich App - ; - NW 2d – (2024), #368,915, rel’d 8\22\24

G. SPECIAL NEEDS TRUST – NOTICE – DISTRIBUTION – MODIFICATION

In re Hernandez Trust, - Mich App - ; - NW 2d – (2024), #366,172, rel’d 10\14\24

IV. CONCLUSION

I. INTRODUCTION

Materials address new reported appellate court decisions in the probate area that have occurred within approximately the last year.

II. CASE LAW

A. MINOR GUARDIANSHIP – JURISDICTION – VISITATION

In re ADW, - Mich App - ; - NW 2d – (2024), #368,361, rel’d 3\14\24

1. In this case, the Court of Appeals, in a unanimous decision, affirmed the ruling of the Lenawee Probate Court appointing a minor guardian but reversed its ruling requiring the minor to visit her maternal siblings and remanded for additional proceedings.

2. The appellant (Dale, father of ADW) and ADW’s mother (Dee), married in 2012; both had children from prior relationships. ADW was a product of their marriage. After Dee’s disappearance on April 24, 2021, Dale’s relationship with her children became strained as they blamed him for her disappearance. Dale prevented ADW from having any contact with Dee’s children.

On May 3, 2022, Dale executed a document titled “Appointment of Guardian and Conservator for Minor Child of Dale J. Warner”, which stated that he requested the court appoint his son guardian and conservator of ADW if he failed to serve for any reason. On September 12, 2023 Dale executed a “Consent to Treat Minor Children” form, permitting a doctor to make decisions regarding ADW’s medical care from September 12, 2023 to January 1, 2024. On September 13, 2023 Dale was found in contempt for failing to cooperate regarding Dee’s conservatorship and sentenced to 93 days in jail. Dee’s adult daughter filed a minor guardianship petition regarding ADW on September 19, 2023. Dale executed a notarized power of attorney purporting to make his son (Jaron) guardian of ADW; the appointment was accepted by Jaron on September 29, 2023.

A hearing was held on October 9, 2023, at which the DHHS worker testified ADW wanted a relationship with Dee’s children but also desired to remain in the care of Jaron. The LGAL recommended that ADW be able to visit with both sides of the family. The Court ruled on the bench and signed an order on October 11, 2023 which appointed Jaron temporary guardian, expiring November 30, 2023. In a separate order dated October 25, 2023, Jaron was directed to contact a named DHHS worker to obtain a recommendation regarding visitation by JDW with her maternal siblings, with supervised visits to commence immediately upon her recommendation being made.

Dale was released on November 7, 2023; before the November 30th guardianship hearing he was charged with murdering Dee, arrested, and detained on a $15 million bond. The outcome of the November 30th hearing is unclear, but Dale was undoubtedly unable to provide for ADW’s care. Dale appealed both probate orders.

3. Dale argued that the orders were invalid due to lack of subject matter jurisdiction and violative of his constitutional parental rights. The appellate panel noted that the Probate Court had subject matter jurisdiction in the case at bar. Amber filed a petition for minor guardianship when Dale was incarcerated for contempt and ADW was residing with Jaron. They concluded that Jaron was not provided with legal authority for ADW’s care and maintenance; therefore, jurisdiction was established per MCL 700.5204(1). None of the documents Dale signed conferred him with this authority.

The Court of Appeals did find that the Probate Court was not empowered to order visitation in guardianships. The power over visitation issues is conferred on the guardian. MCL 700.5215; D’Allessandro v Ely, 173 Mich App 788; 434 NW 2d 662 (1988). However, the Probate Court has the ability to address this issue short of ordering visitation. These include determining whether the guardian has adequately provided for the minor’s welfare (MCL 700.5207(1)(b)), satisfied their duty to facilitate the ward’s education and social or other activities (MCL 700.5215), and conducting a review hearing and ordering the parties to follow a court-structured plan to resolve conditions identified at the review hearing (MCL 700.5207(3)(b)(ii)(B). As a result, the visitation order was reversed, even though the LGAL and DHHS worker both stated that visits by ADW and her maternal siblings would be the child’s best interests.

4. This decision provides a useful overview of the basis and limits of probate court jurisdiction in full minor guardianship proceedings, including the issue of visitation.

5. Application for leave to appeal was not filed.

B. TRUSTS – DIVORCE – MARITAL ASSETS – BREACH OF FIDUCIARY DUTY\FRAUD

In re Lyden Trust, - Mich App - ; - NW 2d – (2024), #362,112, rel’d 4\4\24

1. This 2-1 decision by the Court of Appeals affirmed a ruling of the Muskegon County Probate Court granting summary disposition in favor of the trustee and dismissing the claims of the settlor’s wife to any trust assets. (the couple was in the process of divorcing when the settlor died).

2. In Lyden, the decedent established a revocable trust; upon his death in 2020, his son from a prior marriage became successor trustee. In 2019, the settlor’s wife filed for divorce in Missouri, and the court entered an order generally prohibiting the parties from dissipating or transferring marital assets. The settlor consulted with his attorney and in February 2020 made his son the sole beneficiary and successor trustee. His lawyer noted that these changes were permissible, but would only be operative upon his death and that equitable principles would govern the distribution of his assets during the divorce proceedings. The settlor was hospitalized in March 2020, and he informed his wife that he had stage IV lung cancer. A settlement was reached that nearly equally divided the marital assets, but the wife wanted to be named beneficiary of his life insurance in lieu of spousal support. Negotiations continued but in May 2020 the settlor was determined to be incapacitated; he died in June 2020 before the divorce was finalized. The wife received approximately

$400,000 in assets, but none from the trust, although she would have received almost 50% of the corpus if the divorce had been completed (the total marital property was valued at approximately 2.6 million).

The wife filed a petition to reform or set aside the 2020 trust, arguing that it was contrary to public policy as it disinherited her and resulted in the near complete divestment of the marital assets. The successor trustee\stepson filed a summary disposition motion, noting that Michigan public policy permits a spouse to be disinherited via the other spouse’s trust. In response, the wife argued that trusts had a fiduciary duty to protect her “marital” trust assets. The probate court granted summary disposition, and further ruled that a constructive trust was inappropriate. The wife’s request for delayed leave to appeal was granted.

3. The Panel declined to adopt a fraud claim regarding the marital assets or to rely on marital fraud factors enunciated in Missouri caselaw to inform Michigan public policy. The 2020 amendment was a proper purpose, as there was no indication the settlor intended to defraud his spouse of her marital rights. He consulted with his attorney before executing the modification and was told it would not preclude division of trust assets as part of the divorce proceedings but would only be effective upon his death. The property settlement was not finalized because the wife wanted to be made beneficiary of his life insurance proceeds instead of receiving support payments, and negotiations were not completed before the settlor became incapacitated. In addition, the settlor owed no fiduciary duty to his wife. Per MCL 700.7603(1), duties are owed only to the settlor while a trust is revocable. Also, although a fiduciary duty may exist between husband and wife, it certainly did not remain in the middle of divorce proceedings, when the breach is alleged to have occurred. Nederlander v Nederlander, 205 Mich App 123, 127; 517 NW 2d 768 (1994).

4. In an opinion concurring and dissenting in part, the third member of the Appellate Panel agreed that a claim for equitable relief based on breach of fiduciary duty and fraud on marital assets fails as a matter of law, but would rule that it is available based on a violation of public policy.

5. The lesson of this case: timing is everything. This entire situation could have been avoided if the surviving spouse had not sought to substitute her being named beneficiary of the settlor’s life insurance instead of receiving spousal support, especially since she knew he had stage IV cancer. Although she received approximately $400,000, several hundred thousand dollars of trust assets were unavailable once the settlor died since the divorce had not been finalized. Also, it clarifies the scope of fiduciary duties for the trustee of a revocable trust when the settlor is engaged in divorce proceedings.

6. Application for leave to appeal has been filed and is still pending.

C. ADULT GUARDIANSHIP – DELEGATION OF POWERS\DUTIES

In re Malloy, - Mich - ; - NW 2d – (2024), #165,018, rel’d 5\28\24

1. In this case, the Michigan Supreme Court vacated the Court of Appeals decision in this matter In re Malloy , - Mich App - ; - NW 2d – (2022), #358,006, rel’d 10\13\22 and remanded the proceeding to the Oakland County Probate Court to consider the guidance they provided in this ruling regarding whether an employee of a professional guardian lawfully performed guardianship tasks.

2. Malloy involved two guardianships necessitated by individuals who suffered serious injuries from auto accidents. Both were receiving No Fault insurance payments. The defendant insurer refused to pay for legal and guardianship expenses submitted by the fiduciary attorney and his law firm, arguing that the appointed guardian did not personally perform the services and there was no authority to delegate guardianship duties to employees of his firm. Summary disposition motions were granted in favor of the plaintiff, and the defendant appealed. The Court of Appeals affirmed in part and reversed in part, ruling that a guardian merely has to comply with MCL 700.5103 to delegate powers lawfully. It determined that no question of fact existed that the guardian had largely delegated to his employees guardianship duties and not powers. However, a genuine issue of material fact existed as to whether having individuals other than the named guardian prepare for and attend hearings seeking to modify the guardianship was proscribed by MCL 700.5103, since these could result in the modifications of the duties, liabilities, or

other legal relationships with the wards in question. The cases were remanded for a determination as to whether the defendant had to pay for these tasks.

3. The Justices discussed the differences between a guardian’s duties and powers, both of which are enunciated in MCL 700.5314. In order to lawfully delegate a guardianship power to an employee, or any other decision that would impair or alter the rights, duties, liabilities, or legal relations of an incapacitated individual, the guardian must execute a power of attorney which complies with MCL 700.5103. However, this is not required for a professional guardian to utilize employees to assist in exercising a guardianship power or provide assistance in determining how to exercise these powers.

4. The Supreme Court found that the Court of Appeals ruling was premature. Countermotions for summary disposition were brought before discovery was complete. The present record was apparently limited to the brief descriptions in the billing statements of the employees’ activities attached to the guardian’s complaint. In addition, the probate court and parties did not have the appellate guidance for determining whether guardianship tasks were lawfully performed by an employee. Also, the parties framed their arguments in broad all or nothing terms, and the reasoning of the probate court was similarly broad. As a result, remand in light of their opinion was appropriate.

5. This decision furnishes additional guidance and clarification in this area.

D. TRUSTS – SETTLEMENT AGREEMENT – ENFORCEMENT\ INTERPRETATION

In re Conley Trust, - Mich App - ; - NW 2d – (2024), #366,180, rel’d 7\18\24

In re Conley Trust, - Mich App - ; - NW 2d – (2024), #366,180, rel’d 8\22\24

1. This unanimous Court of Appeals decision affirmed the ruling of the Emmet County Probate Court denying a motion for disclosure of a confidential settlement agreement and the finding that the agreement was not breached.

2. In Conley, after lengthy litigation following the settlor’s death, a confidential settlement agreement was entered into by the parties. 14 months later, in November 2022, two of the parties petitioned the probate court to disclose and enforce the settlement agreement following their receipt of trust-related K-1 IRS forms and capital gains, attorney fees, and accountant fees. Following several hearings, the trial court denied the request for relief, found the agreement language to be unambiguous, and ruled that each party was responsible for their respective tax consequences due to implementation of the agreement.

3. The Appellate Panel rejected appellants argument that the agreement was ambiguous. It noted that a settlement agreement is a binding contract, and pursuant to Michigan jurisprudence its terms are given their plain and ordinary meaning, and interpretations are avoided which would render any part of the instrument nugatory or surplusage. Paragraphs 10 and 11 are not in conflict and no ambiguity is created.

“The word “further” in Paragraph 10 is a temporal adverb indicating administration of the trust after execution of the settlement agreement. … However, all parties were responsible for their obligations associated with effectuating the settlement agreement under Paragraph 11. These two provisions are complementary, rather than ambiguous. (Slip Opinion, pg. 3 [emphasis in original]).

The Court of Appeals also ruled that no breach of the settlement agreement occurred. They opined that the capital gain tax was a natural result of implementing the settlement agreement, which involved the conveyance of the home, as contemplated by Paragraph 5 of the agreement. Pursuant to Paragraph 11, each party was responsible for their respective obligations related to the settlement.

4. This case helps clarify that principles under contract law will be used to adjudicate any disputes related to trust settlement agreements.

5. Note: This opinion was reissued on 8\22\24 with minor modifications which did not substantively alter the decision or its rationale.

6. Application for leave to appeal has not yet been filed.

E. TRUSTS – CLAIMS – QUALIFIED PLAN\INSURANCE – SATISFACTION OF JUDGMENT

In re Fowler Estate, - Mich App - ; - NW 2d – (2024), #365,600, rel’d 7\18\24

In re Fowler Trust, - Mich App - ; - NW 2d – (2024), #365,603, #365,610, rel’d 7\18\24

1. In these consolidated appeals of cases from the St. Clair County Probate Court, the Court of Appeals reversed the court’s ruling that the decedent’s 401(k) proceeds were exempt from recovery under MCL 700.7605(2) and affirmed the trial court’s decision that the decedent’s life insurance could be used to satisfy the wrongful death judgment claim in question.

2. Fowler involves two estates and one trust. Jennifer Fowler was the daughter of Helen Fowler. Jennifer shot and killed Helen before then shooting herself. Helen’s estate filed a claim against Jennifer’s estate regarding the wrongful death claim (her estate had obtained a wrongful death judgement for $623,606.24). Jennifer’s trust filed a declaratory judgment to ascertain what assets could be used to satisfy the judgment. Jennifer had a 401(k) plan and a life insurance policy, each of which lister her trust as the beneficiary. The probate court ruled that the 401(k) assets could not be recovered by the estate pursuant to MCL 700.7605(2) but the life insurance proceeds could be used to satisfy the judgment claim of Helen’s estate. The trustee of Jennifer’s trust appealed.

3. Regarding the 401(k) account, the Appellate Panel noted that this asset was subject to ERISA and while Jennifer was alive could not be used to satisfy the judgement. However, upon her death the account was converted to a lump sum payable to the trust. Once this conversion occurred, the assets were no longer protected pursuant to ERISA and were subject to being used to satisfy the wrongful death claim filed against Jennifer’s estate to the extent its’ assets were insufficient to pay this judgment. The Appeals Court found persuasive the rationale of Commerce Bank, NA v Bolander, 44 Kan App 2d 1; 239 P3rd 83 (2007), and that it “…applies with equal force to the construction and application of MCL 700.7605.” (Slip Opinion, pg. 9).

The Appellate Panel affirmed the probate court’s ruling that the life insurance proceeds could be used to satisfy the wrongful death judgment. The exemption for insurance proceeds pursuant to MCL 500.2207 was not applicable since they were not payable to a dependent, but instead named her trust as the beneficiary.

4. This ruling furnishes clarification regarding when the beneficiary protections of ERISA cease to operate, in addition to the extent to which creditor exemptions apply to life insurance proceeds.

5. Applications for leave to appeal have been filed in both cases and are still pending.

F. DD GUARDIANSHIP – COGUARDIAN – REMOVAL

In re AMMB Guardianship, - Mich App - ; - NW 2d – (2024), #368,915, rel’d 8\22\24

1. This unanimous decision of the Court of Appeals affirmed a Saginaw County Probate Court order removing the ward’s mother as DD coguardian and appointing the father as sole guardian.

2. In AMMB, both parents (who are divorced) served as co plenary guardians of their child. Each subsequently moved for the removal of the other and requested that they be appointed sole guardian. The ward’s mother appealed her removal. The father asked for sanctions and asserted that the appeal was vexatious.

3. The Appellate Panel rejected the mother’s arguments that the trial court improperly excused the ward’s presence from the courtroom and in determining her preference as to who should serve as guardian in an unrecorded in camera interview. AMMB was present for the first day of the hearings, but subsequently her GAL moved for her to be excused, and provided letters from the ward’s psychiatrist and primary care physician that her attendance would be detrimental to the ward. Her reliance on MCL 330.1455(1) was misplaced. This provision states in pertinent part:

The subject of a petition has the right to be present at all hearings. … The subject’s presence may be waived by the court if there is testimony by a physician or licensed psychologist who has recently observed the subject that the subject’s attendance would expose him or her to serious risk of physical harm.

Chapter Four of the Mental Health Code is applicable to civil commitment hearings, not developmentally disabled guardianships. As a result, her argument was without merit. The trial court correctly looked to Chapter Six of the Code, which concerns guardianships for DDs, and relied on MCL 330.1617(1), which provides:

The respondent shall be present at all proceedings conducted pursuant to this chapter. However, the respondent’s presence may be excused by the Court only on a showing, supported by an affidavit signed by the physician or psychologist who recently examined the respondent, that the respondent’s attendance would subject him or her to serious risk of physical or emotional harm.

The appellant did not question whether the letters presented met the requirements to be considered affidavits.

The Appeals Court also disagreed that the in camera interview of the ward was impermissible. The appellant’s reliance on In re HRC, 286 Mich App 444; 781 NW2d 105 (2009) was misplaced. This case involved a juvenile proceeding and held that an in camera interview for whatever purpose was a violation of the parents’ fundamental due process rights. However, no liberty interest exists for parents in exercising control over their adult children’s affairs. This case concerned AMMB’s interests and rights. The Court of Appeals also did not find the mother’s appeal to be vexatious and declined to sanction her.

4. This case provides useful guidance regarding the process of conducting removal proceedings for DD guardianships, including the propriety of utilizing in camera interviews of the ward.

5. Application for leave to appeal has not yet been filed.

G. SPECIAL NEEDS TRUST – NOTICE – DISTRIBUTION - MODIFICATION

In re Hernandez Trust, - Mich App - ; - NW 2d – (2024), #366,172, rel’d 10\14\24

1. In a 3-0 decision, the Court of Appeals upheld a ruling of the Wayne County Probate Court granting summary disposition to the children of the Decedent and altering the terms of his special needs trust to direct its proceeds to his estate.

2. The Decedent\Settlor in Hector received a two million dollar settlement of a medical malpractice claim based which was put in a special needs trust. He had three children (now all adults) with his former wife. In 2020, a special needs trust was drafted which contained a residuary clause directing all remaining funds to be distributed to his sister\guardian (Appellant) upon his death. A petition for funding and supervision of the trust was filed in the Wayne County Probate Court. Distribution of the funds was approved by the Court in December 2020; the decedent\settlor’s children received no notice of this matter.

Following the Decedent\Settlor’s death in June 2021, the trustee (an attorney) filed a final account, which was approved by the Court; the balance was ordered distributed to the Appellant. The Decedent\Settlor’s children received notice of these proceedings for the first time and petitioned to reform the trust, the attorney trustee requested a rehearing on the account, and the Appellant contested the trustee’s failure to distribute the proceeds to her. The children moved for summary disposition, arguing that the residuary clause was unlawfully created. The motion was granted due to lack of notice to the children; the Court altered the residuary clause and directed that the proceeds be paid to the Decedent\Settlor’s personal representative. The sister\guardian appealed.

3. The Appeals Court rejected the Appellant’s argument that the Probate Court erred in ruling the Decedent\Settlor’s children were entitled to notice of the petition to fund the trust. This petition was a protective proceeding under EPIC pursuant to MCL 700.5401; as such, MCL 700.5311(1)(a) applies and mandates that notice be given to the alleged incapacitated individual. Also, MCR 2.420(B)(5) is applicable, which mandates notice to all interested persons before a trust as part of a settlement is funded; the children are presumptive heirs and were entitled to notice according to MCR

5.125(C)(29)(b) before the trust was funded. As a result, the trust authorization proceeding was conducted improperly.

The Appellate Panel also declined to adopt Appellant’s assertion that any error regarding notice was harmless due to the residuary clause being plainly valid and enforceable. Although on its face this clause clearly directs that the balance be distributed to the Appellant, it directly contravenes the Circuit Court order which explicitly barred her from receiving any funds from the settlement and was therefore void. Also, applying the provision of MCL 700.2503 (writing intended as a will) to trusts, the Appellant was unable to show by clear and convincing evidence that the Decedent\Settlor intended the residuary clause allocate his property upon death. The trust supports a determination that the Decedent\Settlor did not review or approve the residuary clause; also, the failure to give notice precluded the children from contesting this provision.

Finally, the Court of Appeals did not accept Appellant’s argument that the Probate Court erred in determining that the existence of the children was a circumstance unanticipated by the Decedent\Settlor. MCL 700.7412(2) was used to modify the trust; under this provision, circumstances unanticipated by the settlor and that modification would further the settlor’s purpose must be found. In the instant case, that the Decedent\Settlor had children was not unanticipated. However, it was not error to terminate the trust, as pursuant to MCL 700.7410 termination was appropriate because the purpose of the trust – to supplement benefits received from the government – became impossible to achieve upon his death.

4. This ruling reaches the right result and is consistent with the provisions of EPIC and sound public policy.