Michigan Laws 700.1216 – Governing instrument; substantial gift to drafting attorney; void; exceptions; definitions
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Terms Used In Michigan Laws 700.1216
- Application: means a written request to the probate register for an order of informal probate or informal appointment under part 3 of article III. See Michigan Laws 700.1103
- Attorney: means , if appointed to represent a child under the provisions referenced in section 5213, an attorney serving as the child's legal advocate in the manner defined and described in section 13a of chapter XIIA of the probate code of 1939, 1939 PA 288, MCL 712A. See Michigan Laws 700.1103
- Court: means the probate court or, when applicable, the family division of circuit court. See Michigan Laws 700.1103
- Descendant: means , in relation to an individual, all of his or her descendants of all generations, with the relationship of parent and child at each generation being determined by the definitions of child and parent contained in this act. See Michigan Laws 700.1103
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- Fiduciary: A trustee, executor, or administrator.
- Fiduciary: includes , but is not limited to, a personal representative, funeral representative, guardian, conservator, trustee, plenary guardian, partial guardian, and successor fiduciary. See Michigan Laws 700.1104
- Gift: A voluntary transfer or conveyance of property without consideration, or for less than full and adequate consideration based on fair market value.
- Governing instrument: means a deed; will; trust; funeral representative designation; insurance or annuity policy; account with POD designation; security registered in beneficiary form (TOD); pension, profit-sharing, retirement, or similar benefit plan; instrument creating or exercising a power of appointment or a power of attorney; or dispositive, appointive, or nominative instrument of any similar type. See Michigan Laws 700.1104
- Inter vivos: Transfer of property from one living person to another living person.
- Organization: means a corporation, business trust, estate, trust, partnership, limited liability company, association, or joint venture; governmental subdivision, agency, or instrumentality; public corporation; or another legal or commercial entity. See Michigan Laws 700.1106
- Person: means an individual or an organization. See Michigan Laws 700.1106
- Power of appointment: means that term as defined in section 2 of the powers of appointment act of 1967, 1967 PA 224, MCL 556. See Michigan Laws 700.1106
- Property: means anything that may be the subject of ownership, and includes both real and personal property or an interest in real or personal property. See Michigan Laws 700.1106
- Security: includes , but is not limited to, a note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under such a title or lease, collateral trust certificate, transferable share, voting trust certificate, or interest in a regulated investment company or other entity generally referred to as a mutual fund or, in general, an interest or instrument commonly known as a security, or a certificate of interest or participation for, a temporary or interim certificate, receipt, or certificate of deposit for, or any warrant or right to subscribe to or purchase any of the items listed in this subdivision. See Michigan Laws 700.1107
- State: means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or a territory or insular possession subject to the jurisdiction of the United States. See Michigan Laws 700.1107
- Trust: includes , but is not limited to, an express trust, private or charitable, with additions to the trust, wherever and however created. See Michigan Laws 700.1107
(1) Any part of a governing instrument that directly or indirectly makes a substantial gift to an attorney who drafted the governing instrument or a person related to the attorney who drafted the governing instrument is void unless the attorney who drafted the governing instrument or the person related to the attorney who drafted the governing instrument is related to the individual making the substantial gift.
(2) This section does not apply to a provision in a governing instrument appointing the attorney who drafted the governing instrument, or a person related to the attorney who drafted the governing instrument, as a fiduciary.
(3) A provision in a governing instrument purporting to waive or otherwise avoid the application of this section is unenforceable.
(4) If a purchaser or lender for value acquires property distributed in kind or a security interest in property from a person that has received a substantial gift pursuant to a part of a governing instrument that is void under subsection (1), the purchaser or lender takes title free of any claims arising under, and incurs no personal liability by reason of, this section. This section does not directly or indirectly impose liability on a person that honors or relies on a part of a governing instrument that is void under subsection (1) and that contains or effectuates a substantial gift, unless the person has knowledge that the part of the governing instrument is void.
(5) If a part of a governing instrument is void under subsection (1), the part that is void is severable and does not affect any other part of the governing instrument that can be given effect, including a term that makes an alternate or substitute gift. If the part of the governing instrument that is void under subsection (1) cannot be severed, the entire governing instrument is void. For a power of appointment, this section does not affect the power to appoint in favor of persons other than the attorney who drafted the governing instrument or a person related to the attorney who drafted the governing instrument.
(6) If the court determines that an attorney who drafted the governing instrument disguised or attempted to disguise a substantial gift, to the attorney who drafted the governing instrument or a person related to the attorney who drafted the governing instrument, as a conveyance for consideration for less than fair market value, the court may find the conveyance void under subsection (1).
(7) The rights and remedies granted in this section are in addition to any other rights or remedies a person may have at law. A part of a governing instrument that is not void under subsection (1) may be challenged under other legal grounds.
(8) This section applies only to a governing instrument executed after the effective date of the amendatory act that added this section.
(9) For purposes of this section, a person is related to an individual if, at the time the attorney who drafted the governing instrument prepared or supervised the preparation or execution of the governing instrument, the person is any of the following:
(a) A spouse of the individual.
(b) A lineal ascendant or descendant of the individual or the individual’s spouse.
(c) A sibling of the individual.
(d) A spouse of the individual described in subdivision (b) or (c).
(10) For purposes of this section, an organization is related to an attorney if the attorney owns a 50% or greater interest in the organization or otherwise controls the organization.
(11) As used in this section:
(a) “Attorney who drafted the governing instrument” means an individual to whom both of the following apply:
(i) The individual is or was licensed to practice law in this state or any other state, before or at the time the governing instrument was prepared or executed, or both.
(ii) The individual directly or indirectly prepared or supervised the preparation, execution, or both, of the governing instrument. For purposes of this subparagraph, among other ways, the individual is considered to have prepared, or supervised the execution of, the governing instrument if the preparation, or supervision of the execution, of the governing instrument was performed by an employee, subordinate, partner, co-owner, or other person or lawyer employed by the same firm or company as the individual as of the time of preparation or execution, or both.
(b) “Gift” includes an inter vivos gift, a testamentary transfer of property, and the power to make the testamentary transfer regardless of any of the following:
(i) Whether the gift or testamentary transfer is outright or in trust.
(ii) When the gift or testamentary transfer is to take effect.
(iii) Whether the power is held in a fiduciary or nonfiduciary capacity.
(c) “Substantial gift” means a gift, the value of which exceeds $5,000.00 as a result of a single governing instrument or 2 or more related governing instruments.