Two Oakland County officials recently uncovered an abuse of several Michigan estate laws and pushed for change to close loopholes. The efforts of the Oakland County Treasurer and County Clerk have led to two bipartisan bills that will classify the abuse as criminal activity.
Currently in Michigan, a person called a public administrator can open a probate estate for a deceased person if the family or interested parties don’t within 42 days following the death. Public administrators sometimes serve in cases where there aren’t any heirs or where an impartial estate representative is needed. Their job, like any personal representative of an estate, is to gather assets, pay any final expenses or creditors of the deceased, and distribute the remaining assets to surviving heirs. If no surviving heirs can be located any remaining assets must be turned over to the unclaimed property division in the State of Michigan.
Here, it appears that a real estate investor was searching delinquent property records and cross referencing them with death records to identify potential estates to open. The investor would tip off a public administrator who would open a probate estate and then hire the investor. The investor would charge to manage the property and to sell it. Unfortunately, heirs were either not notified of probate estate proceedings or were notified but lost a majority, or all, of their inheritance to the fees charged by the public administrator and realtors.
Technically, there weren’t any laws broken in cases where the probate estate was eaten up entirely by fees. However, the proposed new bills would significantly change that in cases where heirs are taken advantage of as they were here. One of the changes the new bills propose is lengthening the time after a person’s death that a public administrator has to wait to open a probate estate from 42 days to 91 days. And if a public administrator opens an estate it must be done formally before a probate judge. The public administrator must notify all heirs of the hearing to open the estate and of their rights. Further, if the deceased person’s real estate has outstanding property taxes or is subject to a mortgage foreclosure, notice must be posted at the property itself. If the administrator knowingly fails to provide proper notice the court can impose up to 90 days in jail or a $1,000 fine, or both.
There are also several other new requirements for the public administrator. If the real estate is subject to a tax foreclosure the administrator must provide the county treasurer with written notice of his/her appointment as representative of the probate estate. Even where properties are free and clear, the public administrator can’t sell any real estate without court approval. Additionally, the court will review the propriety of any individuals or businesses hired by the public administrator. The bills expressly label any real estate fees over 10% of the net proceeds payable to the estate as excessive where the real estate is subject to tax or mortgage foreclosure.
On the positive side, there is more court supervision over these types of matters and penalties for public administrators who attempt to exclude rightful heirs. But increased responsibilities placed on public administrators likely means estates will continue to rack up expenses in fees paid to administrators. It’s important to note that before a creditor or public administrator can open an estate certain family members or nominated people with standing are free to do so at any time. So families who’ve lost a loved one should seek the advice of an experienced estate attorney who can guide them through a difficult time.