What recourse do heirs, creditors and other interested parties have if they suspect that an executor or other person is mishandling assets of a probate estate or trust? Michigan law spells out their options, which include probate litigation, and the consequences of stealing from an estate in MCL 700.1205.
MCL 700.1205: Holding Trustees, Executors, and Others Accountable
The statute has four subsections. Subsection (1) gives the probate court the authority to order someone before the court if someone with standing to do so (like an heir) files a complaint alleging wrongdoing such as concealing, embezzling, or selling property of a decedent’s estate, or trust, or failing to reveal a party’s interest in estate property.
If the person ordered to appear before the court refuses to do so, or to answer written questions related to the allegations, Subsection (2) of the statute actually gives the court authority to have the person committed to the county jail until they obey the court’s order to appear and/or answer the court’s questions.
That’s right: if someone has a legitimate concern about, say, an executor stealing from an estate, and files a complaint with the probate court, the person named in the complaint must appear to address the allegations (or otherwise answer the court’s questions) or risk being placed in jail until they do so. But that is only the beginning of what’s at risk for someone who deals dishonestly with the assets of a trust or estate.
Perpetrators and Beneficiaries of Fraud Pay Double Damages
A person who is injured by fraud under the Michigan Estates and Protected Individuals Code (EPIC) is entitled to double damages from a person who benefited from the fraud—in some cases, even if the beneficiary of the fraud was innocent of any wrongdoing. (A purchaser in good faith of estate or trust assets is not liable for restitution).
Let’s say that Alice dies, leaving behind daughters Betty and Carol, as well as an estate that includes several pieces of valuable jewelry. Alice’s will specifies that her assets are to be divided evenly between her children.
However, Betty has cared faithfully for Alice during several years of illness, while Carol rarely visited. Betty knows that Alice has a diamond necklace worth $20,000. Betty’s daughter Barbie has long admired the necklace. Betty takes the necklace and gives it to Barbie before Carol appears on the scene. Barbie happily accepts and assumes the necklace was left to her in the will. Barbie soon falls on hard times and sells the necklace for $15,000 to a local jeweler.
Some time later, Carol remembers the necklace and wonders why it wasn’t among her mother’s things. Betty says that Alice gave it to Barbie before she died. Carol doubts this story, and files a complaint in the Probate Court. The truth comes out: Alice did not give the necklace to Barbie; Betty took it and did not include it in the estate.
Under the provisions of MCL 700.1205, Betty, as the perpetrator of the theft and fraud against the estate, can be held liable to the estate not only for the value of the necklace, but for double its value, or $40,000. This is so even if she believed her daughter was entitled to it. Alternately, Barbie, who honestly believed the necklace was left to her by her grandmother and was innocent of any intentional wrongdoing, could be held liable for $40,000 as a beneficiary of the fraud. The jeweler who bought the necklace from Barbie, as a good faith purchaser, cannot be held liable.
Of course, there are limitations on when a complaint for fraud, embezzlement or conversion (theft) could be made. Since an act on which such a complaint would be based would, by nature, be deceptive, an injured party might not be aware of their right to a claim for quite some time. For this reason, the statute gives an injured party the right to bring an action within two years from the act’s discovery, not its commission. However, an action may not be brought against anyone who did not perpetrate the fraud more than five years after the fraud was committed.
Using the above example, let’s say that Alice passed away in 2010, and Betty immediately took the necklace and gave it to Barbie that same year. Carol, however, did not discover that Betty gave the necklace to Barbie until 2016. Carol would still have two years in which to file an action against Betty, but she could not recover any damages against Barbie.
Other Scenarios in Which Double Damages May be Imposed
There are a number of scenarios in which double damages could be imposed under MCL 700.1205. Just a few of the many ways this law might come into play include:
- A person who knows of, and deliberately conceals, the most recently executed version of a deceased person’s will because a previous will would be more favorable to them;
- A trustee who embezzles trust assets;
- A caretaker who is misusing a disabled person’s assets for their own benefit;
- A family member who has property of a decedent’s estate in their possession, but refuses to turn it over to the personal representative.
If you are an interested party to an estate or trust and suspect that someone has committed fraud, or you have been accused of fraud yourself, you should contact our BRMM probate and probate litigation attorneys for a confidential consultation at (248) 641-7070 or complete our online form. We look forward to working with you.