Court Opinion

ID: 2775005
Source: CourtListenerOpinion
Date Created: 2015-01-30 14:05:09.948123+00
Date Added: 2024-06-11T11:27:56.128134
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

In re JOHN MARKOUL LIVING TRUST.

SANDIE SARHAN,                                                       UNPUBLISHED
                                                                     January 29, 2015
               Petitioner-Appellant,

v                                                                    No. 316892
                                                                     Oakland Probate Court
GEORGIA MARKOUL,                                                     LC No. 2013-348604-TV

               Respondent-Appellee.
and

JAMES MARK HEPPARD, NICHOLAS
HEPPARD, and MICHELLE HEPPARD,

               Intervening Parties.

Before: CAVANAGH, P.J., and JANSEN and RONAYNE KRAUSE, JJ.

PER CURIAM.

        Petitioner appeals by right in this case involving the construction of a trust. Petitioner is
decedent’s daughter and respondent is decedent’s surviving spouse. The intervening parties are
three of decedent’s stepchildren. We affirm.

        On April 7, 1981, decedent created a living, revocable trust, which became irrevocable
upon his death on March 12, 2012. Upon decedent’s death, the trust was divided into two
separate trusts, designated as the Marital Trust and the Family Trust. Article 8 of the trust
instrument governs the manner in which funds are to be allocated between the two separate
trusts:

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       a. Creation of the Marital Trust

                The Marital Trust shall consist of a dollar amount equal to fifty (50%)
       percent of the value of my gross estate as defined for Federal Estate Tax purposes,
       less all allowable federal estate deductions other than the marital deduction.

              The Marital Trust shall be reduced by the value, for Federal Estate Tax
       purposes, of any interest in property which qualifies for the marital deduction and
       which passes or has passed from me to my spouse other than under this Article.

              The marital deduction amount determined under this Paragraph a. shall be
       a pecuniary amount and not a fractional share.

                                               ***

       c. Creation of the Family Trust.

               The Family Trust shall consist of the balance of the trust property.

       On September 17, 2008, decedent amended Article 8 of the trust instrument to provide as
follows:

               The Marital Trust shall consist of my primary residence (subject to any
       mortgages thereon) at the time of my death, plus a dollar amount equal to fifty
       (50%) percent of the values of the balance of my gross estate as defined for
       Federal Estate Tax purposes, less all allowable federal estate deductions other
       than the marital deduction.

              The Marital Trust shall be reduced by the value, for Federal Estate Tax
       purposes, of any interest in property which qualifies for the marital deduction and
       which passes or has passed from me to my spouse other than under this Article.

              The marital deduction amount determined under this Paragraph a. shall be
       a pecuniary amount and not a fractional share.

        At the time of decedent’s death, he and respondent owned a home as tenants by the
entireties. When decedent died, respondent became the sole owner of the home by right of
survivorship. Nearly one year later, the acting trustee filed a petition for clarification, asserting
that “[b]y not changing the title and funding of the Trust with the Residence, the value of the
Residence becomes an issue.” Accordingly, petitioner asked the court for clarification on the
following points:

               B. Determining whether the value of the Residence is to be included in
       the creation of the Marital Trust;

              C. Determining whether the value of the Residence reduces the value of
       the Marital Trust and, if so, by how much[.]

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        The probate court found that the marital home was never included in the trust and never
“passed” to respondent because it was owned by respondent before and after decedent’s death.
As a result, it found that the value of the Marital Trust should not be reduced by the value of the
marital home. Petitioner disagreed and requested an evidentiary hearing on the issue. The
probate court denied petitioner’s request, explaining that its ruling was made as a matter of law
and that no factual dispute existed between the parties. Petitioner also argued that respondent
was not entitled to her exempt property allowance because she failed to file a claim with the
estate within four months of decedent’s death. Again, the probate court disagreed.

        We review de novo the probate court’s interpretation of language in a trust document. In
re Estate of Reisman, 266 Mich. App. 522, 526; 702 NW2d 658 (2005). The court’s decision
whether to hold an evidentiary hearing is reviewed for an abuse of discretion. People v Unger,
278 Mich. App. 210, 216-217; 749 NW2d 272 (2008). The probate court does not abuse its
discretion when it makes a decision that falls within the range of reasonable and principled
outcomes. See Maldonado v Ford Motor Co, 476 Mich. 372, 388; 719 NW2d 809 (2006).

        When interpreting the meaning of a trust, the probate court must ascertain and give effect
to the intent of the settlor. In re Kostin, 278 Mich. App. 47, 53; 748 NW2d 583 (2008). In doing
so, the court must look to the words of the trust document itself. Id. Only if the language is
ambiguous may the probate court look outside the trust language and consider the circumstances
surrounding its creation. Id.

        The relevant language of Article 8 of the trust is unambiguous. It provides that “[t]he
Marital Trust shall be reduced by the value, for Federal Estate Tax purposes, of any interest in
property which qualifies for the marital deduction and which passes or has passed from me to my
spouse . . . .” The value of the marital home is not to be deducted from the Marital Trust because
it did not “pass” from decedent to respondent. Again, decedent and respondent owned their
home as tenants by the entireties. In Tkachik v Mandeville, 487 Mich. 38, 46; 790 NW2d 260
(2010), our Supreme Court explained that a tenancy by the entireties “is a type of concurrent
ownership in real property that is unique to married persons.” A defining trait of such a tenancy
is “ ‘that one tenant by the entirety has no interest separable from that of the other.’ ” Id.
(citation omitted). In addition, “both spouses have a right of survivorship, meaning that, in the
event that one spouse dies, the remaining spouse automatically owns the entire property.” Id. at
46-47. As a result, “entireties properties are not part of a decedent spouse’s estate, and the law
of descent and distribution does not apply to property passing to the survivor.” Id. at 47
(emphasis added).

        Because decedent and respondent owned their home as tenants by the entireties,
respondent was a full owner of the property before and after her husband’s death. When
decedent died, respondent became the sole owner automatically, not because the property
“passed” as part of the estate. The property never was part of the estate. Furthermore, because
the language of the trust instrument was clear and unambiguous, the probate court did not err by
denying petitioner’s request for an evidentiary hearing. See Kostin, 278 Mich. App. at 53.

       Nor did the probate court err by ruling that respondent was entitled to her exempt
property allowance. Petitioner cites MCL 700.7605(1) and MCL 700.7606(1) for the proposition

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that respondent was required to submit a formal claim for her exempt property allowance within
four months of decedent’s death. MCL 700.7605(1) states:

               The property of a trust over which the settlor has the right without regard
       to the settlor’s mental capacity, at his or her death, either alone or in conjunction
       with another person, to revoke the trust and reinvest principal in himself or herself
       is subject to all of the following, but only to the extent that the settlor’s property
       subject to probate administration is insufficient to satisfy the following expenses,
       claims, and allowances:

               (a) The administration expenses of the settlor’s estate.

              (b) An enforceable and timely presented claim of a creditor of the settlor,
       including a claim for the settlor’s funeral and burial expenses.

               (c) Homestead, family, and exempt property allowances.

MCL 700.7606(1) states in relevant part:

       If a personal representative is not appointed for the settlor’s estate within 4
       months after the date of the publication of notice to creditors, a trust described in
       section 7605(1) is not liable for payment of homestead, family, or exempt
       property allowances. . . .

       First, neither of these statutory provisions applies to the trust in this case. As stated in
MCL 700.7605(1), this portion of the Michigan Trust Code applies only to trusts that remain
revocable at death. The trust in this case became irrevocable upon death. Second, the probate
court correctly construed the language regarding exempt property. Article 8, § 1 of the trust
instrument provides in pertinent part:

               The provisions made herein and in my Will for my spouse shall be in lieu
       of my spouse’s marital rights and all other rights in my estate except for exempt
       property and, in the event my spouse validly elects to take against my Will, then
       the trust property shall be administered and distributed in the manner provided
       herein as though my spouse had predeceased me. [Emphasis added.]

The language is clear that exempt property, such as a property allowance, is not subject to Article
8, § 1.

       Affirmed. As the prevailing party, respondent Georgia Markoul may tax her costs
pursuant to MCR 7.219.

                                                             /s/ Mark J. Cavanagh
                                                             /s/ Kathleen Jansen
                                                             /s/ Amy Ronayne Krause

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