Cost of Living Adjustments – Michigan Probate and Trusts
One of the most common questions we get asked at The Probate Pro is how to distribute a probate estate. Unfortunately, it is not an easy answer as probate and trust administration can be quite confusing and complicated.
A Cost of Living Adjustment or COLA (not the kind you drink!) provides for benefits to keep pace with inflation. MCL 700.1210 provides that annually after 2001, the Michigan department of treasury shall publish the cost-of-living adjustment factor to be applied to the specific dollar amounts referenced within EPIC. A Cost of Living Adjustment provides a mechanism by which the monetary value of exemptions, allowances and intestate shares expressed throughout the statutes be kept current, in economic terms, without the need for legislative update. It is a similar concept to indexing under the Internal Revenue Service.
“Cost-of-living adjustment factor” means a fraction, the numerator of which is the United States consumer price index for the prior calendar year and the denominator of which is the United States consumer price index for 1997. As used in this subdivision, “United States consumer price index” means the annual average of the United States consumer price index for all urban consumers as defined and reported by the United States department of labor, bureau of labor statistics, or its successor agency, and as certified by the state treasurer.
This Table provides the Cost of Living Adjustments (COLA) from 2010 through 2021 for various issues, including the intestate distribution for a surviving spouse, small estates, exemptions and allowances and Trust terminations.
How to distribute a probate estate?
One of the most important duties of a Personal Representative is to distribute the assets of the probate estate. MCL 700.3805 directs the personal representative to make priority of payment if the estate has insufficient assets to pay all claims and allowances in full. Subsection (1) states that if the applicable estate property is insufficient to pay all claims and allowances in full, the personal representative shall make payment in the following order of priority:
(a) Costs and expenses of administration –MCL 700.3805(1(a))
(b) Reasonable funeral and burial expenses– MCL 700.3805(1(b))
(c) Homestead allowance– MCL 700.3805(1(c))
(d) Family allowance – MCL 700.3805(1(d))
(e) Exempt property – MCL 700.3805(1(e))
(f) Debts and taxes with priority under federal law, including, but not limited to, medical assistance payments that are subject to adjustment or recovery from an estate under section 1917 of the social security act, 42 USC 1396p – MCL 700.3805(1(f))
(g) Reasonable and necessary medical and hospital expenses of the decedent’s last illness, including a compensation of persons attending the decedent – MCL 700.3805(1(g))
(h) Debts and taxes with priority under other laws of this state – MCL 700.3805(1(h))
(i) All other claims – MCL 700.3805(1(i))