There is no shortage of important legal cases that came through Michigan courts lately.
Do you know what your insurance policy covers?
Many businesses take out insurance coverage, and then just “set it and forget it” without thinking about how their business has changed or if their policies might no longer apply. This danger was exhibited in Farm Bureau General Insurance Company v. Estate of Andrew Stormzand. Here, the business owner loaned his business vehicle to his son for the son’s personal use. When the son was killed in an accident, his estate sued the business owner’s insurance company for coverage. However, the insurance company did not have to cover the claim because the car was used for personal purposes not related to the business. The lesson: your insurance doesn’t apply to business assets that are used for personal purposes.
Just because your separated, doesn’t mean your spouse won’t inherit from you.
People automatically assume that when a husband passes away, his spouse will inherit all of his assets. However, this is not the case if the spouse was willfully absent and intended to give up her marital rights. Two recent cases examined what it means to be willfully absent. In In re: Estate of Lyle Seth Peterson, the husband had an extramarital affair for over a year. And at the time of this death, his children tried to claim his legal spouse had given up her rights because she had abandoned the marriage. However, the court ruled that “to be willfully absent”, she must have made specific intention to be absent from her spouse. The court ruled in the wife’s favor because she continued to interact with him when he approached her (even though he was having an affair) and she used her own assets to maintain the marital property.
In In re Estate of James Erwin, Sr., the court again ruled that even though they had not lived together since 1976, the court ruled “their physical separation did not operate to foreclose a continued emotional intimacy” further, even as late as 2010, the decedent spouse said that his wife was “irreplaceable”. Therefore, the burden fell on those contesting the status of the individual as a spouse, to prove she was “willfully absent” and more importantly, had taken some affirmative initiative to distance herself from the marriage. The plaintiffs could not meet this standard and thus the wife inherited.
Three lessons from these cases. The first is that they originally went trial in 2011 and 2012 so the parties have spent over 5 years litigating who would inherit. If someone was in dire need of the money, they would not have access to it. Secondly, these cases could have been avoided if the husband had simply created a Will or Living Trust; basic estate planning documents that cost far less than the money spent on the litigation. Lastly, even if there has been a complete separation of husband and wife, unless there is a formal divorce, the wife does not lose her inheritance rights when her husband passes away.
Do you know if you agreement is really binding?
In the next case, Coloma Emergency Ambulance, Inc. v. Onderlinde, the court had to decide whether the terms of a “proposed settlement” were so definitive as to actually constitute a binding agreement. Generally, even if the parties intend for the agreement NOT to be binding, if it contains all the material, terms and conditions of a contract, the court will still say it’s a contract. In this case, the proposed settlement included language clearly implying this was a tentative agreement subject to a future definitive agreement. Most importantly, the court ruled that the proposed settlement omitted essential and substantial terms that needed to clarified and key terms that needed to be defined in the definitive agreement. The lesson: If you want an agreement to be binding, say it’s binding. But more importantly, if you want to avoid a case like this, explicitly state in the agreement that this is non-binding and it is subject to the signature of a future definitive agreement.
Questions on the cases? Call me and we can talk