Detailed Answer
When someone dies and a probate estate is opened in Michigan, any payment made by a third party (for example, an insurer, a government program, a family member or a vendor) that affects estate assets or creditor obligations must be clearly recorded in the probate filings. Accurate recording protects the personal representative (executor/administrator), preserves the rights of creditors and beneficiaries, and reduces the risk of later disputes or court sanctions.
Primary steps to ensure third‑party claims and payments are accurately recorded
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Identify and classify each third‑party item.
Determine whether the item is (a) a claim against the estate (a creditor seeking payment), (b) a payment made on behalf of the estate (for example, a funeral home paid by an insurer), (c) a reimbursement owed to a third party, (d) a lien (e.g., Medicaid or tax lien), or (e) a third‑party transfer of decedent property (e.g., life insurance payable to a beneficiary).
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Gather and preserve documentation.
Collect invoices, paid receipts, itemized funeral bills, bank statements showing the deposit or check, insurance claim letters, lien documents, release forms, and correspondence. Keep originals or certified copies. The probate court and interested persons will want contemporaneous proof showing who paid, when, why, and how much.
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Record the item on the inventory and the estate accounting.
Michigan law requires the personal representative to file inventories and periodic or final accountings describing estate assets, liabilities, receipts and disbursements. Include third‑party payments as either receipts or disbursements (or as reduction/avoidance of a liability). Clearly label the entry (for example: “Paid on behalf of estate by ABC Insurance — funeral expense $4,200; receipt attached”). See the Estates and Protected Individuals Code (MCL chapter 700) for rules on inventory and account filings: MCL Chapter 700 (EPIC).
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File creditor schedules and address claims properly.
If a third party asserts a claim against the estate, follow the statutory procedures for presenting and allowing/disallowing claims. List known creditors and claims on the appropriate court filings and answer or object where required. Keep files showing whether the claim was paid by the estate or by a third party and attach proof of payment or release.
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Attach supporting exhibits to petitions and accountings.
When filing petitions for allowance of accounts, distribution, or approval of actions, attach copies of the receipts, paid invoices, releases or insurance correspondence that show third‑party payments or resolutions. Explicitly refer to those exhibits in the body of the petition so the judge and interested persons can verify the entries without additional requests.
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Disclose third‑party payments to beneficiaries and the court.
Provide written notice to beneficiaries and other interested persons about third‑party payments that affect distributions or creditor priority. Full disclosure prevents later claims that the personal representative concealed assets or payments.
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Handle refunds, setoffs, and reimbursements consistently.
If a third party paid a bill that the estate later reimburses (or if the estate paid and a third party later reimburses), record both the outflow and the inflow so the net effect on net distributable estate is clear. If a third party paid in error, document the steps taken to recover funds and file any court authorization needed before distribution.
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Address liens and subrogation claims promptly.
Medicaid, health insurers and other payors may have subrogation or lien rights. Confirm and document whether those liens exist, and show how the estate resolved or reserved for them in filings. If you dispute the lien, include the dispute and supporting evidence in the estate record.
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Use clear accounting line items and a supporting ledger.
Maintain a chronological ledger that ties each receipt/disbursement on the accounting to bank statements and supporting documents. In the accounting, show the transaction date, payor/payee, reason, amount, and exhibit number for proof.
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Seek court approval for unusual third‑party arrangements.
If you rely on third‑party promises (e.g., a family member agrees to pay a debt or an insurer will cover a claim), ask the court to approve the arrangement in writing before final distribution. Getting approval reduces personal exposure for the personal representative.
Practical example (hypothetical)
Hypothetical: The decedent’s funeral bill was $6,000. An insurance policy paid $4,000 directly to the funeral home, and the estate paid the remaining $2,000. How to record:
- In the inventory/accounting, list the funeral expense as $6,000, show a $4,000 credit/receipt from the insurer (attach the insurer’s payment confirmation), and a $2,000 disbursement from the estate (attach cancelled check and funeral bill marked “paid”).
- If beneficiaries ask why distributions are lower, provide the accounting and the two supporting exhibits so they can see the insurer’s payment and the estate’s payment.
Where to find the controlling Michigan law and forms
Michigan’s probate and estate rules are in the Estates and Protected Individuals Code (commonly called EPIC). See MCL Chapter 700 for statutes about inventories, claims, accountings and the personal representative’s duties: https://www.legislature.mi.gov/mileg.aspx?page=ChapterPage&chapter=700.
For probate court forms and filing instructions (inventories, accountings, creditor claim forms), see the Michigan Courts (SCAO) probate forms page: https://courts.michigan.gov/Administration/SCAO/Pages/Forms/Probate.aspx.
When to get help
If third‑party claims are substantial, disputed, or involve government payors (Medicaid or Medicare) or complex subrogation rights, consider consulting a probate attorney. An attorney can help prepare and attach the right exhibits, object to improper claims, file motions for instructions or approval, and limit the personal representative’s liability.
Important: This is general information about how to record third‑party claims and payments in Michigan probate filings. It is not legal advice. Laws and procedures vary by situation; consult a licensed Michigan attorney for advice about a specific estate.
Helpful Hints
- Keep a single, dated folder (digital and physical) for each third‑party payment or claim with every supporting document.
- Number exhibits and refer to exhibit numbers in the accounting and petitions for easy verification by the court and beneficiaries.
- Use the exact language from paid invoices when describing disbursements in the accounting to avoid ambiguity.
- When in doubt, disclose: include the payment in the accounting and attach documents rather than omit it and risk a later challenge.
- Record bank deposits and cancelled checks that show net effect on estate funds; do not rely only on narrative notes.
- For any third‑party remission of a debt (e.g., creditor accepts payment from insurer), secure a written release from the creditor and file it with the court record.
- Be mindful of probate court rules and local court requirements—local courts may require specific forms or additional notices.
- If a third party pays later (after distribution), immediately notify the court and beneficiaries and ask the court for direction before altering distributions.