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Detailed Answer — How to document and file receipts for estate payments in Michigan

This FAQ explains, in plain language, how a personal representative (executor/administrator) should document and preserve receipts and proof of payments to heirs or to service providers when administering an estate in Michigan. The goal is to create a clear, auditable record that satisfies interested parties and the probate court.

Key legal context (Michigan)

Michigan’s Estates and Protected Individuals Code (EPIC) governs probate administration, duties of the personal representative, inventories, accountings, and distributions. A personal representative must act in the estate’s best interest, keep accurate records, and provide accountings to interested persons or the court when required. For the statutes that create these duties, see the Michigan Legislature’s resources on the Estates and Protected Individuals Code (MCL Chapter 700): Michigan Legislature — search MCL Chapter 700 (EPIC). For probate forms and instructions used in Michigan courts (inventories, fiduciary accountings, receipts, and more), see the Michigan Courts / SCAO probate forms page: Michigan Courts — Probate Forms (SCAO).

Practical steps to document payments and receipts

1. Open and use a separate estate bank account. Deposit estate funds in an account titled in the estate’s name and the personal representative’s capacity. Never commingle estate funds with personal funds. Bank statements and cleared checks are primary proof of payments.
2. Collect original receipts and invoices for every expense or payment. For service providers (contractors, attorneys, funeral homes, accountants): get an itemized invoice showing date, work performed, rates, and total. Add proof of payment (copy of the front and back of the cleared check, electronic payment confirmation, or bank statement showing the transfer).
3. Use signed receipts or written releases for payments to heirs.
   • If the personal representative makes an advance or distribution to an heir (e.g., $5,000 advance on inheritance), have the heir sign a written acknowledgment that states the date, amount, reason (advance on inheritance, loan repaid, etc.), and whether the advance will reduce their eventual share.
   • Include a simple release or waiver if the payment settles claims or debts between the heir and the estate. If the payment was for services the heir provided (e.g., caretaker services), use an invoice from the heir and an independent review/approval (see below).
4. Keep an estate ledger or accounting spreadsheet. Record each transaction with these columns: date, payee, check or reference number, category (funeral, creditor, distribution to beneficiary, estate administration, repairs), amount, and link to scanned backup (invoice, receipt, canceled check). Keep the ledger updated contemporaneously.
5. Scan and back up original documents. Scan originals (invoices, signed receipts, canceled checks) and keep both digital and physical copies. Store digital copies in a secure, date-stamped folder structure (e.g., /EstateName/Year/Category/).
6. Obtain court authorization when required. Some expenditures or distributions may require prior court approval or must be reported later in a formal accounting. When in doubt, request court permission or disclose the payment in the estate accounting. File required inventories and accountings using Michigan probate forms: see the SCAO probate forms link above.
7. Document independent approval when related parties are involved. If paying an heir or a close relative for services, obtain an independent invoice and at least one independent estimate or sign-off from a third party (another contractor, the decedent’s physician for medical services, etc.). Prep a short memo explaining why the payment was reasonable and necessary to the estate.
8. Number and cross-reference receipts to bank entries and ledger lines. When you scan a receipt, name the file so it references the ledger entry (e.g., 2024-03-02_Check_1023_JonesContracting.pdf). This creates an auditable trail from ledger to receipt to cleared bank item.
9. Retain proof of delivery for distributed personal property. If you give household items or vehicles to heirs, prepare a bill of sale, written inventory of transferred items, or receipt signed by the heir that lists the items and their condition/value.
10. Keep records for the recommended retention period. Retain estate records for the longer of (a) the period required by the probate court (often several years after final distribution), or (b) seven years — particularly if tax issues, creditor claims, or audits are possible.

How to prepare receipts and documents that the probate court will accept

• Use clear, dated invoices with the service provider’s name, address, license number (if applicable, e.g., contractor or appraiser), description of work, and the amount.
• Include copies of supporting documents: contracts, time logs, delivery slips, photographs (for repairs or damage), and correspondence authorizing the work.
• Attach canceled checks or bank statements that show the exact payment. If paid electronically, include the payment confirmation showing date/time and transaction ID.
• For payments to heirs, include a signed receipt or a simple written agreement describing the reason for the payment and how it affects the beneficiary’s share.
• When filing an accounting with the probate court, include a schedule of disbursements with references to the physical receipts and invoices.

Tax and reporting considerations

The estate should obtain an Employer Identification Number (EIN) and, when required, issue Form 1099-NEC or 1099-MISC to nonemployee service providers paid $600 or more during the tax year. For guidance from the IRS on information returns, see IRS Forms & Publications. Michigan tax treatment of inheritances and estate income may vary; consult Michigan Department of Treasury resources or an accountant when preparing estate tax returns.

Hypothetical example (illustrative)

Facts: The decedent left a $120,000 checking account. The personal representative paid $6,500 to a contractor for roof repairs, $3,200 to a funeral home, and advanced $5,000 to an heir who was living with the decedent and cared for them in the final months.

How to document:

• Contractor: Keep the signed contract, itemized final invoice, photographs of completed work, and a copy of the cleared check showing payee and check number. Enter the transaction into the ledger, attach the scanned invoice and check image, and note the vendor’s license number.
• Funeral home: Retain the itemized bill, contract, and paid receipt. Record payment in the ledger and attach bank statement showing the electronic transfer or cleared check.
• Advance to heir: Prepare a short signed written acknowledgment signed by the heir that states this is an advance on inheritance, the amount, date, and how it will be offset from their final distribution. Keep a ledger entry and the bank record. If in doubt about fairness, seek court approval or notify interested persons in writing.

When to involve the probate court or get professional help

File a formal accounting with the court when the estate reaches a stage that requires it or if creditors or beneficiaries request it. If you anticipate disputes (related-party payments, questions on reasonableness of compensation, or potential creditor claims), consult an attorney experienced in Michigan probate administration before making payments or distributions.

Helpful Hints

• Always use the estate bank account for estate receipts and payments; avoid cash when possible.
• Require written invoices and signed receipts for all significant payments, especially to relatives or heirs.
• Scan and back up documents immediately and keep both digital and paper copies.
• Number receipts and cross-reference them to ledger entries and bank transactions for quick verification.
• When paying an heir, use a written acknowledgment that clearly states whether the payment is an advance, loan, reimbursement, or settlement.
• If a payment might be questioned later, get court approval or at least inform all interested persons in writing and give them an opportunity to object.
• Budget time for a complete accounting and review before final distributions; keep funds to satisfy reasonable unexpected claims.
• Retain records for at least seven years and longer if taxes or litigation are possible.
• Consider professional bookkeeping software or a simple spreadsheet template to maintain a clear ledger and link to scanned receipts.

Disclaimer: This information is educational and general in nature and is not legal advice. Laws and court rules change. For guidance specific to your situation and to make sure filings meet Michigan probate requirements, consult a licensed Michigan probate attorney or the probate court in the county where the estate is being administered.