The Michigan Court of Appeals recently identified a situation in which the personal representative of an estate is not entitled to have attorney fees paid from estate assets. Braun Kendrick Finkbeiner, PLC, v. Estate of Matthew G. Scott, No 363756, 2024 WL 1228733 (Mich Ct App Mar 21 2024) (unpublished).

A law firm represented Mr. Sprague as personal representative of a decedent’s estate in several probate litigation matters against the decedent’s son. The personal representative petitioned to recover certain investment accounts from the son for the benefit of the estate, while the son petitioned to invalidate the decedent’s estate plan based on Mr. Sprague’s alleged undue influence. The jury found that the decedent’s estate plan was the product of Mr. Sprague’s undue influence, and so the estate plan was invalidated. The probate court removed Mr. Sprague as personal representative and appointed the son as his replacement. Mr. Sprague’s law firm then sued the son as personal representative of the decedent’s estate for payment of its attorney fees incurred while representing Mr. Sprague as personal representative in the probate litigation matters. The probate court dismissed the law firm’s claim on summary disposition, and the law firm appealed.

The Michigan Court of Appeals ruled that the probate court had properly dismissed the law firm’s claim. Michigan law provides that a personal representative who engages in litigation is entitled to have litigation-related attorney fees paid from estate assets if the personal representative brought or defended the litigation “in good faith.” In a prior case, In re Nestorovski, 283 Mich App 177 (2009), the Court of Appeals ruled that where a personal representative pays an attorney to defend the validity of estate planning documents which were obtained by the personal representative exerting undue influence over the decedent, then the personal representative’s participation in such litigation is not “in good faith.” Applying the Nestorovski rule to the present case, the appellate court ruled that Mr. Sprague had not litigated “in good faith” and so was not entitled to have his attorney fees paid from estate assets.

Practitioners, when representing a fiduciary to defend the validity of estate-planning documents, should consider drafting their engagement letters to provide that the fiduciary agrees to pay legal invoices from the fiduciary’s personal assets in the event that a court rules that fiduciary assets cannot be used to pay attorney fees.