Parents and other relatives of prison inmates are confronted an estate-planning problem: Is the imprisoned relative to be included in the will or trust? A person who is planning his or her estate first must decide whether to include an imprisoned relative as a beneficiary. If there is no will or trust, an incarcerated relative will receive a distribution equal to others who are similarly related. A person who is not mentioned may take under a will or trust, under certain conditions. Survivors often do not want an incarcerated relative to receive an inheritance, but a prison sentence does not break the chain of blood relationship. If the decedent did not want the inmate to share in the estate, the estate plan should have reflected that determination.
Families often stand by their imprisoned relatives. After all, many state and federal prisoners are innocent of the crimes for which they were sent to prison. Even if guilty, blood is not only thicker than water, a blood relationship can be impervious to an order of conviction. If it is decided to include a prisoner in the estate plan, the next question is how to ensure that he or she does not waste the money or have it taken by the state department of corrections.
It can be difficult to transmit money to prisoners and they are not allowed to receive most mail-order goods. The UPS carrier will not be allowed to deliver that nice Christmas sweater from Land’s End to Aunt Betty’s nephew Duke, who is in doing 20 to life for robbing a bell-ringer in front of Wal*Mart. To benefit a prisoner, it is better to appoint a trustee who can make sure that the prisoner will be able to get the benefit of any funds or goods intended for him or her.
A trust can also protect an inheritance from an imprudent beneficiary, whether incarcerated or not. The trustee can be instructed to distribute the trust gradually to ensure that a large inheritance is not wasted.
A few states, including Michigan but not Pennsylvania, will file a claim for incarceration costs against a prisoner who receives an inheritance or other windfall. The personal representative or trustee does not have an obligation to report an inheritance to correctional authorities, but a Michigan prisoner does. The State Correctional Facility Reimbursement Act (SCFRA), Michigan Compiled Laws Annotated (MCLA) 800.401, et seq., requires a state prisoner to report his or her income and assets and imposes a reimbursement scheme that allows the Department of Corrections to assert a claim on most financial resources. MCLA 800.401a(a).
There are two specified exemptions in the law. The prisoner’s homestead “up to $50,000 value,” MCLA 800.401a(a)(I), and money saved from the prisoner’s “wages and bonuses” while incarcerated are protected. MCLA 800.401a(a)(ii). The state will assert a claim if the prisoner’s assets exceed 10% of the estimated cost of care for up to two years, MCLA 800.403(2), although the state is not barred from proceeding when the possible recovery would be less than that threshold. The claim is capped at 90% of the prisoner’s assets. MCLA 800.403(3).
Prisoners may not disclaim benefits to avoid SCFRA. Although SCFRA does not impose any reporting requirement on a personal representative or trustee holding assets that are distributable to a state prisoner, helping a prisoner to avoid the reporting requirement and the state’s claim would be hazardous.
Federal inmates whose assets exceed the federal poverty level are liable, up to the amount of the excess, for an incarceration fee based on the average cost of confinement for one year. 28 CFR § 505.4(b). The amount is prorated if the total time in custody, including pre-sentence custody, is less than 334 days. 28 CFR § 505.4(c). However, a federal prisoner’s incarceration fee is based only on the pre-sentence report and the sentencing judge’s findings, so a later inheritance or trust distribution to a prisoner may not affect the calculation of the fee. 28 CFR § 505.4(a).
Michigan counties and municipalities may also recover costs of incarceration, up to $60.00 per day, plus health-care costs. MCLA 801.313.
Whether to exclude a son or daughter who has been convicted of a crime from the estate plan can be a difficult decision. Once the decision is made, it is important to consult an experienced estate-planning attorney to ensure that the choice is effective and that any benefits intended for the beneficiary are received properly and are not seized by the government nor imprudently wasted.
John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com ©2013 John B. Payne, Attorney