On March 10, 2011, in a 22-page decision, the Michigan Supreme Court decided Klooster v Charlevoix, ___ Mich ___ (2011). The case involves the General Property Tax Act (GPTA) and two particular circumstances in which a conveyance of property may or may not permit a taxing authority to “uncap” and reassess the value of that property. Two issues of importance to family estate planning were addressed by the court:
(1) whether a “conveyance” as that term is used in MCL 211.27a(3) must be by means of a written instrument and
(2) whether, under MCL 211.27a(7)(h), petitioner’s property was uncapped for purposes of property-tax reassessment by either the death of the other joint tenant in January 2005 or the creation of a subsequent joint tenancy in September 2005.
As to the second issue, the Court held that when the petitioner’s joint tenancy was terminated in January 2005 by the death of a cotenant, this event was within the joint-tenancy exception created by MCL 211.27a(7)(h) and was thus not a transfer of ownership that uncapped the property.
However, when the Petitioner conveyed titled to himself and his brother as joint tenants in September 2005, this did uncap the property, because the conveyance did not fall within the joint-tenancy exception. As a result, the court reversed the earlier Court of Appeals decision, holding that it was the city of Charlevoix was correct in issuing its 2006 notice of reassessment and that the Tax Tribunal reached the correct result, albeit for the wrong reason.
The decision is an intricate “deconstruction” of the joint-tenancy exception contained in MCL 211.27a(7)(h) to get at its plain meaning. Thus, the supreme court began here:
"The joint-tenancy exception from the definition of “transfer of ownership” provides that a transfer of ownership does not include
"[a] transfer creating or terminating a joint tenancy between 2 or more persons if at least 1 of the persons was an original owner of the property before the joint tenancy was initially created and, if the property is held as a joint tenancy at the time of conveyance, at least 1 of the persons was a joint tenant when the joint tenancy was initially created and that person has remained a joint tenant since the joint tenancy was initially created. A joint owner at the time of the last transfer of ownership of the property is an original owner of the property. For purposes of this subdivision, a person is an original owner of property owned by that person’s spouse. [MCL 211.27a(7)(h).]
"While this is not the simplest provision to understand at first reading, a careful deconstruction reveals its plain meaning."
The court's decision requires careful reading for the prudent legal advisor. You may read the opinion Klooster v Charlevoix here.