Exempt Property Allowance Michigan: How Surviving Spouses Protect Assets from Creditors

When a Michigan spouse dies with unpaid medical bills, credit card debt, or nursing home balances, the surviving partner often assumes the creditors get paid first and whatever's left goes to the family. That's backwards. Michigan law builds several financial walls between creditors and the surviving spouse — and the Exempt Property Allowance is one of the most valuable ones most people never claim.

What Is the Exempt Property Allowance?

The Exempt Property Allowance is a statutory protection under MCL 700.2404 of the Michigan Estates and Protected Individuals Code (EPIC). It entitles the surviving spouse to select certain categories of personal property from the decedent's estate, up to an inflation-adjusted dollar cap, entirely free from the claims of the estate's general creditors.

For 2026, the inflation-adjusted exempt property allowance is approximately $15,000.

If no surviving spouse exists, minor children share the allowance equally.

What Property Qualifies?

The exempt property categories under MCL 700.2404 are specifically defined:

• Household furniture, furnishings, and appliances
• Automobiles and other motor vehicles (used by the decedent or family members)
• Personal effects — clothing, jewelry, items of personal use

The surviving spouse selects specific items from these categories up to the allowance cap. If the property of that type in the estate is worth more than the cap, the spouse selects items totaling up to approximately $15,000. If the estate's qualifying personal property is worth less than the cap, the surviving spouse may receive additional assets from other estate property to make up the difference.

The right to select includes picking which specific items to keep — the spouse isn't forced to take items of the estate's choosing.

Why the Exempt Property Allowance Matters: Payment Priority

The real power of this allowance comes from where it sits in Michigan's payment hierarchy under MCL 700.3805. Estate assets must be distributed in this strict order:

1. Costs and expenses of administration
2. Reasonable funeral and burial expenses
3. Homestead Allowance, Exempt Property Allowance, and Family Allowance
4. Debts and taxes with federal priority
5. Reasonable and necessary medical expenses from the final illness
6. State and local taxes
7. All other claims (credit cards, general medical bills, personal loans)

That means every dollar of the exempt property allowance comes out of the estate before a single unsecured creditor receives anything. A credit card company with a $10,000 balance cannot touch the property set aside as the exempt property allowance. A hospital with an outstanding $25,000 medical bill cannot either.

Even the Michigan Medicaid Estate Recovery Program (MERP) — which has priority creditor status when seeking to recover nursing home costs — cannot reach assets that are properly claimed and set aside under the Homestead, Family, and Exempt Property allowances.

The Three Allowances Together

The Exempt Property Allowance operates alongside two other EPIC spousal protections, and all three function as a unit:

Homestead Allowance (MCL 700.2402): $30,000 to the surviving spouse. This is cash or cash-equivalent from the estate — not a right to occupy the home (that's a different concept). If no surviving spouse, it's divided among minor children. Paid before unsecured creditors.

Exempt Property Allowance (MCL 700.2404): Approximately $15,000 in household furniture, vehicles, and personal effects for the 2026 benefit year. Paid before unsecured creditors.

Family Allowance (MCL 700.2403): A reasonable amount for the maintenance of the surviving spouse and minor children during the administration period. The probate court has discretion over the amount — there's no fixed ceiling. Paid before unsecured creditors.

For a surviving spouse, these three allowances together can total $45,000 or more that is completely shielded from creditor claims. In many modest Michigan estates, this means the surviving spouse receives everything of meaningful value while unsecured creditors receive little or nothing.

How to Claim the Exempt Property Allowance

The allowance doesn't claim itself. As Personal Representative or surviving spouse, you must assert it as part of the estate administration process.

Step 1: Identify all household furniture, furnishings, appliances, vehicles, and personal effects in the probate estate. List them on the inventory (PC 577) with their date-of-death fair market values.

Step 2: The surviving spouse selects specific items totaling up to the allowance cap. This selection should be documented — a written list identifying each item claimed, signed by the surviving spouse, kept with the estate records.

Step 3: In the estate accounting (PC 583 or PC 584), reflect the exempt property as a priority distribution to the surviving spouse before any unsecured creditor claims are satisfied.

Step 4: If the value of qualifying personal property in the estate is less than the allowance cap, the surviving spouse can petition the probate court to receive additional assets from the estate to make up the shortfall.

If you fail to formally claim the allowance and instead pay creditors first, you cannot later unwind those payments. The order matters — allowances must be asserted before creditors are paid.

Common Mistakes When Claiming the Allowance

Paying medical bills first out of obligation. Many executors — especially surviving spouses managing a recently deceased partner's estate — feel morally obligated to pay outstanding medical bills immediately. Under Michigan law, those bills sit in category 5 of the payment priority order. Paying them before claiming the Exempt Property Allowance and Homestead Allowance is legally incorrect and financially harmful to the family.

Not identifying exempt property on the inventory. The inventory (PC 577) must list all probate assets. Household items are often omitted because they seem too personal or modest to matter. But if they aren't listed, they can't be properly claimed under the allowance, and creditors may argue against their set-aside.

Confusing the allowance with the right to live in the home. The Homestead Allowance is a cash benefit, not the right to remain in the home. Michigan's homestead exemption laws and the right of a surviving spouse to occupy property are separate legal issues governed by different statutes.

Assuming Medicaid can reach these assets. MERP recovery is limited to assets that pass through the probate estate. Assets properly claimed as allowances before distribution to the spouse are paid out as priority expenses of administration — they don't "pass" to the surviving spouse as an inheritance in the same way, and MERP's reach is further limited by the statutory priority structure.

Does the Exempt Property Allowance Apply to Non-Probate Estates?

The Exempt Property Allowance under MCL 700.2404 applies to probate assets — property held in the decedent's name that would otherwise need to pass through the court. Assets that transfer via Lady Bird Deed, joint tenancy, beneficiary designations, or trusts bypass probate entirely and are not subject to the probate creditor priority hierarchy.

If most assets pass outside probate (which is increasingly common for well-planned estates), the allowance has less practical significance. Its value is greatest in estates where the decedent held significant personal property in their name alone.

Putting It All Together

For a surviving spouse navigating a Michigan probate estate, asserting all three statutory allowances — Homestead, Exempt Property, and Family — before paying any unsecured creditors is the most significant financial protection available under state law.

The Michigan Probate Process Guide details how to document and claim each allowance in the correct sequence, how to present them in the estate accounting, and how they interact with Medicaid estate recovery claims from MDHHS.

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