Many people are unaware that a prisoner who is incarcerated by the State of Michigan is required to reimburse the State for the cost of his stay. The State Correctional Facility Reimbursement Act gives the State the right to take up to 90% percent of the value of a prisoner’s assets in order to reimburse the taxpayers. The prisoner is allowed to keep a home up to $50,000 in value and to keep the money saved by the prisoner from the wages and bonsues paid while he was incarcerated. In addition, a Court must consider the prisoner’s legal obligations to support a spouse, minor children or other dependents, before allowing the State to take the prisoner’s assets.

Disclaiming Assets Does Not Work

It is common for this issue to arise when a prisoner is set to inherit money or be paid a settlement. Often, the prisoner will try to “disclaim” the assets, or say “no” to receiving the payment, so that the State cannot get reimbursed. In the recent case of State Treasurer v. Snyder (decided on November 29, 2011), the Michigan Court of Appeals made clear that a prisoner’s “assets” include property that is DUE to a prisoner. In that case, the prisoner was the beneficiary on his mother’s life insurance policy. So, the moment that his mother died, the prisoner was DUE the life insurance money. The Court ruled that it was irrelevant that the prisoner tried to stop the funds from being paid to him. The moment the funds were DUE, the State had a right to 90% of the life insurance proceeds.

The same result would be true if the prisoner was an heir under a will or trust. Unless the documents make clear that the inheritance is not DUE to the prisoner, then the inheritance will be used to reimburse the State of Michigan.

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