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					 Michigan
 Probate & estate Planning

 Journal
     Table of ConTenTs                                    Vol. 29   M   Winter 2009   M   no. 1


Feature articles:

a Closer look at the Michigan Trust
Code: What’s new—What’s in—What’s
next?
Mark K. harder ...................................... 2
Michigan’s new Trust Code Contains
fifteen Mandatory rules That affect
Many existing Trusts and all future
Trusts
sebastian V. grassi, Jr. ......................... 11
Tips for drafting revocable Trusts Under
the new Michigan Trust Code
Marilyn K. lankfer .............................. 40
The Power of discretion: an introduc-
tion to Creditor rights and disability
Planning Under the Michigan Trust Code
douglas Chalgian ................................. 58




  sTaTe bar of MiChigan ProbaTe and esTaTe Planning seCTion
subscription information
The Michigan Probate and Estate Planning Journal is
                                                                     Michigan Probate and estate Planning Journal
published three times a year by the Probate and estate
Planning section of the state bar of Michigan, with the
                                                                        Vol. 29 M Winter 2009 M no. 1
cooperation of the institute of Continuing legal education,
and is sent to all members of the section. lawyers newly
admitted to the state bar automatically become members of
the section for two years following their date of admission.
                                                                                             Table of ConTenTs
Members of the state bar, as well as law school students, may
become members of the section by paying annual dues of $30.
institutions and individuals not eligible to become members
of the state bar may subscribe to the Journal by paying an
annual $25 subscription. The subscription year begins on
                                                                    From the Desk of the Chairperson
october 1 and is not prorated for partial years. subscription       Harold G. Schuitmaker ................................................................. 1
information is available from the state bar of Michigan,
Journal subscription service, 306 Townsend street, lansing,         Feature articles
Mi 48933-2012, (517) 372-9030. a limited number of copies
of prior issues of the Journal are available beginning with fall    a Closer look at the Michigan Trust Code: What’s new—What’s in—
1988, Volume 8, number 1, for $6 each, plus $2 for postage          What’s next?
and handling. Copies of articles from back issues cost $7 per       Mark K. Harder.......................................................................................... 2
article. Prior issues and copies of articles from back issues
may be obtained by contacting the institute of Continuing           Michigan’s new Trust Code Contains fifteen Mandatory rules
legal education, 1020 greene street, ann arbor, Mi, (734)           That affect Many existing Trusts and all future Trusts
764-0533.
                                                                    Sebastian V. Grassi, Jr. ............................................................................ 11
editorial Policy
                                                                    Tips for drafting revocable Trusts Under the new Michigan Trust Code
The Michigan Probate and Estate Planning Journal is aimed
primarily at lawyers who devote at least a portion of their
                                                                    Marilyn A. Lankfer ................................................................................... 40
practice to matters dealing with wills, trusts, and estates. The    The Power of discretion: an introduction to Creditor rights and disability
Journal endeavors to address current developments believed
to be of professional interest to members and other readers.        Planning Under the Michigan Trust Code
The goal of the editorial board is to print relevant articles and   Douglas Chalgian .................................................................................... 58
columns that are written in a readable and informative style
that will aid lawyers in giving their clients accurate, prompt,     Departments
and efficient counsel.
The editorial board of the Journal reserves the right to accept     recent decisions in Michigan Probate, Trust, and estate Planning law
or reject manuscripts and to condition acceptance on the            Hon. Phillip E. Harter ............................................................................. 64
revision of material to conform to its editorial policies and
criteria. Manuscripts and letters should be sent to nancy l.        legislative report
little, Managing editor, Michigan Probate and Estate                Harold G. Schuitmaker ............................................................................ 69
Planning Journal, bernick, omer, radner & ouellette, PC,
2400 lake lansing rd., ste. f, lansing, Mi 48912, (517) 371-
                                                                    ethics and Unauthorized Practice of law
5361, fax (517) 371-1211, e-mail nlittle@borpc.com.                 Fred Rolf and Josh Ard ............................................................................ 71
opinions expressed in the Journal are those of the authors and      Miscellaneous
do not necessarily reflect the views of the editorial board or of
the Probate and estate Planning Council. it is the responsibility   iCle resources ....................................................................................... 73
of the individual lawyer to determine if advice or comments in      section Council ........................................................................................ 74
an article are appropriate or relevant in a given situation. The
editorial board, the Probate and estate Planning Council, and
the state bar of Michigan disclaim all liability resulting from
comments and opinions in the Journal.
Citation Form
                                                                           editorial board
issues through Volume 4, number 3 may be cited [Vol.] Mich
Prob & Tr lJ [Page] [Year]. subsequent issues may be cited
Michigan Prob & est Plan J, [issue], at [Page].
                                                                           nancy l. little, Managing editor
                                                                           bernick, omer, radner & ouellette, PC, lansing
section Web site
http://www.michbar.org/probate/
                                                                           Melisa M. W. Mysliwiec
                                                                           foster Zack, PC, okemos
                                                                           Christine Mathews, Copy and Production editor
Michigan Probate and Estate Planning Journal                               The institute of Continuing legal education, ann arbor
nancy l. little, Managing editor
bernick, omer, radner & ouellette, PC
2400 lake lansing rd., ste. f, lansing, Mi 48912
(517) 371-5361, fax (517) 371-1211
e-mail nlittle@borpc.com
Winter 2009                                                      MiChigan Probate & estate Planning


                             From the Desk of the Chairperson
                                     By Harold G. Schuitmaker

                   It is a great honor to be elect-   thank our outgoing chairperson, Nancy Little. Not
                   ed Chair of the Probate and        only has she been a participant in the Section for
                   Estate Planning Section of the     many years and a presenter at many ICLE semi-
                   State Bar of Michigan. This        nars, she has also been a great leader. Under
                   honor is an exciting, but yet,     Nancy’s leadership, we have helped adopt leg-
                   humbling event.                    islation that is very helpful to our members and
                       The Section meets month-       our clients, as well as the courts and the public.
                   ly at the University Club in       With her continued help and the help of all those
                   East Lansing except during         who are Section members, as well as all the nu-
the summer, during our newly elected Chair’s          merous guests who attend our meetings or who
meeting, and during the Annual Probate & Es-          correspond with our Section, we can continue to
tate Planning Institute in Acme, Michigan. Over       make a difference to better serve our clients and
the past decade, I have attended most of the          the general public.
Section’s monthly meetings, and I leave each             All of you are welcome to attend our meetings
meeting knowing much more than when I came            or, in any other way, contribute your thought and
to the meeting because of the tremendous intel-       ideas.
lect, experience, and insight shown by the Sec-
tion members during our discussions and pre-
sentations.
   Over the past few years, our Section has
been instrumental in repealing the rule Against
Perpetuities for personal property, as well as the
adoption of the Michigan Trust Code. We con-
stantly take positions of support or non-support
on legislation that affects our clients as well as
our practice. We have 37 standing committees
and/or liaisons with other State Bar Sections,
SACO, Court Rules, Michigan Bankers Associa-
tions, and the Probate Judges Association.
   We promote education and advocacy for Sec-
tion members, and we are a leader in continu-
ing education in partnership with the Institute of
Continuing Legal Education. This spring will be
our 50th Probate and Estate Planning Institute.
   There appears to be a trend in our current leg-
islature that there is a need to help vulnerable
adults and seniors avoid the pitfalls of scams,
fraud, and deceit. I would expect our Section to
be at the forefront in helping to shape any new
legislation that would, in a safe and sensible
manner, protect these vulnerable persons.
   With my election, I want to take a moment to

                                                                                                    
MiChigan Probate & estate Planning                                                              Winter 2009


                        A Closer Look at the Michigan Trust Code:
                         What’s New —What’s In—What’s Next?
                                         By Mark K. Harder     


                  Introduction                                 Continuation of Existing Law
    Governor Granholm signed enacting legis-              As noted above, many of the Michigan Trust
lation for the Michigan Trust Code into law on
     2                                                Code provisions represent a continuation of cur-
June 18, 2009. The Code takes effect April 1,         rent Michigan law or what many believe the law
2010, and will apply to all trusts created before,    would be if the courts ruled on particular issues.
on, or after the effective date. The Code pro-
                                 3                    Therefore, there is much in the Code that will be
vides Michigan with a comprehensive codifica-         familiar to Michigan practitioners. Some of the
tion of the law of trusts. It preserves much of our   more significant areas where current law has
                                                      been expressly and carefully continued are as
current statutory and common trust law and fills
                                                      follows:
in many of the gaps in the current law.
                                                          Trust Registration. The trust registration provi-
    The purpose of these materials is to review
                                                      sions now found in Sections 7101 through 7105
key themes, describe some areas where the             of EPIC are incorporated into Part 2.
Code changes Michigan law, and note some                  Termination and Modification of Trusts. Michi-
places where the Code draws on prior law found        gan Trust Code Section 7411(1) is the principal
in EPIC and elsewhere.                                provision dealing with termination and modifi-
                  Key Themes                          cation of trusts. It is prospective only. It permits
                                                      courts to approve the termination or modification
    There are several important themes to the         of the trust upon petition of the current income
Michigan Trust Code.                                  and vested remainder beneficiaries when contin-
    Series of default rules. Section 7105 of the      uance is not necessary to achieve a material pur-
Code provides that the Code is a series of de-        pose of the trust. This is consistent with current
fault rules, which can be varied by the settlor of    Michigan law. See Rose v Southern Michigan
the trust. From a practitioner’s standpoint this is   Nat’l Bank, 255 Mich 275, 238 NW 284 (1931).
an extremely important rule, because it generally         The Code also recognizes the authority of
recognizes freedom of drafting.  4                    trust protectors, alone or with the beneficiaries,
    Preserves existing Michigan law. The Code         to terminate trusts when the trust instrument so
preserves long standing Michigan law unless           provides.
there were significant procedural or policy ben-          The drafters did not intend the adoption of this
                                                      provision to be in derogation of existing Michi-
efits from changing the law.
                                                      gan law, which permits settlors and beneficiaries
    Preserves uniform language. Where Michi-
                                                      to agree to termination of a trust with court ap-
gan’s law and the UTC are substantively simi-
                                                      proval, see Hein v Hein, 214 Mich App 356, 543
lar, the Michigan Trust Code favors the UTC lan-      NW2d 19 (1995), and when the settlor and the
guage if uniformity of language among the states      trustee to agree to do so, see Fredricks v Neer,
might be advantageous.                                260 Mich 627, 245 NW 537 (1932).
    Aligns wills and revocable trusts used as will        Claims of Beneficiaries’ Creditors. Part 5
substitutes. Because of the widespread use of         deals with the relationship to the trust of credi-
revocable trusts as will substitutes, the Code        tors of beneficiaries of trusts, the enforceability
aligns the legal treatment of wills and revocable     of spendthrift provisions, and the effect of dis-
trusts in several places.                             cretionary distribution powers. It codifies the Re-

 
Winter 2009                                                        MiChigan Probate & estate Planning


statement (Second) of the Law of Trusts, which         §7605 through §7615.
has been incorporated into Michigan’s common               Compensation of Trustees. Section 7708
law in decisions such as Miller v Dept of Mental       makes clear that trustees are entitled to reason-
Health, 432 Mich 426, 442 NW2d 617 (1989);             able compensation for their service as trustee. It
In re Edgar Estate, 425 Mich 364, 389 NW2d             does not attempt to define how this is to be de-
696 (1986); Evans & Luptak v Obolensky, 194            termined nor does it seek to vary current law in
Mich App 708, 487 NW2d 521 (1992); Cover-              any fashion.
ston v Kellogg, 136 Mich App 504, 357 NW2d                 Section 7709 also permits reimbursement of
705 (1984); In re Estate of Sykes, 131 Mich App        expenses incurred by a trustee, with interest if
49, 345 NW2d 642 (1983); and Hurley v Hurley,          appropriate, and gives the trustee a lien against
107 Mich App 249, 309 NW2d 225 (1981). This            trust property if expenses were incurred to pro-
part of the Code does not follow the general ap-       tect trust property. The Code also makes clear
proach taken in the Uniform Trust Code and the         that advances and reimbursements of expens-
Restatement (Third) of the Law of Trusts.              es are not considered acts of self-dealing or a
   Accounting to Incapacitated Settlors of Revo-       breach of trust.
cable Trusts. Former EPIC Section 7303 dealt               Notice of Trust Existence and Accountings.
somewhat imperfectly with how the trustee of a         Although it relies on the UTC structure for or-
revocable trust is to keep an incapacitated set-       ganizing these provisions, the Michigan Trust
tlor of a revocable trust informed of the trust ad-    Code adopts the conceptual approach to dis-
ministration. EPIC provides a duty to do so and        closing trusts, providing information about the
to provide this information to the settlor’s desig-    trust status, and accountings that was found in
nated agent. Left unclear was what to do if the        EPIC. These provisions are found in MTC Sec-
designated agent is the settlor’s trustee. This po-    tion 7814. By continuing the existing rules found
tentially leaves the incapacitated individual vul-     in EPIC, the existence of the trust, the identity of
nerable and the trustee in ambiguous circum-           the trustee and its address, and a copy of rele-
stances.                                               vant portions of the trust instrument must be pro-
   Section 7603 of the Michigan Trust Code             vided to the beneficiaries. However, the settlor
builds on this provision and offers a more com-        of a trust will remain free to limit the group that
plete default rule that is more protective of the      receives annual accountings.
incapacitated individual. If the trustee reason-           An important distinction to note is a change
ably believes the settlor of a revocable trust is an   in terminology. EPIC refers to “current trust ben-
incapacitated individual, the trustee must keep        eficiary” and “interested trust beneficiary”. These
the settlor’s designated agent, or if none or if the   terms are not be used in the MTC and the defi-
sole designated agent is a trustee, each person        nitions have been deleted. The Michigan Trust
who would be a qualified trust beneficiary if the      Code uses the terms distributees, permissible
settlor were deceased, informed of the existence       distributees, and “qualified trust beneficiary” to
of the trust and reasonably informed of its ad-        describe the same persons.
ministration.                                              Trustee Powers. Sections 7816 and 7817 of
   Claims Against Decedent’s Revocable Trusts.         the Michigan Trust Code set forth the general
The Michigan Trust Code incorporates into its          and specific powers of the trustee. Section 7816
Part 6 the existing provisions that allow a dece-      sets forth the general rule. Section 7817 relied
dent’s creditors to bring their claims against the     upon the provisions of EPIC for a list of specific
decedent’s revocable trust if there is no probate      powers.
proceeding or the assets of the probate estate             There are five new powers expressly provid-
are insufficient to satisfy all of the claims. See     ed for in MTC Section 7817:

                                                                                                       
MiChigan Probate & estate Planning                                                               Winter 2009


  •	 Powers related to employee benefit                change the law. Some of the more important pro-
     and retirement plans; added as Section            visions include the following:
     7817(jj).                                         Transferring the Principal Place of Administra-
  •	 Making loans; added as Section                    tion. Section 7108 defines the principal place of
     7817(kk).                                         administration of trusts in a manner consistent
  •	 Pledging trust property to guarantee              with EPIC.
     debts of others; added as Section                     Both private and institutional or professional
     7817(ll).                                         Trustees regularly transfer or relocate the prin-
  •	 Using alternative dispute resolu-                 cipal places of administration of trusts. In many
     tion mechanisms; added as Section                 cases the trust agreement expressly permits the
     7817(mm).                                         trustee to do so; in other cases the trustee sim-
  •	 Exercising powers to wind up the trust            ply does so subject to the existing EPIC require-
     and distribute property to those entitled         ment that the trustee “administer the trust at a
     to it; added as Section 7817(nn).                 place appropriate to the purposes of the trust
   In addition,                                        and to its sound, efficient management.” The
  •	 The provisions dealing with environmen-           MTC will continue to permit the trustee to trans-
     tal matters now found in EPIC are in-             fer the principal place of administration without
     cluded without change as Michigan Trust           court approval.
     Code Section 7818.                                    However, the MTC will require the trustee to
  •	 The provisions found in EPIC dealing              give written notice of the proposed change. The
     with the trustee’s authority over tax mat-        notice is given to the qualified trust beneficiaries.
     ters are continued as Section 7819.               The trustee is free to change the place of ad-
  •	 EPIC’s facility of payment provision has          ministration after 63 days unless a beneficiary
     been included in the Michigan Trust               objects. If an objection is raised, the trustee will
     Code as Section 7820.                             need to either cancel plans to transfer the prin-
   Attorneys Fees in Litigation. Section 7904          cipal place of administration or obtain court ap-
gives the courts the right to assess attorney fees     proval of the change. If no objection is raised,
and costs as part of the relief for disputes involv-   the transfer of the place of administration can
ing the trust. The Code allows awards from the         freely occur. Settlors will remain free to provide
trust to the beneficiaries only when the matter        their own rules as well.
enhances, preserves, or protects the trust. The        Nonjudicial Settlement Agreements. Michigan
provision follows the law in Becht v Miller, 279       Trust Code Section 7111 recognizes nonjudicial
Mich 629, 273 NW 294 (1937), and Temple v              settlement agreements. These may be used in
Temple (In re Estate of Temple), 278 Mich App          a variety of areas and matters related to trust
122, 748 NW2d 265 (2008). In addition, the Code        administration, such as interpretation or con-
provides for reimbursement of a trustee who de-        struction of the trust, approval of accountings,
fends or prosecutes a matter in good faith, un-        resignation, appointment or compensation of the
less it involves a breach of trust for which a court   trustee, transfers of the principal place of admin-
orders relief described in Section 7902(2).            istration, and trustee liability.
                                                           The list provided in the statute is not exclu-
     Important New Provisions or Changes
                                                       sive; it is illustrative. However, nonjudicial settle-
   As one might expect in a Code as compre-            ment agreements cannot be used to achieve ter-
hensive as the Michigan Trust Code, it includes        mination or modification of trusts. These actions
a number of provisions that fill gaps, extend the      remain subject to the provisions found in Part 4
law, and in a small number of cases affirmatively      of the Code.

 
Winter 2009                                                         MiChigan Probate & estate Planning


Expanded Representation Rules. The UTC in-              have become too small to administer effectively
cludes an entire article dealing with representa-       or efficiently. Many trust agreements expressly
tion of beneficiaries in matters such as the re-        permit the trustees to also terminate trusts under
ceipt of notice and consent. The Michigan Trust         similar circumstances. Section 7414 specifically
Code incorporates these sections in substan-            authorizes the modification or termination of un-
tially the form presented, with some conforming         economic trusts with or without court approval.
changes to EPIC. These sections build from and          The threshold for termination is $50,000 and is
closely track the representation provisions of the      adjusted for inflation. The Michigan Trust Code
Uniform Probate Code, which are found in Sec-           directs the distribution of the assets of small
tions 1209 and 1403 of EPIC.                            trusts to the current beneficiaries if no manner is
    Due to their similarity to existing provisions of   provided for in the trust instrument.
EPIC, the concepts embodied in this Part will be        Capacity Standard. Section 7601 states that the
familiar to practitioners. However, current EPIC        standard of capacity to create a revocable trust
Sections 1209 and 1403 only apply in the context        is the same as the standard of capacity to make
of judicial proceedings. One significant change         a will.
                                                              5


Part 3 represents from current law is that it would         In recent years, the Michigan courts have used
be applicable at all times, not just when a judicial    language invoking a contract standard for capac-
proceeding is ongoing. This means, for example,         ity to set standards for durable powers of attor-
that notice and delivery of an accounting given         ney and for beneficiary designations. It makes
                                                                                                6


to parents or guardians of minor children can be        sense to have more aspects of citizens’ estate
binding on the child when no conflict exists be-        planning governed by a common standard. Con-
tween the parent and the children.                      sequently, EPIC section 2501 has been modi-
Enforcement of Charitable Trusts. Section 7405          fied to include a more expansive definition of the
continues to recognize and permit a wide variety        standard of capacity for making wills, which in-
of charitable trusts. Prior to the MTC, however,        cludes language invoking a contract standard.
only the charitable beneficiary and the Attorney        The definition is based on the Michigan Civil Jury
General may enforce the terms of the charitable         Instructions and adds a requirement that the set-
trust. The settlor was not permitted under current      tlor understand in a reasonable manner the gen-
law to enforce his or her own trust. Prentis Fam-       eral nature and effect of his actions. This change
ily Found, Inc v Barbara Ann Karmanos Cancer            aligns the rules for determining the capacity re-
Inst, 266 Mich App 39, 698 NW2d 900 (2005).             quired of wills, revocable trusts, durable powers
    The Michigan Trust Code includes a provision        of attorney, and beneficiary designations.
granting Settlors and named beneficiaries the           Presumption of Revocability. Section 7602 re-
right to maintain proceedings to enforce charita-       verses the common law presumption and pro-
ble trusts. This right is personal to the trustee and   vides a general rule that trusts created after the
may not be exercised by the settlor’s heirs, the        effective date of the enactment of the Code are
Settlor’s personal representative, or the trustee       revocable and amendable unless the trust in-
of the Settlor’s revocable trust, and may be exer-      strument states otherwise. The Code also pro-
cised by a an agent under power of attorney only        vides for how revocation or amendment occurs,
if the right is specifically conferred. The Attorney    and the powers others (such as an agent under
General continues to have the rights contained          a power of attorney or conservator) may have to
in the Supervision of Trusts for Charitable Pur-        exercise the settlor’s powers.
poses Act, 1961 P.A. 101, MCL 14.251 et seq.            Statute of Limitations for Challenges to the Va-
Termination of Small Trusts. Courts have rou-           lidity of Revocable Trusts. Michigan Trust Code
tinely authorized the termination of trusts that        Section 7604 brings finality to the question of

                                                                                                       
MiChigan Probate & estate Planning                                                                 Winter 2009


when a contest may be brought regarding the             for not taking actions that requires trust protector
validity of a revocable trust. It provides for an end   approval if the trustee has timely sought, but not
to contests upon the earlier of two years after         received, approval. The trustee is also protected
the settlor’s death or six months after the trustee     if it seeks court approval if the trustee has any
sends notice of the trust’s existence, relevant         question about the propriety of the direction.
portions of the terms of the trust that describe or         The trust protector provisions also ensure that
affect the person’s interest, the trustee’s name        the trust protector is subject to the jurisdiction of
and address, and the time allowed for commenc-          Michigan’s courts. Finally, the trust protector pro-
ing a proceeding to contest the trust.                  visions place nonmodifiable limits on the excul-
    The notice is similar to the required disclo-       pation of trust protectors, which match the limits
sures regarding the trust’s existence under Sec-        on exculpation that apply to trustees.
tion 7814. This section also provides protection        Distributions Upon Termination. Section 3908 of
to trustees administering the trust and distrib-        EPIC permits a personal representative of a pro-
uting trust property without knowledge of any           bate estate to provide to the beneficiaries a pro-
pending contest or plans to bring a contest of the      posal for distributions. The beneficiaries of the
trust. The provision also obligates beneficiaries       estate have 28 days to object. Section 7821 of
to return any distributions received if the trust is    the Michigan Trust Code provides a similar rule
later determined to be invalid.                         for trusts. It permits the trustee to offer a proposal
Trust Protectors. The Code includes Michigan’s          for distribution of trust property upon termination
first law concerning the use of trust protectors.       of the trust and gives the beneficiaries 28 days to
For purposes of the Michigan Trust Code, a trust        object or be bound. The notice of proposed dis-
protector is anyone, other than a settlor or holder     tribution must include provisions informing the
of a power of appointment, with the power to di-        trust beneficiaries of the right to object and the
rect actions of the trustee. See §7103(n), MCL          time permitted.
700.7103(n).                                            EPIC Rules of Construction Applicable to Wills.
    With certain exceptions, section 7809 re-           The widespread use of trusts as will substitutes
quires that trust protectors be fiduciaries, act in     prompted a decision to make applicable to trusts
good faith, act in accordance with the terms of         several rules of construction that are applicable
the trust instrument, and be liable for their ac-       to wills and that are found in EPIC. These in-
tions. The exceptions include trust protectors          clude:
who are beneficiaries of the trust and trust pro-         •	 Section 2605 (increase in securities and
tectors whose powers are powers of administra-                accessions)
tion within the meaning of Section 675(4) of the          •	 Section 2606 (nonademption of specific
Internal Revenue Code.                                        devises)
    When a trust protector is serving, the trust-         •	 Section 2607 (nonexoneration)
ee may not act without approval of the court if           •	 Section 2608 (ademption by satisfaction)
a trust protector’s instruction is contrary to the      These are incorporated by reference in Section
terms of the trust or would result in a breach of a     7112.
duty that the trust protector owes to the benefi-       In Terrorem or No Contest Clauses. Section 7113
ciaries. However, when the trust protector’s di-        borrows from EPIC Sections 2518 and 3905 the
rections are within the scope of the protector’s        provisions recognizing in terrorem or no contest
authority and are consistent with the protector’s       clauses and extends them to trusts.    7


duties, the trustee is protected from liability for     Revocability of Trust During Settlor’s Incapac-
compliance with the directions of the trust pro-        ity. Whether a “revocable” trust remains revo-
tector. The trustee is also protected from liability    cable during the period of a settlor’s incapacity

 
Winter 2009                                                           MiChigan Probate & estate Planning


sometimes is misunderstood or uncertain. The           their clients. Where there are differences, forms
definition of “revocable” makes clear that the         will need to be updated.
characterization of a trust as revocable is not af-        Some particular areas where practitioners
fected by the settlor’s lack of capacity to exer-      might want to focus their attention include:
cise the power, regardless of whether an agent,        Exculpation. The Trust Code limits the ability of the trust
conservator, or plenary guardian is serving. See       agreement to exculpate the trustee from liability. Trustees
§7103(h), MCL 700.7103(h).                             cannot be relieved of liability for a breach of trust committed
                                                       in bad faith or with reckless indifference to the purposes of
      Familiarize Yourself with the Code
                                                       the trust or the interests of the beneficiaries.
    The Michigan Trust Code takes effect on            Trustee Removal. The Michigan Trust Code does not
April 1, 2010. Practitioners will need to use the      give trust beneficiaries the power to remove trustees. This
time between now and then to take a number             is a departure from the UTC provision. Settlors remain free
of steps. The first priority for Michigan attorneys    to confer this power upon trust beneficiaries and drafters
is to familiarize themselves with the structure,       should be careful to consult with their clients and consider
scope, and meaning of the Michigan Trust Code.         whether the trust beneficiaries should be given this power.
The Code continues current law and fills in many       Co-trustees. Drafting and providing for the powers of
gaps in a way that is consistent with most prac-       co-trustees is remarkably more complex than may initially
titioners’ understanding of the law or what they       appear. Special care and attention should be given to the
believe the law would be if the courts ruled on        default rules found in Section 7703 of the Michigan Trust
a matter. However, as these materials indicate,        Code and consideration given to this subject and whether
there are some substantive changes. In addition,       the practitioner’s trust forms need to be modified to depart
many familiar concepts are now codified or lo-         from the default rules.
cated in different places than previously.             Accounting Provisions. The Michigan Trust Code
    The most important concept to remember             provisions requiring notice of the existence of
about the Code is that it is a default statute. Sec-   trusts and accounting to beneficiaries are consis-
tion 7105(2) provides that the terms of the trust      tent with current law. However, some of the ter-
will prevail over the terms of the Code except in      minology differs. Because these provisions are
a limited number of specific areas described in        integral to the administration of trusts, language
the section. See Section I.C, above, for the list      in forms should be reviewed to ensure that any
of exceptions. For planners this provision means       changes are made to avoid ambiguity.
they and their clients are free to create terms of     Discretionary, Support, and Spendthrift Trusts.
the trust that meets their needs. For those ad-        The Trust Code preserves the common law em-
ministering trusts it means that the terms of the      bodied in the Restatement (Second) and adopted
trust must be reviewed and understood because          by Michigan’s courts in the areas of discretionary,
these terms will generally prevail over the provi-     support, and spendthrift trusts. The Code’s defi-
sions of the Code.                                     nitions of what is a discretionary provision, sup-
                                                       port provision, and spendthrift provision should
              Revisit Your Forms
                                                       be carefully reviewed and compared to forms to
   Those engaged in estate planning will want to       make certain the practitioner understands the
use the time between enactment and the April 1,        forms’ language and how the courts are likely to
2010, effective date to revisit their forms, com-      classify and interpret them.
pare them to the Trust Code’s default provisions,      Rethink Trust Protectors. If practitioners are us-
and determine whether the judgments of the             ing trust protectors, these provisions must be re-
drafters of the UTC and the Michigan Trust Code        viewed. If the terms of the trust provide that trust
are consistent with their views and the views of       protectors are acting in a nonfiduciary capacity,

                                                                                                                  
MiChigan Probate & estate Planning                                                               Winter 2009


this language usually will not be effective after      include the representation rules in Part 3, Section
the Code becomes effective. Similarly, language        7405 (enforcement of charitable trusts), Section
that exculpates a trust protector will not be effec-   7602 (revocation and amendment of revocable
tive if it goes beyond what the statute permits.       trusts), Section 7603 (receive information about
   In addition, practitioners should consider          the administration of revocable trusts). These
whether there are persons acting with respect to       provisions and their intersection with forms of
a trust who are not designated as a trust protec-      Durable Power of Attorney need to be consid-
tor in the document, but who have been given           ered.
powers over a trust that will make the individ-
                                                         Revisit Trust Administration Procedures
ual a trust protector under the statute. For ex-
ample, if a nonbeneficiary holds a power to re-            Procedures for administering trusts and set-
move trustees, this person meets the definition        tling decedent’s estates through revocable trusts
of a trust protector and will be held to a fiduciary   will also need to be considered.
standard in the exercise of this power. Results            Besides the items noted here, consider also
such as this may prompt drafters and their cli-        how the provisions dealing with notice of the ex-
ents to reconsider the terms under which these         istence of trusts and trust accountings, as well
powers are conferred.                                  as the trust protector provisions, will affect trust
Review Trustee Powers. Although the provisions         administration and settlement.
of EPIC that define a trustee’s powers were the        Statute of Limitations to Contest Revocable
basis for the Trust Code’s trustee powers provi-       Trusts. The new period of limitations to contest
sions, there are some changes and practitioners        the validity of revocable trusts creates an op-
may wish to modify their trust agreements to in-       portunity for persons administering decedent’s
corporate the new powers that were added.              estates to bring certainty the validity of the trust
Termination of Small Trusts. The default provi-        within a reasonable time of notice of the trust.
sion for distribution of trust assets upon the ter-    This notice should be added to checklists for
mination of small trusts is to distribute the assets   decedent’s estates. In addition, practitioners
to the income beneficiaries. This may not always       will want to consider whether and how they will
be appropriate. For example, if the trust is for the   satisfy the requirement to provide relevant por-
benefit of a second spouse and a marital deduc-        tions of the terms of the trust in satisfaction of the
tion is not important, it may be more appropri-        requirement that these be delivered to the trust
ate that upon termination the trust property be        beneficiaries with the notice.
distributed between the income beneficiary and         Transfers of the Principal Place of Administra-
the remainder beneficiaries on the basis of their      tion. As noted above, transferring the principal
actuarial interests.                                   place of administration can still occur, but will re-
   Similarly, if a trust was established for Med-      quire prior notice to the beneficiaries.
icaid planning purposes, it may be appropriate         Representation. The representation rules found
to require that the trust terminate only with court    in Part 3 of the Michigan Trust Code will be help-
approval or only after the trustee considers the       ful in bringing closure to a number of routine ad-
impact on the qualification of trust beneficiaries     ministration matters. Practitioners will need to
for governmental benefits and finds there will be      carefully study these rules for how they could
none.                                                  benefit and affect a variety of day to day matters
Review Durable Powers of Attorney. Several             involving trusts.
sections of the Michigan Trust Code address            Nonjudicial Settlement Agreements. These
how agents under Durable Powers of Attorney            agreements can provide greater certainty in the
can act on behalf of the settlor. These provisions     administration of trusts and should be consid-

 
Winter 2009                                                                 MiChigan Probate & estate Planning


ered when there are matters affecting the trust               mately February 2010. This article draws heavily from the
and the beneficiaries or trustee want to achieve              author’s outline for the 49th Annual Probate and Estate
                                                              Planning Institute presented by the Institute of Continuing
final resolution regarding them.                              Legal Education in May and June 2009 in Acme and Plym-
Delegation Between Trustees. The provisions                   outh, Michigan, respectively. The Institute featured a Mich-
dealing with delegation among co-trustees have                igan Trust Code Track and readers may wish to obtain ma-
been changed to eliminate the (widely ignored)                terials from the Institute for further information about the
requirement of court approval to delegation.                  Michigan Trust Code. In addition, readers may also wish
                                                              to consult the author’s articles The Michigan Trust Code:
However, practitioners must give notice of the                An Overview, available at www.michbar.org/probate/trust-
delegation if the power is not one that can be                code.cfm, The Michigan Trust Code: Some Things Old,
delegated to a non-agent trustee.                             Some Things New, Michigan Prob & Est Plan J, Winter
Notice of Proposed Distribution. The extension                2008, and The Michigan Trust Code: Its Organization and
of the provision now found in EPIC Section 3908               Structure, Michigan Prob & Est Plan J, Spring 2009.
                                                                   2. The enacting legislation consists of five Public Acts.
to the distribution of the proceeds of a trust upon           The main Act is 2009 P.A. 46, which amends the Estates
its termination means practitioners should add                and Protected Individuals Code by deleting Article VII and
an item to their checklists for the administration            replacing it with the Michigan Trust Code, as well as mak-
of trusts for this item.                                      ing conforming changes to the balance of EPIC. The other
                                                              four Acts are:
                     Conclusion                                  • 2009 PA 42 amending 1846 R.S. 41 related to
                                                                     fraudulent conveyances
   Enactment of the Michigan Trust Code repre-                   • 2009 PA 43 amending the Statute of Uses and
sents a continuation of the process of modern-                       Trusts, MCL 555.1 et seq.
izing the law of estates and trusts that began in                • 2009 PA 44 amending the Uniform Fraudulent
                                                                     Transfer Act, MCL 566.31 et seq.
Michigan in 1998 with the enactment of EPIC and
                                                                 • 2009 PA 45 amending the Powers of Appointment
continued in 2004 with the adoption of the Uni-                      Act, MCL 556.123.
form Principal and Income Act, in 2005 with pas-                   2009 PA 43 ensures that in the event of a conflict be-
sage of the Uniform Prudent Investor Act, and                 tween the Michigan Trust Code and the Statute of Uses
occurred most recently in 2008 with the repeal                and Trusts, the Michigan Trust Code prevails. The remain-
                                                              ing bills are designed to address potential creditor con-
of the Rule Against Perpetuities. The Code rep-
                                                              cerns arising out of the use of lifetime or inter vivos QTIP
resents a significant advance in the law of trusts            gift trusts, intentionally defective grantor trusts, and with-
and ensures that Michigan’s citizens and bar has              drawal powers. Copies of the legislation can be found on
a single source, comprehensive, modern body                   the Michigan legislature’s website: http://www.legislature.
of law to govern an area of importance to its citi-           mi.gov.
                                                                   3. See §8206(1)(a), MCL 700.8206(1)(a). The Code
zens, its legal and financial communities and its             applies to judicial proceedings commenced on or after the
courts.                                                       effective date. The Code also applies to judicial proceed-
                                                              ings commenced before the effective date unless the court
                                                              finds the particular provision would substantially interfere
                          Notes                               with the conduct of the proceedings or would prejudice the
                                                              rights of the parties.
    1. The author chairs the Michigan Trust Code Commit-           4. There are, however, a number of exceptions, which
tee of the State Bar of Michigan Probate and Estate Plan-     include:
ning Section. He also serves as Secretary of the Section         • The requirements for creating a trust
and is a Fellow of the American College of Trust and Es-         • The duty to administer a trust in good faith, expe-
tate Counsel, where he is a member of the College’s State            ditiously, in accordance with the terms and pur-
Laws Committee. Together with John H. Martin, Reporter               poses of the trust and for the benefit of the trust
for EPIC, the author is the co-author of the forthcoming             beneficiaries
“EstatEs and ProtEctEd IndIvIduals codE and MIchIgan trust       • The requirement that the trust have a purpose that
codE wIth rEPortErs’ coMMEntary”, which will be published            is lawful, not contrary to public policy, and pos-
by the Institute for Continuing Legal Education in approxi-          sible to achieve

                                                                                                                        
MiChigan Probate & estate Planning                                                                   Winter 2009


   • The power of the court to terminate or modify a                             Mark K. Harder has served
        trust under certain circumstances                                        as Chair and Reporter of the
   • The effect of a spendthrift provision, a support pro-
        vision, and a discretionary trust provision on the
                                                                                 Michigan Trust Code Commit-
        rights of creditors and assignees to reach a trust                       tee from its inception. He is a
   • The power of a court to require, dispense with, or                          partner in the law firm of War-
        modify or terminate a bond                                               ner Norcross & Judd LLP and
   • The power of the court to adjust a trustee’s com-                           practices in the firm’s Holland
        pensation
   • The fiduciary duty of a trust protector
                                                                                 office. He serves as Treasur-
   • The duty to provide trust beneficiaries with the                            er of the Section and is a Fel-
        terms of the trust and information about the trust     low of the American College of Trust and Estate
        properties and to give notice of the trust to quali-   Counsel, where he is a member of the College’s
        fied trust beneficiaries                               State Laws Committee.
   • The power of the court to order statements of ac-
        count and other information be provided
   • The effect of an exculpatory term
   • The rights of persons other than a trustee or trust
        beneficiary
   • Periods of limitation
   • The power of a court to take action and exercise
        jurisdiction
   • The subject matter jurisdiction of the court and
        venue
     5. Having a common standard for wills and revocable
trusts is important for several reasons:
   • The trend among states is clearly in favor of the
        will standard.
   • If the standard of capacity for revocable trusts is
        that of the capacity to contract and the standard
        of capacity for a will is different, odd results
        could occur. Consider that if a court finds a per-
        son lacked capacity to create a revocable trust,
        but possessed capacity to make a will, it would
        invalidate the person’s trust that was signed on
        the same day immediately before a valid will was
        executed.
  •A Closer Look at the Michigan Trust Code: What’s
      New —What’s In—What’s Next? By Mark K.
      Harder1
  6. For the standard of capacity required to create a
      Durable Power of Attorney, see Persinger v Holst,
      248 Mich App 499, 639 NW2d 594 (2001). For the
      standard of capacity required to create a benefi-
      ciary designation, see In re Erickson Estate, 202
      Mich 329, 508 NW2d 181 (1993).
     7. Coincidentally the court of appeals did likewise in
late 2008. Nacovsky v Hall (In re Griffin Trust), 281 Mich
App 532, 760 NW2d 318 (2008). However, on June 22,
2009, the Michigan Supreme Court simultaneously grant-
ed leave to appeal and reversed the court of appeals deci-
sion without explanation.




 0
Winter 2009                                                         MiChigan Probate & estate Planning


   Michigan’s New Trust Code Contains Fifteen Mandatory Rules That Affect
                 Many Existing Trusts and All Future Trusts
                                         By Sebastian V. Grassi, Jr.
                      Introduction                       1212, 1308 and 1507; MCL 700.1212, 700.1308,
                                                         and 700.1507 concerning certain fiduciary re-
    Michigan recently adopted a new comprehen-           lationships and duties; (iii) EPIC section 2901;
sive trust administration code. The new code is          MCL 700.2901 concerning the disclaimer of a
contained in Article VII of Michigan’s Estates and       fiduciary power; (iv) EPIC section 2904; MCL
Protected Individuals Code (MCL 700.1101 – 700.          700.2904 concerning certain requirements for
8102) (“EPIC”), and is known as the “Michigan            disclaiming an interest that arises under a trust;
Trust Code” (Public Act (PA) 46 of 2009, June
              1                                          (v) EPIC section 3403; MCL 700.3403 concern-
18, 2009, effective April 1, 2010 ; MCL 700.7101
                                     2                   ing a decedent’s probate estate providing notice
- 700.8206) (“MTC”). The MTC codifies current            to the trustee of the decedent’s revocable living
                                                         trust of certain claims and allowances against
Michigan law (concerning trusts) as contained in
                                                         the estate which the trust is responsible for pay-
EPIC, Michigan caselaw, and the Uniform Trust            ing (if the probate estate is insufficient); (vi) EPIC
Code (UTC).                                              section 3705; MCL 700.3705 which requires
    The MTC also contains several provisions not         the personal representative to provide notice of
previously found in Michigan common law, EPIC,           its appointment to the trustee of the deceased
or the UTC. These provisions were added to pro-          settlor’s revocable living trust; (vii) EPIC section
vide conformity and clarification to the MTC.    3       3801; MCL 700.3801 which requires a personal
    “On balance, the Michigan Trust Code [is trust-      representative to publish a notice to creditors
ee friendly and] tends to preserve long standing         and to send a copy of the notice to the trustee of
Michigan law....” 4                                      the deceased settlor’s revocable living trust; (viii)
                                                         EPIC section 3915; MCL 700.3915 which permits
    The MTC is supplemented by the common
                                                         a personal representative to require that a trust
law of trusts and principles of equity. EPIC sec-
                                                         be registered and request that a bond be posted
tion 1203; MCL 700.1203. Also, the MTC is to             before the personal representative makes a dis-
be liberally construed to “promote a speedy              tribution to that trust; and (ix) EPIC section 5407;
and efficient system for liquidating a decedent’s        MCL 700.5407 which permits the Probate Court
[trust] estate and making distribution to the de-        to create a revocable or irrevocable trust of the
cedent’s successors.” EPIC section 1201; MCL             estate property of a protected individual6 even
700.1201.                                                though the trust may extend beyond the lifetime
    Most of the MTC consists of default rules            or disability of the protected individual. PA 46 of
that apply only if the terms of the trust fail to ad-    2009 (June 18, 2009, effective April 1, 2010).
dress or insufficiently cover a particular issue,        Although not amended, several rules of con-
                                                         struction that apply to wills are now applicable
and the scrivener can vary or override most of
                                                         to trusts: (i) EPIC section 2605; MCL 700.2605
the MTC provisions. MTC section 7105(1); MCL
                        5
                                                         concerning increase in securities and acces-
700.7105(1).                                             sions; (ii) EPIC section 2606; MCL 700.2606
    In conjunction with the adoption of the MTC,         concerning nonademption of specific devises;
various conforming amendments (effective April           (iii) EPIC section 2607; MCL 700.2607 concern-
1, 2010) were made to:                                   ing nonexoneration; and (iv) EPIC section 2608;
  (1) EPIC. The following pertinent sections of          MCL 700.2608 concerning ademption by satis-
  EPIC were amended (as pertains to the MTC):            faction.7
  (i) EPIC sections 1103-1107; MCL 700.1103–             EPIC sections 1214, 3713 and 5421; MCL sec-
  700.1107 concerning certain definitions that are       tions 700.1214, 700.3713 and 700.5421 have
  also applicable to the MTC; (ii) EPIC sections         been amended to conform with MTC section

                                                                                                             
MiChigan Probate & estate Planning                                                                   Winter 2009


 7802. These three EPIC sections deal with self-           discretionary right to be reimbursed by a trustee
 dealing by a fiduciary                                    for income taxes attributable to an irrevocable
 Caution: The above summary does not recite                grantor trust (for income tax purposes) created
 all the amendments made to EPIC by PA 46 of               by the settlor for the benefit of third parties, and
 2009.                                                     the trustee’s actual reimbursement of the settlor
 (2) The Michigan Powers of Appointment                    from trust assets. PA 42 of 2009 (June 18, 2009,
 Act (MCL 556.111 - 556.133, amending MCL                  effective April 1, 2010).
 556.123). The MCL 556.123 amendment states                Practice Point: The amendment to MCL 566.131
 that the lapse, release waiver or disclaimer of           distinguishes Commissioner v. Vander Weele,
 a power of appointment given to a donee by a              254 F2d 895 (6th Cir, 1958, applying Michigan
 donor (such as a Crummey withdrawal right) is             law), and makes inapplicable the court’s reliance
 not a gift, conveyance, transfer or assignment of         on Michigan Statutes Annotated (“MSA”) section
 property by the donee. PA 45 of 2009 (June 18,            26.921 (which was repealed by PA 174 of 1964
 2009, effective April 1, 2010).                           (effective January 1, 1964)) and has now been
 (3) The Michigan Uniform Fraudulent Trans-                explicitly overruled by the amendment to MCL
 fer Act (MCL 566. 31 – 566.43, amending                   566.131. Thus, Michigan practitioners can draft
 MCL 566.31). The amendment excludes from                  Michigan IVQTIPs beginning April 1, 2010 with-
 the definition of a “transfer” (contained in MCL          out being concerned with the holding in Vander
 566.31(l)): (i) the lapse, release waiver or dis-         Weele or former MSA 26.921 - since neither are
 claimer of a power of appointment given to a do-          applicable to a Michigan IVQTIP.
 nee by a third-party donor (such as a Crummey             Planning Point: An IVQTP that is a discretion-
 withdrawal right), and (ii) a settlor’s discretionary     ary spendthrift trust (with an independent trust-
 right to be reimbursed by a trustee for income            ee) concerning the surviving donor-spouse’s
 taxes attributable to an irrevocable grantor trust        contingent secondary life estate in the IVQTIP
 (for income tax purposes) created by the settlor          will provide significant asset protection to the
 for the benefit of third parties, and the trustee’s       donor-spouse. Thus, a discretionary IVQTIP
 actual (discretionary) reimbursement of the set-          concerning the surviving donor-spouse is similar
 tlor from trust assets. PA 44 of 2009 (June 18,           to a self-settled domestic asset protection trust
 2009).                                                    (“DAPT”), albeit subject to the preceding life es-
 Practice Point: The MCL 566.31(l)(ii) amend-              tate of the donee-spouse.
 ment now permits a settlor of certain Michigan ir-        (5) Michigan Statute of Uses and Trusts (MCL
 revocable grantor trusts (including an inter-vivos        555.1–555.28, adding MCL 555.28). MCL 555.28
 QTIP (“IVQTIP”) trust, discussed immediately              states that if the Michigan Statute of Uses and
 below) to be reimbursed (on a purely discretion-          Trusts conflicts with any portion of the MTC, the
 ary basis8) by an independent trustee (as defined         MTC prevails. PA 43 of 2009 (June 18, 2009).
 in IRC section 672(c)), as permitted by Rev. Rul.
                                                            Fifteen New Trust Code Rules That Will
 2004-64, 2004-27 I.R.B. 7.9
 (4) The Michigan Statute of Frauds (MCL                           Affect All Michigan Trusts
 566.131–566.136, amending MCL 566.131).                    According to MTC section 7105(2); MCL
 The amendment excludes from the definition of           700.7105(2), there are fifteen mandatory MTC
 a “void” transfer as against creditors (existing or     rules that cannot be varied or overridden by the
 subsequent) of the transferee: (i) the lapse, re-
                                                         settlor or the trust instrument. All fifteen rules ap-
 lease waiver or disclaimer of a power of appoint-
 ment given to a donee by a third-party donor
                                                         ply to trusts created on or after April 1, 2010 and
 (such as a Crummey withdrawal right), (ii) the          apply to many trusts created before April 1,
 contingent secondary life estate of a surviving         2010. 11



 donor-spouse who creates an IVQTIP trust for               These fifteen mandatory rules: (i) prohibit
 the donee-spouse pursuant to Internal Revenue           the settlor from varying the power and authority
 Code (“IRC”) section 2523(f),10 and (iii) a settlor’s   of the Michigan courts, (ii) deal with the duties


Winter 2009                                                          MiChigan Probate & estate Planning


and powers of a trustee, (iii) deal with relations        MTC Sec. 0 (Requirements For Creating
among trustees, and (iv) deal with the rights and         a Trust). (1) A trust is created only if all of the
interests of trusts beneficiaries.                        following apply:
   Michigan estate planning practitioners who               (a) The settlor has capacity to create a trust.
                                                            (b) The settlor indicates an intention to create
draft and/or administer trusts need to be familiar
                                                            the trust.
with these fifteen new rules, which are set forth
                                                            (c) The trust has a definite beneficiary or is ei-
below. Following each rule is a verbatim copy of            ther of the following:
the pertinent MTC and/or EPIC provisions (but                (i) A charitable trust.13
not the Michigan Court Rules) for the practitio-             (ii) A trust for a noncharitable purpose or for
ner’s easy reference to the new statutory re-                the care of an animal, as provided in [EPIC]
quirements.                                                  section 2722.
   Rule  - Requirements For Creating a Valid               (d) The trustee has duties to perform.
Michigan Trust (MTC section 0()(a); MCL                 (e) The same person is not the sole trustee and
00.0()(a)). A Michigan trust can only be
                                        12                  sole beneficiary.
created in accordance with MTC section 7401;              (2) A trust beneficiary is definite if the trust ben-
                                                          eficiary can be ascertained now or in the future,
MCL 700.7401. This rule cannot be varied or
                                                          subject to any applicable rule against perpetuit-
overridden by the settlor or the trust instrument.
                                                          ies.
This section and MTC sections 7402, 7403 and              (3) A power in a trustee to select a trust benefi-
7405 set forth various requirements for creating          ciary from an indefinite class is valid only in a
a valid trust. MTC sections 7406, 7407 and 7601           charitable trust.
are also pertinent to the creation of a valid trust.      MTC Sec. 0 (Trusts Created In Other Ju-
  MTC Sec. 0 (Methods of Creating a Trust).            risdictions). A trust not created by will is validly
  (1) A trust may be created by any of the follow-        created if its creation complies with the law of the
  ing:                                                    jurisdiction in which the trust instrument was ex-
    (a) Transfer of property to another person as         ecuted or the law of a jurisdiction to which, at the
    trustee during the settlor’s lifetime or by will or   time of creation, any of the following applied:
    other disposition taking effect upon the settlor’s      (a) The settlor was domiciled, had a place of
    death.                                                  abode, or was a national in the jurisdiction.
    (b) Declaration by the owner of property that the       (b) A trustee was domiciled or had a place of
    owner holds identifiable property as trustee.           business in the jurisdiction.
    (c) Exercise of a power of appointment in favor         (c) Any trust property was located in the juris-
    of a trustee.                                           diction.
    (d) A promise by 1 person to another person,          MTC Sec. 0 (Charitable Purposes of Trusts
    whose rights under the promise are to be held         and Enforcement). (1) A charitable trust may be
    in trust for a third person.                          created for the relief of poverty, the advancement
  (2) The instrument establishing the terms of a          of education or religion, the promotion of health,
  trust is not rendered invalid because property or       scientific, literary, benevolent, governmental, or
  an interest in property is not transferred to the       municipal purposes, any purpose described in
  trustee or made subject to the terms of the trust       section 501(c)(3) of the internal revenue code,
  concurrently with the signing of the instrument.        26 USC 501, or other purposes the achievement
  Until property or an interest in property is trans-     of which is beneficial to the community.
  ferred to the trustee or made subject to the terms      (2) If the terms of a charitable trust do not identify
  of the trust, the person nominated as trustee has       a particular charitable purpose or beneficiary, the
  no fiduciary or other obligations under the instru-     court may select 1 or more charitable purposes
  ment establishing the terms of the trust except         or beneficiaries. The selection shall be consis-
  as may have been specifically agreed by the set-        tent with the settlor’s intention to the extent it can
  tlor and the nominated trustee.                         be ascertained.

                                                                                                              
MiChigan Probate & estate Planning                                                                 Winter 2009


 (3) The settlor, a named beneficiary, or the at-        the settlor’s other estate planning documents,
 torney general of this state, among others, may         such as a pour-over will, revocable trust, durable
 maintain a proceeding to enforce a charitable           power of attorney, etc.).
 trust. The right of the settlor of a charitable trust   EPIC Sec. 0 (Requirements to Make a
 to enforce the trust is personal to the settlor and     Will). (1) An individual 18 years of age or older
 may not be exercised by any of the following:           who has sufficient mental capacity may make a
   (a) The settlor’s heirs, assigns, or beneficia-       will.
   ries.                                                 (2) An individual has sufficient mental capacity
   (b) The settlor’s fiduciary, other than the trustee   to make a will if all of the following requirements
   of the charitable trust the enforcement of which      are met:
   is being sought.                                        (a) The individual has the ability to understand
   (c) An agent of the settlor acting pursuant to a        that he or she is providing for the disposition of
   durable power of attorney, unless the right to          his or her property after death.
   enforce the trust is expressly conferred on the         (b) The individual has the ability to know the
   agent by the power of attorney.                         nature and extent of his or her property.
 MTC Sec. 0 (Creation of Trust Induced by               (c) The individual knows the natural objects of
 Fraud, Duress or Undue Influence). A trust is             his or her bounty.
 void to the extent its creation was induced by            (d) The individual has the ability to understand
 fraud, duress, or undue influence.                        in a reasonable manner the general nature and
 MTC Sec. 0 (Evidence of An Oral Trust).                effect of his or her act in signing the will.
 Except as required by a statute other than this         Practice Point: A Michigan trust can also be
 article [VII], a trust need not be evidenced by a       created by the Probate Court under a Protec-
 trust instrument, but the creation of an oral trust     tive Order (SCAO Form PC 639). EPIC section
 and its terms may be established only by clear          5407(2); MCL 700.5407(2).
 and convincing evidence.                                EPIC Sec. 0 (Permissible Court Orders;
 MTC Sec. 0 (Settlor’s Capacity To Create a           Protective Orders). (1) The court shall exercise
 Revocable Trust). The capacity required to cre-         the authority conferred in this part to encour-
 ate, amend, revoke, or add property to a revo-          age the development of maximum self-reliance
 cable trust, or to direct the actions of the trustee    and independence of a protected individual and
 of a revocable trust, is the same as that required      shall make protective orders only to the extent
 to make a will.                                         necessitated by the protected individual’s men-
 Practice Point: Under the MTC, the settlor’s14          tal and adaptive limitations and other conditions
 capacity to execute, amend, revoke, or add prop-        warranting the procedure. Accordingly, the court
 erty to a revocable15 trust is now the same as          may authorize a protected individual to function
 that required to make a Michigan will. MTC sec-         without the consent or supervision of the individ-
 tion 7601; MCL 700.7601. For irrevocable trusts,        ual’s conservator in handling part of his or her
 the MTC is silent about the requisite capacity a        money or property, including authorizing the in-
 settlor must possess to enter into an irrevocable       dividual to maintain an account with a financial
 trust. Consequently, practitioners will have to         institution. To the extent the individual is autho-
 look to Michigan caselaw to determine the set-          rized to function autonomously, a person may
 tlor’s required level of capacity necessary to en-      deal with the individual as though the individual
 ter into an irrevocable trust agreement (which is       is mentally competent.
 generally thought to be the same as the capacity        (2) The court has the following powers that may
 to enter into a contract). From a practical point of    be exercised directly or through a conservator
 view, it may make little or no difference between       in respect to a protected individual’s estate and
 the new standard of capacity to enter into a revo-      business affairs:
 cable trust and the standard of capacity to enter         (a) While a petition for a conservator’s appoint-
 into an irrevocable trust (since oftentimes an ir-        ment or another protective order is pending
 revocable trust is executed in conjunction with           and after preliminary hearing and without no-


Winter 2009                                                             MiChigan Probate & estate Planning


   tice to others, the court has the power to pre-              tate or intestate succession or by inter vivos
   serve and apply property of the individual to be             transfer.
   protected as may be required for the support of           (3) The court may exercise or direct the exercise
   the individual or the individual’s dependents.            of the following powers only if satisfied, after the
   (b) After hearing and upon determining that a             notice and hearing, that it is in the protected indi-
   basis for an appointment or other protective or-          vidual’s best interests and that the individual ei-
   der exists with respect to a minor without other          ther is incapable of consenting or has consented
   disability, the court has all those powers over           to the proposed exercise of the power:
   the minor’s estate and business affairs that are            (a) To exercise or release a power of appoint-
   or may be necessary for the best interests of               ment of which the protected individual is do-
   the minor and members of the minor’s immedi-                nee.
   ate family.                                                 (b) To renounce or disclaim an interest.
   (c) After hearing and upon determining that a               (c) To make a gift in trust or otherwise exceed-
   basis for an appointment or other protective                ing 20% of a year’s income of the estate.
   order exists with respect to an individual for a            (d) To change a beneficiary under an insurance
   reason other than minority, the court, for the              and annuity policy.
   benefit of the individual and members of the              (4) A determination that a basis for a conserva-
   individual’s immediate family, has all the pow-           tor’s appointment or another protective order ex-
   ers over the estate and business affairs that             ists has no effect on the protected individual’s
   the individual could exercise if present and not          capacity.
   under disability, except the power to make a              Practice Point: An agent may be able to create
   will. Those powers include, but are not limited           a Michigan trust if the durable power of attorney
   to, all of the following:                                 contains the express authority to create such a
     (i) To make gifts.                                      trust.17
     (ii) To convey or release a contingent or ex-
                                                              Rule  - Trustee’s Duty To Administer a
     pectant interest in property including marital
                                                           Michigan Trust (MTC section 0()(b); MCL
     property rights and a right of survivorship in-
     cident to joint tenancy or tenancy by the en-         00.0()(b)). A trustee has a duty to admin-
                                                                                          18



     tirety.                                               ister a Michigan trust in accordance with MTC
     (iii) To exercise or release a power held by the      section 7801; MCL 700.7801. This rule cannot
                                                                                               19


     protected individual as personal representa-          be varied or overridden by the settlor or the trust
     tive, custodian for a minor, conservator, or do-      instrument.
     nee of a power of appointment.                          MTC Sec. 0 (Trustees’s Duty To Admin-
     (iv) To enter into a contract.                          ister Trust). Upon acceptance of a trusteeship,
     (v) To create a revocable or irrevocable trust          the trustee shall administer the trust [i] in good
     of estate property16 that may extend beyond             faith, [ii] expeditiously, [iii] in accordance with its
     the disability or life of the protected individual.     terms and purposes, [iv] for the benefit of the
     (Emphasis added.)                                       trust beneficiaries, and [v] in accordance with
     (vi) To exercise an option of the protected in-         this article [VII] [i.e., in accordance with MTC
     dividual to purchase securities or other prop-          sections 7101-7913; MCL 700.7101-700.7913].
     erty.                                                     Rule  – A Michigan Trust Can Not Be Con-
     (vii) To exercise a right to elect an option and      trary To Public Policy (MTC section 0()(c);
     change a beneficiary under an insurance or
                                                           MCL 00.0()(c)). A Michigan trust must be
     annuity policy and to surrender the policy for
     its cash value.
                                                           created and administered for a lawful purpose,
     (viii) To exercise a right to an elective share       not be contrary to public policy, and the admin-
     in the estate of the individual’s deceased            istration and purposes of the trust be possible
     spouse.                                               to achieve. MTC section 7404; MCL 700.7404.
     (ix) To renounce or disclaim an interest by tes-      This rule cannot be varied or overridden by the

                                                                                                                  
MiChigan Probate & estate Planning                                                                    Winter 2009


settlor or the trust instrument.                             (b) Upon the consent of the qualified trust ben-
  MTC Sec. 0 (Trust Purposes). A trust may                eficiaries and a trust protector who is given the
  be created only to the extent its purposes are             power under the terms of the trust to grant,
  lawful, not contrary to public policy, and possible        veto, or withhold approval of termination or
  to achieve.                                                modification of the trust.
   Rule  – The Probate Court Can Modify                     (c) By a trustee or trust protector to whom a
Or Terminate a Michigan Trust (MTC section                   power to direct the termination or modification
0()(d); MCL 00.0()(d)). A Michigan                  of the trust has been given by the terms of a
                                                             trust.
trust is always subject to the power of the Michi-
                                                           (2) Subsection (1) does not apply to irrevocable
gan Probate Court to modify or terminate a trust
                                                           trusts created before or to revocable trusts that
under MTC sections 7410, 7412(1) - (3), 7414(2),           become irrevocable before the effective date of
7415, and 7416; MCL 700.7410, 700.7412(1) -                the amendatory act that added this section. (Em-
(3), 700.7414(2), 700.7415, and 700.7416. This             phasis added.)
rule cannot be varied or overridden by the settlor         (3) Notice22 of any proceeding to terminate or
or the trust instrument.                                   modify a trust shall be given to the settlor, or
  MTC Sec. 7410 (Modification or Termination               the settlor’s representative if the petitioner has
  of Trust; Proceedings for Approval or Dis-               a reasonable basis to believe the settlor is an in-
  approval of Modification or Termination of a             capacitated individual, the trust protector, if any,
  Trust). (1) In addition to the methods of termina-       the trustee, and any other person named in the
  tion prescribed by sections 7411 to 7414, a trust        terms of the trust to receive notice of such a pro-
  terminates to the extent the trust is revoked or         ceeding.
  expires pursuant to its terms, no purpose of the         (4) Upon termination of a trust under subsection
  trust remains to be achieved, or the purposes of         (1), the trustee shall distribute the trust property
  the trust have become impossible to achieve or           as agreed by the qualified trust beneficiaries.
  are found by a court to be unlawful or contrary to       (5) If the trustee fails or refuses to consent, or
  public policy.                                           fewer than all of the qualified trust beneficiaries
  (2) A proceeding to confirm the termination of a         consent, to a proposed modification or termina-
  trust under subsection (1) or to approve or disap-       tion of the trust under subsection (1), the modi-
  prove a proposed modification or termination un-         fication or termination may be approved by the
  der sections 7411 to 7416 or trust combination or        court if the court is satisfied that both of the fol-
  division under section 7417 may be commenced             lowing apply:
  by a trustee or beneficiary. A proceeding to mod-          (a) If the trustee and all of the qualified trust
  ify a charitable trust under section 7413 may be           beneficiaries had consented, the trust could
  commenced by the persons with the power to                 have been modified or terminated under this
  enforce the terms of a charitable trust pursuant           section.
  to section 7405.                                           (b) The interests of a qualified trust beneficiary
  MTC Sec. 7411 (Modification or Termination                 who does not consent will be adequately pro-
  of Noncharitable Irrevocable Trust By Con-                 tected.
  sent). (1) Subject to subsection (2), a nonchari-        (6) As used in this section, “settlor’s representa-
  table irrevocable trust may be modified or termi-        tive” means the settlor’s agent under a durable
  nated in any of the following ways:                      power of attorney, if the attorney in fact is known
    (a) By the court upon the consent of the trustee       to the petitioner, or, if an agent has not been ap-
    and the qualified trust beneficiaries20 if the court   pointed, the settlor’s conservator, plenary guard-
    concludes that the modification or termination         ian, or partial guardian.
    of the trust is consistent with the material pur-      MTC Sec. 7412 (Modification or Termination of
    poses21 of the trust or that continuance of the        Trust Due To Unanticipated Circumstances or
    trust is not necessary to achieve any material         Inability to Administer Trust Effectively). (1) The
    purpose of the trust.                                  court may modify the administrative terms of a

 
Winter 2009                                                          MiChigan Probate & estate Planning


  trust if continuation of the trust on its existing         date of the trust’s creation.
  terms would be impracticable or wasteful or im-         MTC Sec. 7414 (Modification or Termination
  pair the trust’s administration.                        of an Uneconomical Trust). (1) After 63 days
  (2) The court may modify the administrative or          after notice to the qualified trust beneficiaries
  dispositive terms of a trust or terminate the trust     and, if the trust is a charitable trust, to the at-
  if, because of circumstances not anticipated by         torney general of this state, the trustee of a trust
  the settlor, modification or termination will further   consisting of trust property having a total value
  the settlor’s stated purpose or, if there is no stat-   less than $50,000.00 may terminate the trust if
  ed purpose, the settlor’s probable intention.           the trustee concludes that the value of the trust
  (3) If a trust is terminated under this section, the    property is insufficient to justify the cost of ad-
  trustee shall distribute the trust property as or-      ministration. The $50,000.00 amount expressed
  dered by the court.                                     in this section shall be adjusted each year as
  (4) Notice of any proceeding to terminate or            provided in section 1210. (Emphasis added.)
  modify a trust shall be given in the manner de-         (2) The court may modify or terminate a trust
  scribed in section 7411(3).                             or remove the trustee and appoint a different
  MTC Sec.  (Cy Pres). (1) Except as oth-             trustee if it determines that the value of the trust
  erwise provided in subsections (2) or (3), if a         property is insufficient to justify the cost of ad-
  particular charitable purpose becomes unlawful,         ministration.
  impracticable, or impossible to achieve, no al-         (3) Upon termination of a trust under this section,
  ternative taker is named or provided for, and the       the trustee shall distribute the trust property in
  court finds the settlor had a general, rather than      the manner provided for in the terms of the trust,
  a specific, charitable intent, all of the following     if any, and otherwise to the current income ben-
  apply:                                                  eficiaries or, if there are no current income ben-
     (a) The trust does not fail, in whole or in part.    eficiaries, in the manner directed by the court.
     (b) The trust property does not revert to the set-   (4) This section does not apply to an easement
     tlor or the settlor’s successors in interest.        for conservation or preservation.
     (c) The court may apply cy pres to modify or         MTC Sec. 7415 (Judicial Modification of Trust
     terminate the trust by directing that the trust      to Correct Mistakes of Fact or Law). The court
     property be applied or distributed, in whole or      may reform the terms of a trust, even if unam-
     in part, in a manner consistent with the settlor’s   biguous, to conform the terms to the settlor’s in-
     general charitable intent.                           tention if it is proved by clear and convincing evi-
  (2) If the terms of a charitable trust confer a pow-    dence that both the settlor’s intent and the terms
  er on the trustee, or another person designated         of the trust were affected by a mistake of fact or
  in the trust or gift, to modify or terminate either     law, whether in expression or inducement.
  the charitable trust, a charitable gift to the trust,   MTC Sec. 7416 (Judicial Modification of
  or the charitable purpose of the trust or gift in       Trust to Achieve Settlor’s Tax Objectives).
  favor of another charitable trust, gift, or purpose,    To achieve the settlor’s tax objectives, the court
  the terms of the trust prevail over the power of        may modify the terms of a trust in a manner that
  the court to apply cy pres to modify or terminate       is not contrary to the settlor’s probable intention.
  the trust.                                              The court may provide that the modification has
  (3) A provision in the terms of a charitable trust      retroactive effect. [Emphasis added.]
  that would result in distribution of the trust prop-    Caution: Absent a qualified reformation con-
  erty to a noncharitable beneficiary prevails over       tained in a federal statute (to wit, IRC section
  the power of the court to apply cy pres to modify       2055(e)(3) concerning charitable split interest
  or terminate the trust only if, when the provision      trusts) or a federal regulation (to wit, Treas. Reg.
  takes effect, either of the following applies:          §25.2702-5(a)(2) concerning qualified personal
     (a) The trust property is to revert to the settlor   residence trusts, and Treas. Reg. §20.2056A-
     and the settlor is still living.                     4(a)(2) concerning qualified domestic trusts) that
     (b) Less than 50 years have elapsed since the        permits a reformation to be effective retroactive-

                                                                                                            
MiChigan Probate & estate Planning                                                                        Winter 2009


  ly, the IRS rarely recognizes retroactive reforma-           spendthrift provision is valid and enforceable.
  tions for tax purposes when the taxable event                (2) A term of a trust providing that the interest of
  has already occurred (the “completed transac-                a trust beneficiary is held subject to a “spend-
  tion rule”23).                                               thrift trust,” or words of similar import, restrains
  MTC Sec.  (Division or Combination of                    both voluntary and involuntary transfer of the
  Trusts). (1) After notice to the qualified trust             trust beneficiary’s interest.
  beneficiaries and to the holders of powers of ap-            (3) Except as provided in sections 7504, 7506,
  pointment, a trustee may divide trust property               and 7507, the trust beneficiary’s interest in a
  into 2 or more separate portions or trusts and               trust may not be transferred in violation of a valid
  allocate property between them if the trusts have            spendthrift provision and trust property is not
  substantially identical terms and conditions or if           subject to enforcement of a judgment until dis-
  the result does not impair rights of any benefi-             tributed directly to the trust beneficiary.
  ciary or adversely affect achievement of the pur-            (4) Notwithstanding the existence of a spend-
  poses of the trust.                                          thrift provision in the terms of the trust, a trustee
  (2) After notice to the qualified trust beneficiaries        is not liable to the beneficiaries of the trust for
  and to the holders of powers of appointment, a               making a distribution to which a trust beneficiary
  trustee may consolidate 2 or more trusts and ad-             is otherwise entitled pursuant to the direction of
  minister them as 1 trust if the trusts have sub-             the trust beneficiary.
  stantially identical terms and conditions or if the          MTC Sec. 0 (Effect of Support Trusts). (1)
  result does not impair rights of any beneficiary or          The interest of a trust beneficiary that is subject
  adversely affect achievement of the purposes of              to a support provision may not be transferred
  the trust. If the rule against perpetuities speaks           and the trust property is not subject to the en-
  from different dates with reference to the trusts            forcement of a judgment until income or prin-
  or if there are other variations in terms, consoli-          cipal, or both, is distributed directly to the trust
  dation may still take place, but the property of             beneficiary. After a distribution to a trust benefi-
  the trusts shall be maintained in separate ac-               ciary whose interest is subject to a support pro-
  counts if necessary to recognize and give effect             vision, the income and principal distributed are
  to the differences.                                          subject to the enforcement of a judgment only to
Rule  – The Effect of a Spendthrift Provi-                    the extent that the income or principal, or both, is
sion and the Rights of Certain Creditors To                    not necessary for the health, education, support,
Reach or Attach a Beneficiary’s Interest In a                  or maintenance of the trust beneficiary.
Michigan Trust (MTC section 7105(2)(e); MCL                    (2) The use or enjoyment of trust property by a
700.7105(2)(e)). The effect of a Michigan trust’s              trust beneficiary whose interest is subject to a
spendthrift, support and discretionary trust pro-
             24        25                    26                support provision may not be transferred and
                                                               is not subject to the enforcement of a judgment
visions on a beneficiary, and the ability of certain
                                                               against the trust beneficiary.
creditors and assignees to reach a beneficiary’s
                                                               (3) Subsections (1) and (2) do not apply under
interest in these types of trusts are subject to               circumstances described in section 7504, 7506,
Part 5 of the MTC, which is contained in MTC                   or 7507.
sections 7501-7508; MCL 700.7501-700.7508.                27
                                                               MTC Sec. 0 (“Super Creditor” Exceptions
The rights of the creditors and assignees cannot               to Spendthrift Provisions or Support Trusts).
be overridden by the settlor or the trust instru-              (1) The interest of a trust beneficiary that is sub-
ment.                                                          ject to a spendthrift provision, a support provi-
  MTC Sec. 0 (Application and General Pro-                  sion, or both may be reached in satisfaction of
  visions Concerning Creditors and Transfer-                   an enforceable claim against the trust beneficia-
  ees of Trusts). This part [5] applies to a creditor’s        ry by any of the following [“super” creditors]:
  or transferee’s claims with respect to spendthrift,            (a) A trust beneficiary’s child or former spouse
  support, and discretionary trusts.                             who has a judgment or court order against the
  MTC Sec. 0 (Spendthrift Provisions). (1) A                  trust beneficiary for support or maintenance.

 
Winter 2009                                                           MiChigan Probate & estate Planning


    (b) A judgment creditor who has provided ser-              uted to or for the settlor’s benefit exclusive
    vices that enhance, preserve, or protect a trust           of sums to pay the settlor’s taxes during the
    beneficiary’s interest in the trust.                       settlor’s lifetime.
    (c) This state or the United States.                   (2) If a trust has more than 1 settlor, the amount
  (2) The court shall order the trustee to satisfy all     a creditor or assignee of a particular settlor may
  or part of a judgment described in subsection (1)        reach under subsection (1)(c) shall not exceed
  only out of all or part of distributions of income or    the settlor’s interest in the portion of the trust at-
  principal as they become due.                            tributable to that settlor’s contribution.
  (3) Notwithstanding that the terms of the trust in-      (3) A trust beneficiary is not considered a settlor
  clude a spendthrift provision, this section does         merely because of a lapse, waiver, or release of
  not apply to the interest of a trust beneficiary that    a power of withdrawal over the trust property.
  is subject to a discretionary trust provision.           (4) An individual who creates a trust shall not
  Practice Point: MTC section 7504(3) preserves            be considered a settlor with regard to the indi-
  (and codifies) existing Michigan (case) law con-         vidual’s retained beneficial interest in the trust
  cerning the use of a third-party created and             that follows the termination of the individual’s
  funded irrevocable discretionary spendthrift trust       spouse’s prior beneficial interest in the trust if all
  for a special needs beneficiary.28                       of the following apply:
  (4) As used in this section, “child” includes any          (a) The individual creates, or has created, the
  person for whom an order or judgment for child             trust for the benefit of the individual’s spouse.
  support has been entered in this or another                (b) The trust is treated as qualified terminable
  state.                                                     interest property under section 2523(f) of the
  MTC Sec. 0 (Effect of Discretionary                     internal revenue code, 26 USC 2523.
  Trusts). The transferee or creditor of the benefi-         (c) The individual retains a beneficial interest in
  ciary of a discretionary trust provision does not          the trust income, trust principal, or both, which
  have a right to any amount of trust income or              beneficial interest follows the termination of the
  principal that may be distributed only in the exer-        individual’s spouse’s prior beneficial interest in
  cise of the trustee’s discretion, and trust property       the trust.
  is not subject to the enforcement of a judgment          MTC Sec. 0 (Overdue Mandatory Trust
  until income or principal, or both, is distributed       Distribution). (1) Whether or not a trust contains
  directly to the trust beneficiary.                       a spendthrift provision, a creditor or assignee of
  MTC Sec. 0 (Creditor’s Claims Against a               a trust beneficiary may reach a mandatory distri-
  Settlor). (1) Whether or not the terms of a trust        bution of income or principal, including a distri-
  contain a spendthrift provision, the following           bution upon termination of the trust, if the trustee
  rules apply:                                             has not made the distribution to the trust benefi-
    (a) During the lifetime of the settlor, the prop-      ciary within a reasonable time after the desig-
    erty of a revocable trust is subject to claims of      nated distribution date.
    the settlor’s creditors.                               (2) As used in this section, “mandatory distribu-
    (b) After the death of a settlor, and subject to the   tion” means a distribution of income or principal
    settlor’s right to direct the source from which li-    that the trustee is required to make to a trust ben-
    abilities will be paid, the property of a trust that   eficiary under the terms of the trust, including a
    at the settlor’s death was revocable by the set-       distribution upon termination of the trust. Manda-
    tlor, either alone or in conjunction with another      tory distribution does not include a distribution
    person, is subject to expenses, claims, and al-        subject to the exercise of the trustee’s discretion
    lowances as provided in section 7605.                  even if either of the following applies:
    (c) With respect to an irrevocable trust, a credi-       (a) The direction is expressed in the form of a
    tor or assignee of the settlor may reach no              standard of distribution.
    more than the lesser of the following:                   (b) The terms of the trust authorizing a distribu-
      (i) The claim of the creditor or assignee.             tion use language of discretion and language
      (ii) The maximum amount that can be distrib-           of direction.

                                                                                                               
MiChigan Probate & estate Planning                                                                         Winter 2009


  MTC Sec. 0 (Personal Obligations of                    (a) The duties of the trustee are substantially
  Trustee). Trust property is not subject to person-        different from those contemplated when the
  al obligations of the trustee, even if the trustee        trust was created.
  becomes insolvent or bankrupt.                            (b) The compensation specified by the terms of
   Rule  – The Probate Court’s Power To Mod-               the trust would be unreasonably low or high.
ify Or Terminate a Michigan Trustee’s Bond                   Rule  – Special Rules Concerning Trust
(MTC section 7105(2)(f); MCL 700.7105(2)(f)). A          Protectors (MTC section 0()(h); MCL
Michigan trust is subject to the Probate Court’s         00.0()(h)). A trust protector is a fiducia-
                                                                                                 29


power under MTC section 7702; MCL 700.7702               ry except with regard to: (i) certain grantor trust
to require, dispense with, or modify or terminate        powers held by the trust protector solely for in-
a trustee’s bond. The court’s power cannot be            come tax purposes, or (ii) if a trust beneficiary
                                                                                30


varied or overridden by the settlor or the trust in-     serves as a trust protector. A trust protector’s fi-
strument.                                                duciary duty can not be modified to a lower stan-
  MTC Sec. 0 (Trustee’s Bond). (1) A trustee          dard by the settlor or the trust instrument.
  shall give bond to secure performance of the               A trust protector can receive limited exculpa-
  trustee’s duties only if the court finds that a bond   tion. MTC section 7809; MLC 700.7809.
  is needed to protect the interests of the trust            The imposition of a fiduciary duty on a trust
  beneficiaries or is required by the terms of the       protector seems to make the trust protector the
  trust and the court has not dispensed with the
                                                         trust beneficiary’s “independent trustee” rather
  requirement.
  (2) The court may specify the amount of a bond,
                                                         than the settlor’s independent “watchdog” of the
  its liabilities, and whether sureties are neces-       trust. It is the author’s opinion that the role of
  sary. The court may modify or terminate a bond         a trust protector under the MTC will be severe-
  at any time.                                           ly limited (due to the trust protector’s fiduciary
  (3) A financial institution qualified to do trust      duty to the beneficiaries) and that a trust protec-
  business in this state need not give bond, even if     tor will (in order to protect itself from a potential
  required by the terms of the trust.                    claim of breach of fiduciary duty) either require
    Rule  – The Probate Court’s Power To                consent from all the beneficiaries or seek court
Modify a Michigan Trustee’s Fee (MTC sec-                approval before exercising its powers. If this
tion 0()(g); MCL 00.0()(g)). A Mich-            becomes the case, the use of a special power
igan trust is always subject to the Probate              holder who holds a special (limited) power of ap-
Court’s power under MTC section 7708(2); MCL             pointment over trust assets may become a pre-
700.7708(2) to adjust a trustee’s compensation           ferred method of drafting additional flexibility into
if the court determines that the amount of com-          irrevocable trusts. A special power holder is not
pensation specified in the trust instrument is un-       a trust protector (MTC section 7103n(ii); MCL
reasonably low or high. The court’s power can-           700.7103n(ii)) and is not a fiduciary.       31


not be varied or overridden by the settlor or the          MTC Sec. 0 (Trust Protectors). (1) A trust
trust instrument.                                          protector, other than a trust protector who is a
  MTC Sec. 0 (Compensation of Trustee). (1)             beneficiary of the trust, is subject to all of the
  If the terms of a trust do not specify the trustee’s     following:
  compensation, a trustee is entitled to compensa-           (a) Except as provided in subsection (2), the
  tion that is reasonable under the circumstances.           trust protector is a fiduciary to the extent of the
  (2) If the terms of a trust specify the trustee’s          powers, duties, and discretions granted to him
  compensation, the trustee is entitled to be com-           or her under the terms of the trust.
  pensated as specified, but the court may allow             (b) In exercising or refraining from exercising
  more or less compensation if either of the follow-         any power, duty, or discretion, the trust protec-
  ing apply:                                                 tor shall act in good faith and in accordance

 0
Winter 2009                                                             MiChigan Probate & estate Planning


    with the terms and purposes of the trust and             trust protector of a trust registered in this state or
    the interests of the beneficiaries.                      having its principal place of administration in this
    (c) The trust protector is liable for any loss that      state, the trust protector submits to the jurisdic-
    results from the breach of his or her fiduciary          tion of the courts of this state even if investment
    duties.                                                  advisory agreements or other related agree-
  (2) The terms of a trust may provide that a trust          ments provide otherwise, and the trust protector
  protector to whom powers of administration de-             may be made a party to any action or proceed-
  scribed in section 675(4) of the internal revenue          ing relating to a decision, action, or inaction of
  code, 26 USC 675, have been granted may ex-                the trust protector.
  ercise those powers in a nonfiduciary capacity.            (8) A term of a trust that relieves a trust protector
  However, the terms of the trust shall not relieve          from liability for breach of his or her fiduciary du-
  the trust protector from the requirement under             ties is unenforceable to the extent that either of
  subsection (1)(b) that he or she exercise or re-           the following applies:
  frain from exercising any power, duty, or discre-            (a) The term relieves the trust protector of liabil-
  tion in good faith and in accordance with the                ity for acts committed in bad faith or with reck-
  terms and purposes of the trust and the interests            less indifference to the purposes of the trust or
  of the beneficiaries.                                        the interests of the trust beneficiaries.
  (3) Except as otherwise provided in subsection               (b) The term was inserted as the result of an
  (4), the trustee shall act in accordance with a              abuse by the trust protector of a fiduciary or
  trust protector’s exercise of the trust protector’s          confidential relationship to the settlor.
  specified powers and is not liable for so acting.           Rule  – A Trustee’s Duty To Provide In-
  (4) If either of the following applies to a trust pro-   formation and Accountings To Beneficiaries
  tector’s attempted exercise of a specified pow-          (MTC section 7105(2)(i); MCL 700.7105(2)(i)).
  er, the trustee shall not act in accordance with         The trustee of a Michigan trust has the duty under
  the attempted exercise of the power unless the           MTC section 7814(2)(a)-(c); MCL 700.7814(2)(a)-
  trustee receives prior direction from the court:
                                                           (c) to provide trust beneficiaries with the terms
                                                                                                 32

    (a) The exercise is contrary to the terms of the
                                                           of the trust and information about the trust’s
    trust.
    (b) The exercise would constitute a breach of          property, and to notify qualified trust beneficia-
    any fiduciary duty that the trust protector owes       ries (as defined in MTC section 7103(g); MCL
    to the beneficiaries of the trust.                     700.7103(g)) of an irrevocable trust of the exis-
  (5) A trustee is not liable for any loss that results    tence of the trust and the identity of the trustee.
  from any of the following:                               This duty cannot be varied or overridden by the
    (a) The trustee’s compliance with a direction of       settlor or the trust instrument.
    a trust protector, unless the attempted exercise         MTC Sec. 7103(g) (Qualified Trust Beneficia-
    was described in subsection (4).                         ry Defined). “Qualified trust beneficiary” means
    (b) The trustee’s failure to take any action that        a trust beneficiary to whom 1 or more of the fol-
    requires a prior authorization of the trust pro-         lowing apply on the date the trust beneficiary’s
    tector if the trustee timely sought but failed to        qualification is determined:
    receive the authorization.                                 (i) The trust beneficiary is a distributee33 or per-
    (c) Seeking a determination from the court re-             missible distributee of trust income or princi-
    garding the trust protector’s actions or direc-            pal.
    tions.                                                     (ii) The trust beneficiary would be a distributee
    (d) The trustee’s refraining from action pursu-            or permissible distributee of trust income or
    ant to subsection (4).                                     principal if the interests of the distributees un-
  (6) The terms of a trust may confer upon a trust-            der the trust described in subparagraph (i) ter-
  ee or other person a power to direct the modifi-             minated on that date without causing the trust
  cation or termination of the trust.                          to terminate.
  (7) By accepting an appointment to serve as a                (iii) The trust beneficiary would be a distribu-

                                                                                                                 
MiChigan Probate & estate Planning                                                                  Winter 2009


   tee or permissible distributee of trust income or    the administration of the trust and of the mate-
   principal if the trust terminated on that date.      rial facts necessary for them to protect their in-
 MTC Sec. 7110 (Others Treated As A Qualified           terests. Unless unreasonable under the circum-
 Trust Beneficiary). (1) A charitable organization      stances, a trustee shall promptly respond to a
 expressly named in the terms of a trust to receive     trust beneficiary’s request for information related
 distributions under the terms of a charitable trust    to the administration of the trust.
 has the rights of a qualified trust beneficiary un-    (2) A trustee shall do all of the following:
 der this article if 1 or more of the following are       (a) Upon the reasonable request of a trust ben-
 applicable to the charitable organization on the         eficiary, promptly furnish to the trust beneficiary
 date the charitable organization’s qualification is      a copy of the terms of the trust that describe
 being determined:                                        or affect the trust beneficiary’s interest and rel-
   (a) The charitable organization is a distributee       evant information about the trust property.
   or permissible distributee of trust income or          (b) Subject to subsection (6), within 63 days
   principal.                                             after accepting a trusteeship, notify the quali-
   (b) The charitable organization would be a             fied trust beneficiaries of the acceptance, of
   distributee or permissible distributee of trust        the court in which the trust is registered, if it is
   income or principal on the termination of the          registered, and of the trustee’s name, address,
   interests of other distributees or permissible         and telephone number. (Emphasis added.)
   distributees then receiving or eligible to receive     (c) Subject to subsection (6), within 63 days af-
   distributions.                                         ter the date the trustee acquires knowledge34
   (c) The charitable organization would be a dis-        of the creation of an irrevocable trust, or the
   tributee or permissible distributee of trust in-       date the trustee acquires knowledge that a for-
   come or principal if the trust terminated on that      merly revocable trust has become irrevocable,
   date.                                                  whether by the death of the settlor or other-
 (2) A person appointed to enforce a trust created        wise, notify the qualified trust beneficiaries of
 for the care of an animal or another nonchari-           the trust’s existence, of the identity of the set-
 table purpose as provided in section 2722 has            tlor or settlors, of the court in which the trust is
 the rights of a qualified trust beneficiary under        registered, if it is registered, and of the right to
 this article.                                            request a copy of the terms of the trust that de-
 (3) The attorney general of this state has the fol-      scribe or affect the trust beneficiary’s interests.
 lowing rights with respect to a charitable trust         (Emphasis added.)
 having its principal place of administration in this   Author’s Note: the above italicized text of MTC
 state:                                                 section 7814(2)(a) - (c), which is mandatory,
   (a) The rights provided in the supervision of        deals with the trustee’s requirement to provide
   trustees for charitable purposes act, 1961 PA        a qualified beneficiary with notice of the trust’s
   101, MCL 14.251 to 14.266.                           existence. Under the MTC, the settlor is free to
   (b) The right to notice of any judicial proceed-     determine who is entitled to receive trust ac-
   ing and any nonjudicial settlement agreement         countings, subject to the Probate Court’s power
   under section 7111.                                  to order accountings (see, Rule 10, below).
 Practice Point: Per MTC section 7110(3), the             (d) Notify the qualified trust beneficiaries in ad-
 Michigan Attorney General is not a qualified trust       vance of any change in the method or rate of
 beneficiary. The Michigan Attorney General’s             the trustee’s compensation.
 rights to receive information concerning a chari-      (3) A trustee shall send to the distributees or per-
 table trust is contained in Michigan’s Supervision     missible distributees of trust income or principal,
 of Trustees For Charitable Purposes Act, which         and to other qualified or nonqualified trust ben-
 is contained in MCL 14.251 - 14.266.                   eficiaries who request it, at least annually and at
 MTC Sec.  (Trustee’s Duty To Inform and            the termination of the trust, a report of the trust
 Report). (1) A trustee shall keep the qualified        property, liabilities, receipts, and disbursements,
 trust beneficiaries reasonably informed about          including the source and amount of the trustee’s


Winter 2009                                                            MiChigan Probate & estate Planning


  compensation, a listing of the trust property and,        ments of account and other information to per-
  if feasible, their respective market values, and,         sons excluded under the terms of the trust to the
  if applicable, any disclosure required under sec-         extent and in the manner the court directs.
  tion 7802(5). In the trustee’s discretion, the trust-      Rule  – Limits On the Enforceability of
  ee may provide the report to any trust benefi-          Provisions That Exculpate a Michigan Trustee
  ciary. Upon a vacancy in a trusteeship, unless a        and/or a Michigan Trust Protector (MTC sec-
  cotrustee remains in office, a report shall be sent     tion 7105(2)(k); MCL 700.7105(2)(k)). A Michigan
  to the qualified trust beneficiaries by the former
                                                          trust may exculpate a trustee (MTC 7908; MCL
                                                                                 35
  trustee. A personal representative, conservator,
  or guardian may send the qualified trust benefi-        700.7908) and a trust protector (MTC 7809(8);
  ciaries a report on behalf of a deceased or inca-       MCL 700.7809(8), subject to certain limitations
  pacitated trustee.                                      contained in those MTC sections. The limitations
  (4) If the terms of a trust direct that accounts and    on exculpation can not be modified to a lower
  information be provided to less than all qualified      standard by the settlor or the trust instrument.
  trust beneficiaries, at the court’s direction, the        MTC Sec. 0 (Exculpation of Trustee). (1)
  trustee shall provide statements of account and           A term of a trust relieving a trustee of liability for
  other information to persons excluded under the           breach of trust is unenforceable to the extent
  terms of the trust to the extent and in the manner        that either of the following applies:
  the court directs.                                          (a) The term relieves the trustee of liability for
  (5) A trust beneficiary may waive the right to a            breach of trust committed in bad faith or with
  trustee’s report or other information otherwise             reckless indifference to the purposes of the
  required to be furnished under this section. A              trust or the interests of the trust beneficiaries.
  trust beneficiary, with respect to future reports           (b) The term was inserted as the result of an
  and other information, may withdraw a waiver                abuse by the trustee of a fiduciary or confiden-
  previously given.                                           tial relationship to the settlor.
  (6) Subsection (2)(b) and (c) applies only to a           (2) The terms of a trust relieving a trustee of li-
  trustee who accepts a trusteeship [on or after            ability for breach of trust for the acquisition or
  the effective date of the amendatory act that             retention of a particular asset or asset class or
  added this section], an irrevocable trust created         failure to diversify investments are enforceable.
  [on or after the effective date of the amendatory         MTC Sec. 0() (Exculpation of Trust Pro-
  act that added this section] or a revocable trust         tector). A term of a trust that relieves a trust pro-
  that becomes irrevocable on or after the effec-           tector from liability for breach of his or her fidu-
  tive date of the amendatory act that added this           ciary duties is unenforceable to the extent that
  section. (Emphasis added.)                                either of the following applies:
   Rule 0 - The Probate Court’s Power To                     (a) The term relieves the trust protector of liabil-
Require a Michigan Trustee To Provide Ad-                     ity for acts committed in bad faith or with reck-
ditional Information and Accountings (MTC                     less indifference to the purposes of the trust or
section 7105(2)(j); MCL 700.7105(2)(j)). A Michi-             the interests of the trust beneficiaries.
gan trust is subject to the Probate Court’s power             (b) The term was inserted as the result of an
under MTC section 7814(4); MCL 700.7814(4)                    abuse by the trust protector of a fiduciary or
                                                              confidential relationship to the settlor.
to order the trustee to provide statements of ac-
count and other information concerning the trust.        Rule  – The Rights of Third Parties In
The court’s power cannot be varied or overrid- Their Dealings With a Michigan Trustee (MTC
den by the settlor or the trust instrument.           section 0()(l); MCL 00.0()(l)). Irre-
  MTC Sec. () If the terms of a trust direct     spective of contrary provisions in a trust instru-
  that accounts and information be provided to        ment, the rights of certain persons (other than
  less than all qualified trust beneficiaries, at the a trustee or beneficiary), such as third parties
  court’s direction, the trustee shall provide state- dealing with the trustee, trustees who are gen-

                                                                                                                
MiChigan Probate & estate Planning                                                                 Winter 2009


eral partners, person who deal in good faith with        ted by the partnership or for obligations arising
a trustee, and certificates of trust existence and       from ownership or control of the interest unless
authority, are subject to the provisions of MTC          the trustee is personally at fault.
sections 7910–7913; MCL 700.7910–700.7913.               (3) The immunity provided by this section does
                                                         not apply with respect to a general partnership
These rights cannot be modified by the settlor or
                                                         interest held in any capacity other than as trust-
the trust instrument.                                    ee.
  MTC Sec. 0 (Limitation of Trustee’s Per-
                                                         (4) If the trustee of a revocable trust holds an
  sonal Liability). (1) Unless otherwise provided
                                                         interest as a general partner, the settlor is per-
  in the contract, a trustee is not personally liable    sonally liable for contracts and other obligations
  on a contract properly entered into in the trust-      of the partnership as if the settlor were a general
  ee’s fiduciary capacity in the course of adminis-      partner.
  tration of the trust estate unless the trustee fails   MTC Sec.  (Protection of Person Dealing
  to reveal the trustee’s representative capacity        With Trustee). (1) A person other than a trust
  and identify the trust estate in the contract.         beneficiary who in good faith assists a trustee,
  (2) A trustee is personally liable for an obligation   or who in good faith and for value deals with a
  arising from ownership or control of the trust es-     trustee, without knowledge that the trustee is
  tate property or for a tort committed in the course    exceeding or improperly exercising the trustee’s
  of administration of the trust estate only if the      powers is protected from liability as if the trustee
  trustee is personally at fault.                        properly exercised the power.
  (3) A claim based on a contract entered into by        (2) A person other than a trust beneficiary who in
  a trustee in the trustee’s fiduciary capacity, on      good faith deals with a trustee is not required to
  an obligation arising from ownership or control        inquire into the extent of the trustee’s powers or
  of the trust estate, or on a tort committed in the     the propriety of the exercise of the powers.
  course of trust administration may be asserted         (3) A person who in good faith delivers assets to
  against the trust estate by proceeding against         a trustee need not ensure the proper application
  the trustee in the trustee’s fiduciary capacity,       of the assets.
  whether or not the trustee is personally liable for    (4) A person other than a trust beneficiary who
  the claim.                                             in good faith assists a former trustee, or who
  (4) The question of liability as between the trust     in good faith and for value deals with a former
  estate and the trustee individually may be deter-      trustee, without knowledge that the trusteeship
  mined in a proceeding for accounting, surcharge,       has terminated is protected from liability as if the
  or indemnification or in another appropriate pro-      former trustee were still a trustee.
  ceeding.                                               (5) Comparable protective provisions of other
  MTC Sec.  (Trustee’s Interest As a Gen-            laws relating to commercial transactions or
  eral Partner). (1) Except as otherwise provided        transfer of securities by fiduciaries prevail over
  in subsection (3), a trustee who holds an inter-       the protection provided by this section.
  est as a general partner in a general or limited       MTC Sec. 7913 (Certification of Trust). (1) In-
  partnership is not personally liable on a contract     stead of furnishing a copy of the trust instrument
  entered into by the partnership after the trust’s      to a person other than a trust beneficiary, the
  acquisition of the interest if the fiduciary capac-    trustee may furnish to the person a certificate of
  ity was disclosed in the contract or in a state-       trust containing all of the following information:
  ment previously filed pursuant to the Michigan           (a) The name of the trust and the date of the
  revised uniform limited partnership act, 1982 PA         trust instrument and any amendments.
  213, MCL 449.1101 to 449.2108, or was known              (b) The name and address of the currently act-
  by the other party to the contract.                      ing trustee.
  (2) Except as otherwise provided in subsection           (c) The powers of the trustee relating to the
  (3), a trustee who holds an interest as a general        purposes for which the certificate is being of-
  partner is not personally liable for torts commit-       fered.

 
Winter 2009                                                             MiChigan Probate & estate Planning


     (d) The revocability or irrevocability of the trust   mencing a judicial action concerning a Michigan
     and the identity of any person holding a power        trust, trustee, trust protector, etc. are governed
     to revoke the trust.                                  by the periods of limitation set forth in the MTC.        36

     (e) The authority of cotrustees to sign or other-     These periods of limitations can not be modified
     wise authenticate and whether all or less than        to a shorter time period by the settlor or the trust
     all are required in order to exercise powers of
                                                           instrument.
     the trustee.
                                                              Below are various MTC sections that directly
  (2) A certificate of trust may be signed or other-
  wise authenticated by the settlor, any trustee, or
                                                           (or indirectly) provide a time period for a ben-
  an attorney for the settlor or trustee. The certifi-     eficiary or a trustee to take certain actions, with
  cate shall be in the form of an affidavit.               the principal period of limitations being set forth
  (3) A certificate of trust shall state that the trust    in MTC sections 7604 (contesting a revocable
  has not been revoked, modified, or amended               trust) and 7095 (action for breach of trust).
  in any manner that would cause the represen-               MTC Sec. 0 (Trust’s Principal Place of
  tations contained in the certificate of trust to be        Administration). (1) Without precluding other
  incorrect.                                                 means for establishing a sufficient connection
  (4) A certificate of trust need not contain the dis-       with the designated jurisdiction, terms of a trust
  positive terms of the trust.                               designating the principal place of administration
  (5) A recipient of a certificate of trust may re-          are valid and controlling if either of the following
  quire the trustee to furnish copies of those ex-           applies:
  cerpts from the original trust instrument and later          (a) A trustee’s principal place of business is lo-
  amendments that designate the trustee and con-               cated in or a trustee is a resident of the desig-
  fer upon the trustee the power to act in the pend-           nated jurisdiction.
  ing transaction.                                             (b) All or part of the administration occurs in the
  (6) A person who acts in reliance upon a cer-                designated jurisdiction.
  tificate of trust without knowledge that the repre-        (2) A trustee is under a continuing duty to admin-
  sentations contained in the certificate are incor-         ister the trust at a place appropriate to its pur-
  rect is not liable to any person for so acting and         poses, its administration, and the interests of the
  may assume without inquiry the existence of the            qualified trust beneficiaries.
  facts contained in the certificate.                        (3) Without precluding the right of the court to
  (7) A person who in good faith enters into a trans-        order, approve, or disapprove a transfer, the
  action in reliance upon a certificate of trust may         trustee, in furtherance of the duty prescribed by
                                                             subsection (2), may transfer the trust’s principal
  enforce the transaction against the trust property
                                                             place of administration to another state or to a
  as if the representations contained in the certifi-
                                                             jurisdiction outside of the United States.
  cate were correct.
                                                             (4) The trustee shall notify the qualified trust
  (8) A person making a demand for the trust in-
                                                             beneficiaries in writing of a proposed transfer of
  strument in addition to a certificate of trust or
                                                             a trust’s principal place of administration not less
  excerpts is liable for damages, costs, expenses,
                                                             than 63 days before initiating the transfer. The
  and legal fees if the court determines that the
                                                             notice of proposed transfer shall include all of
  person was not acting pursuant to a legal re-
                                                             the following:
  quirement in demanding the trust instrument.
                                                               (a) The name of the jurisdiction to which the
  (9) This section does not limit the right of a per-
                                                               principal place of administration is to be trans-
  son to obtain a copy of the trust instrument in a
                                                               ferred.
  judicial proceeding concerning the trust.                    (b) The address and telephone number at the
  Rule  – Periods of Limitations For Com-                    new location at which the trustee can be con-
mencing a Judicial Proceeding Against a                        tacted.
Michigan Trustee (MTC section 7105(2)(m);                      (c) An explanation of the reasons for the pro-
MCL 700.7105(2)(m)). Time limitations for com-                 posed transfer.

                                                                                                                
MiChigan Probate & estate Planning                                                                   Winter 2009


    (d) The date on which the proposed transfer is       tered in this state are subject to the jurisdiction of
    anticipated to occur.                                the courts of this state regarding any matter in-
    (e) In a conspicuous manner, the date, not less      volving the trust. By accepting a distribution from
    than 63 days after the giving of the notice, by      such a trust, the recipient submits personally to
    which a qualified trust beneficiary must notify      the jurisdiction of the courts of this state regard-
    the trustee in writing of an objection to the pro-   ing any matter involving the trust.
    posed transfer.                                      (4) This section does not preclude other meth-
 (5) The authority of a trustee under this section       ods of obtaining jurisdiction over a trustee, ben-
 to transfer a trust’s principal place of administra-    eficiary, or other person who receives property
 tion without the approval of the court terminates       from the trust.
 if a qualified trust beneficiary notifies the trustee   MTC Sec.  (Cy Pres). [See, Rule 4, above,
 in writing of an objection to the proposed transfer     for the text of MTC section 7413, and its 50 year
 on or before the date specified in the notice.          period concerning Cy Pres.]
 (6) In connection with a transfer of the trust’s        MTC Sec. 7414 (Modification or Termina-
 principal place of administration, the trustee may      tion of an Uneconomical Trust). [See, Rule
 transfer some or all of the trust property to a suc-    4, above, for the text of MTC section 7414, and
 cessor trustee designated in the terms of the           its 63 days notice requirement to qualified trust
 trust or appointed pursuant to section 7704.            beneficiaries (and the attorney general concern-
 (7) The view of an adult beneficiary shall be           ing charitable trusts) regarding the termination
 given weight in determining the suitability of the      of a trust.]
 trustee and the place of administration. (Empha-        MTC Sec. 0 (Limitation on Action Con-
 sis added.)                                             cerning Validity of Revocable Trust; Distribu-
 MTC Sec. 0 (Probate Court’s Jurisdiction             tion of Trust Property). (1) A person may com-
 Over Trustee). (1) By registering a trust37 or ac-      mence a judicial proceeding to contest the valid-
 cepting the trusteeship of a registered trust or a      ity of a trust that was revocable at the settlor’s
 trust having its principal place of administration      death within the earlier of the following:
 in this state or by moving the principal place of         (a) Two years after the settlor’s death.
 administration to this state, the trustee submits         (b) Six months after the trustee sent the person
 personally to the jurisdiction of the courts of this      a notice informing the person of all of the fol-
 state regarding any matter involving the trust. No-       lowing:
 tice of a proceeding shall be given to the trustee         (i) The trust’s existence.
 in accordance with [EPIC] section 1401 at the              (ii) The date of the trust instrument.
 trustee’s address as stated in the registration or         (iii) The date of any amendments known to the
 as reported to the court and to the trustee’s ad-          trustee.
 dress then known to the petitioner.                        (iv) A copy of relevant portions of the terms of
 (2) For purposes of a proceeding commenced by              the trust that describe or affect the person’s
 a trust beneficiary before registration, a trustee         interest in the trust, if any.
 of a trust that is not registered in a proper place        (v) The settlor’s name.
 is subject to the personal jurisdiction of a court         (vi) The trustee’s name and address.
 in which the trust could have been registered.             (vii) The time allowed for commencing a pro-
 In addition, a trustee who, within 28 days after           ceeding.
 receipt of a written demand by a trust settlor or       (2) Upon the death of the settlor of a trust that
 beneficiary, fails to register a trust as required by   was revocable at the settlor’s death, the trustee
 the terms of the trust is subject to removal and        may proceed to distribute the trust property in
 denial of compensation or to surcharge as the           accordance with the terms of the trust. The trust-
 court may direct. (Emphasis added.)                     ee is not subject to liability for doing so unless
 (3) With respect to their interests in the trust, the   either of the following applies:
 beneficiaries of a trust having its principal place       (a) The trustee knows of a pending judicial pro-
 of administration or having been properly regis-          ceeding contesting the validity of the trust.


Winter 2009                                                           MiChigan Probate & estate Planning


    (b) A potential contestant has notified the trust-     with section 7608, the allowance or disallowance
    ee in writing of a possible judicial proceeding        of a claim presented in the manner described
    to contest the trust and a judicial proceeding         in section 7609(1) and within a time period de-
    is commenced within 63 days after the contes-          scribed in section 7610 is governed by the fol-
    tant sent the notification.                            lowing provisions:
  (3) A beneficiary of a trust that is determined to         (a) The trustee may deliver or mail a notice to
  have been invalid is liable to return any distribu-        the claimant stating that the claim has been
  tion received. (Emphasis added.)                           disallowed in whole or in part. If, after allowing
  MTC Sec. 0 (Claims Procedure). (1) Sub-                 or disallowing a claim, the trustee changes a
  ject to section 7611, if not barred earlier by an-         decision concerning the claim, the trustee shall
  other statute of limitations, a claim against the          notify the claimant. The trustee shall not change
  settlor of a trust described in section 7606(1)            a decision disallowing a claim if the time for the
  that arose at or before the settlor’s death that a         claimant to commence a proceeding for allow-
  person seeks to recover from the trust is barred           ance expires or if the time to commence a pro-
  against the trust, each trustee of the trust, and          ceeding on the claim expires and the claim has
  a trust beneficiary, unless presented within 1 of          been barred. A claim that is disallowed in whole
  the following times:                                       or in part by the trustee is barred to the extent
    (a) If notice is given in compliance either with         not allowed unless the claimant commences a
    section 3801 or section 7608, within 4 months            proceeding against the trustee not later than
    after the date of publication of notice to credi-        63 days after the mailing of the notice of disal-
    tors.                                                    lowance or partial allowance if the notice warns
    (b) For a creditor known to the personal rep-            the claimant of the impending bar. Failure by
    resentative at the time of publication or during         the trustee to deliver or mail to a claimant no-
    the 4 months following publication, or known             tice of action on the claim within 63 days after
    to the trustee at or during such a time if publi-        the time for the claim’s presentation has ex-
    cation occurred under section 7608, within 28            pired constitutes a notice of allowance.
    days after the subsequent sending of notice or           (b) After allowing or disallowing a claim, the
    4 months after the date of publication of notice         trustee may change the allowance or disallow-
    to creditors, whichever is later.                        ance as provided in this subdivision. Before pay-
    (c) If the notice requirements of either sec-            ment, the trustee may change the allowance to
    tion 3801 or section 7608 are not met, within 3          a disallowance in whole or in part, but not after
    years after the settlor’s death.                         allowance by a court order or judgment, or an
  (2) This section does not affect or prevent any of         order directing payment of the claim. The trust-
  the following:                                             ee shall notify the claimant of the change to
    (a) A proceeding to enforce a mortgage, pledge,          disallowance, and the disallowed claim is then
    or other lien upon property held in the trust.           subject to bar as provided in subdivision (a).
    (b) A proceeding to establish the settlor’s or           The trustee may change a disallowance to an
    the trustee’s liability for which the settlor or the     allowance, in whole or in part, until it is barred
    trustee is protected by liability insurance to the       under subdivision (a). After a claim is barred, it
    limits of the insurance protection only.                 may be allowed and paid only if the trust is sol-
    (c) Collection of compensation for services              vent and all whose interests would be affected
    rendered and reimbursement of expenses ad-               consent.
    vanced by the trustee or by an attorney, au-             (c) Upon the trustee’s or a claimant’s com-
    ditor, investment adviser, or other specialized          mencement of a proceeding, the court may
    agent or assistant for the trustee. (Emphasis            allow in whole or in part a claim properly pre-
    added.)                                                  sented in due time and not barred by subdivi-
  MTC Sec.  (Claims Procedure). If there                 sion (a).
  is no personal representative appointed for the            (d) A judgment in a proceeding in another court
  settlor’s estate and notice is given in accordance         against a trustee to enforce a claim against a

                                                                                                             
MiChigan Probate & estate Planning                                                                 Winter 2009


   decedent’s estate constitutes an allowance of        MTC Sec. 0 (Co-Trustees). (1) Cotrustees
   the claim.                                           shall act by majority decision.
   (e) Unless otherwise provided in a judgment          (2) If a vacancy occurs in a cotrusteeship, the
   in another court entered against the trustee,        remaining cotrustee or cotrustees may act for
   an allowed claim bears interest at a rate de-        the trust.
   termined under section 6013 of the revised           (3) A cotrustee shall participate in the perfor-
   judicature act of 1961, MCL 600.6013, for the        mance of a trustee’s function unless the cotrust-
   period commencing 63 days after the time for         ee is unavailable to perform the function because
   original presentation of the claim has expired,      of absence, illness, disqualification under other
   unless based on a contract that provides for         law, or other temporary incapacity or the cotrust-
   interest, in which case the claim bears inter-       ee has properly delegated the performance of
   est in accordance with the contract. (Emphasis       the function to another trustee.
   added.)                                              (4) If prompt action is necessary to avoid injury
 MTC Sec.  (Claims Procedure). (1) Upon             to the trust property, the remaining cotrustee or a
 the expiration of 4 months after the date of the       majority of the remaining cotrustees may act for
 publication of the notice to creditors, the trustee    the trust if either of the following applies:
 shall proceed to pay the claims allowed against          (a) A cotrustee is unavailable to perform duties
 the trust in the order of priority prescribed in         because of absence, illness, disqualification
 section 7607(2)(f) to (i), after making provision        under other law, or other temporary incapacity.
 for costs and expenses of trust administration,          (b) A cotrustee who is available fails or refuses
 for reasonable funeral and burial expenses, for          to participate in the administration of the trust
 each claim already presented that is not yet al-         following notice from the remaining cotrustee
 lowed or whose allowance is appealed, and for            or cotrustees.
 each unbarred claim that may yet be presented.         (5) By agreement of the trustees, a trustee may
 A claimant whose claim is allowed, but not paid        delegate to a cotrustee 1 or both of the follow-
 as provided in this section, may petition the court    ing:
 to secure an order directing the trustee to pay          (a) Any power that is permitted to be delegated
 the claim to the extent that money of the trust is       pursuant to section 7817(v) to an agent who is
 available for the payment.                               not a trustee.
 (2) At any time, the trustee may pay a claim that        (b) Any power that can only be performed by a
 is not barred, with or without formal presenta-          trustee, if notice of the delegation is provided to
 tion, but is individually liable to another claimant     the qualified trust beneficiaries within 28 days.
 whose claim is allowed and who is injured by the       (6) Unless a delegation under subsection (5)
 payment if either of the following occurs:             was irrevocable, a trustee may revoke the del-
   (a) Payment is made before the expiration of         egation previously made. A revocation under this
   the time limit stated in subsection (1) and the      subsection shall be in writing and shall be given
   trustee fails to require the payee to give ad-       to all of the remaining cotrustees. If notice of the
   equate security for the refund of any of the pay-    delegation was required to be provided to the
   ment necessary to pay another claimant.              qualified trust beneficiaries, notice of the revoca-
   (b) Payment is made, due to the negligence or        tion shall be given to the qualified trust beneficia-
   willful fault of the trustee, in a manner that de-   ries within 28 days after the revocation.
   prives the injured claimant of priority.             (7) If 2 or more trustees own securities, their acts
 (3) If a claim is allowed but the whereabouts of       with respect to voting have 1 of the following ef-
 the claimant is unknown at the time the trustee        fects:
 attempts to pay the claim, upon petition by the          (a) If only 1 trustee votes, in person or by proxy,
 trustee and after notice the court considers ad-         that trustee’s act binds all of the trustees.
 visable, the court may disallow the claim. If the        (b) If more than 1 trustee votes, in person or by
 court disallows a claim under this subsection,           proxy, the act of the majority so voting binds all
 the claim is barred. (Emphasis added.)                   of the trustees.


Winter 2009                                                          MiChigan Probate & estate Planning


    (c) If more than 1 trustee votes, in person or by     termination of a trust, the trustee may send to
    proxy, but the vote is evenly split on a particular   the trust beneficiaries a proposal for distribution.
    matter, each faction is entitled to vote the secu-    The right of any trust beneficiary to object to the
    rities proportionately.                               proposed distribution terminates if the trust ben-
  (8) A trustee is not liable for the action or omis-     eficiary does not notify the trustee of an objec-
  sion of a cotrustee if all of the following apply:      tion within 28 days after the proposal was sent,
    (a) The trustee is not unavailable to perform a       but only if the proposal informed the trust benefi-
    trustee’s function because of absence, illness,       ciary of the right to object and of the time allowed
    disqualification under other law, or other inca-      for objection.
    pacity or has not properly delegated the perfor-      (2) Upon the occurrence of an event terminat-
    mance of the function to a cotrustee.                 ing or partially terminating a trust, the trustee
    (b) The trustee is aware of but does not join in      shall proceed expeditiously to distribute the trust
    the action or omission of the cotrustee.              property to the persons entitled to it, subject to
    (c) The trustee dissents in writing to each co-       the right of the trustee to retain a reasonable
    trustee at or before the time of the action or        reserve for the payment of debts, taxes, and
    omission.                                             expenses, including attorney fees and other ex-
  (9) A trustee who is not aware of an action by a        penses incidental to the allowance of the trust-
  cotrustee is not liable for that action unless the      ee’s accounts.
  trustee should have known that the action would         (3) A release by a trust beneficiary of a trustee
  be taken and, if the trustee had known, would           from liability for breach of trust is invalid to the
  have had an affirmative duty to take action to          extent either of the following applies:
  prevent the action.                                       (a) The release was induced by improper con-
  (10) A dissenting trustee who joins in an action          duct of the trustee.
  at the direction of the majority of the trustees and      (b) The trust beneficiary, at the time of the re-
  who notified any cotrustee in writing of the dis-         lease, did not know of the trust beneficiary’s
  sent at or before the time of the action is not li-       rights or of the material facts relating to the
  able for the action. (Emphasis added.)                    breach.
  MTC Sec. 0 (Resignation of Trustee). (1)             MTC Sec. 0 (Limitations of Actions
  A trustee may resign in either of the following         Against Trustees). (1) The following limitations
  circumstances:                                          on commencing proceedings apply in addition to
    (a) Upon at least 28 days’ notice to the quali-       other limitations provided by law:
    fied trust beneficiaries, the holders of powers         (a) A trust beneficiary shall not commence a
    of appointment, and all cotrustees.                     proceeding against a trustee for breach of trust
    (b) With the approval of the court.                     more than 1 year after the date the trust benefi-
  (2) In approving a resignation, the court may is-         ciary or a representative of the trust beneficiary
  sue orders and impose conditions reasonably               was sent a report that adequately disclosed the
  necessary for the protection of the trust prop-           existence of a potential claim for breach of trust
  erty.                                                     and informed the trust beneficiary of the time
  (3) Any liability of a resigning trustee or of any        allowed for commencing a proceeding.
  sureties on the trustee’s bond for acts or omis-          (b) A trust beneficiary who has waived the right
  sions of the trustee is not discharged or affected        to receive reports pursuant to section 7814(5)
  by the trustee’s resignation. (Emphasis added.)           shall not commence a proceeding for a breach
  MTC Sec.  (Trustee Duty To Inform and                 of trust more than 1 year after the end of the
  Report). [See, Rule 9, above, for the text of MTC         calendar year in which the alleged breach oc-
  section 7814, and its 63 days notice requirement          curred.
  to qualified trust beneficiaries concerning the ex-     (2) A report adequately discloses the existence
  istence of a trust.]                                    of a potential claim for breach of trust if it pro-
  MTC Sec.  (Distribution Upon Termina-               vides sufficient information so that the trust ben-
  tion of Trust). (1) Upon termination or partial         eficiary or representative knows of the potential

                                                                                                            
MiChigan Probate & estate Planning                                                                   Winter 2009


  claim or should have inquired into the potential        a trust does not result in continuing judicial su-
  claim’s existence.                                      pervision unless ordered by the court. Subject
  (3) If subsection (1) does not apply, a judicial pro-   to court jurisdiction as invoked by an interested
  ceeding by a trust beneficiary against a trustee        person or as otherwise exercised as provided
  for breach of trust shall be commenced within 5         by law, the management and distribution of a
  years after the first of the following to occur:        trust estate, submission of an account or report
    (a) The removal, resignation, or death of the         to beneficiaries, payment of a trustee’s fees and
    trustee.                                              other trust obligations, acceptance and change
    (b) The termination of the trust beneficiary’s in-    of trusteeship, and any other aspect of trust ad-
    terest in the trust.                                  ministration shall proceed expeditiously consis-
    (c) The termination of the trust. (Emphasis add-      tent with the terms of the trust, free of judicial
    ed.)                                                  intervention, and without court order or approval
   Rule  - Jurisdiction of Michigan Courts              or other court action.
                                                          (3) A proceeding involving a trust may relate to
Over a Michigan Trust (MTC section 0()(n);
                                                          any matter involving the trust’s administration,
MCL 00.0()(n)). A Michigan trust can not
                                                          including a request for instructions and a deter-
prohibit the power of the court to take action            mination regarding the validity, internal affairs, or
and exercise jurisdiction over a Michigan trust,          settlement of a trust; the administration, distribu-
trustee or trust protector. This provision of the         tion, modification, reformation, or termination of
MTC provides the only statutorily authorized fo-          a trust; or the declaration of rights that involve a
rum for the resolution of trust disputes. Although        trust, trustee, or trust beneficiary, including, but
a provision in the trust instrument requiring the         not limited to, proceedings to do any of the fol-
arbitration of trust disputes will evidence a set-        lowing:
tlor’s intent, absent a court ordering arbitration          (a) Appoint or remove a trustee.
(or a statute that expressly permits mandatory              (b) Review the fees of a trustee.
                                                            (c) Require, hear, and settle interim or final ac-
arbitration of trust disputes), an arbitration provi-
                                                            counts.
sion will not be binding on the trustee, trust pro-
                                                            (d) Ascertain beneficiaries.
tector, beneficiaries, or the Probate Court. Nev-           (e) Determine a question that arises in the ad-
ertheless, a trustee may be able to enter into a            ministration or distribution of a trust, including
binding arbitration agreement with third parties,           a question of construction of a trust.
such as those with whom the trustee contracts               (f) Instruct a trustee and determine relative to
for goods or services on behalf of the trust.               a trustee the existence or nonexistence of an
  Practice Point: The MTC permits non-judicial              immunity, power, privilege, duty, or right.
  settlements of certain matters. MTC section 7111;         (g) Release registration of a trust.
  MCL 700.7111.38 And, MTC section 7817(mm);                (h) Determine an action or proceeding that in-
  MCL 700.7817(mm) permits a trustee to resolve             volves settlement of an irrevocable trust.
  a dispute concerning the interpretation of the          MTC Sec. 0 (Court’s Jurisdiction Over
  trust or its administration by mediation, arbitra-      Trustee and Beneficiary). (1) By registering
  tion, or other procedure for alternative dispute        a trust or accepting the trusteeship of a regis-
  resolution.                                             tered trust or a trust having its principal place
  MTC Sec. 0 (Role of Court in Administra-             of administration in this state or by moving the
  tion of Trust). (1) A court of this state may inter-    principal place of administration to this state, the
  vene in the administration of a trust to the extent     trustee submits personally to the jurisdiction of
  its jurisdiction is invoked by an interested person     the courts of this state regarding any matter in-
  or as provided by law.                                  volving the trust. Notice of a proceeding shall be
  (2) A trust is not subject to continuing judicial su-   given to the trustee in accordance with section
  pervision unless ordered by the court. Registra-        1401 at the trustee’s address as stated in the
  tion of a trust or another proceeding concerning        registration or as reported to the court and to the

 0
Winter 2009                                                           MiChigan Probate & estate Planning


  trustee’s address then known to the petitioner.          tional Provisions). The court where a trust is
  (2) For purposes of a proceeding commenced by            registered has concurrent jurisdiction with other
  a trust beneficiary before registration, a trustee       courts of this state of an action or proceeding to
  of a trust that is not registered in a proper place      determine the existence or nonexistence of the
  is subject to the personal jurisdiction of a court       trust if created other than by will, of an action
  in which the trust could have been registered.           or proceeding against a creditor or debtor of the
  In addition, a trustee who, within 28 days after         trust, and of another action or proceeding that
  receipt of a written demand by a trust settlor or        involves a trustee and a third party.
  beneficiary, fails to register a trust as required by    EPIC Sec. 0 (Exclusive Subject Matter Ju-
  the terms of the trust is subject to removal and         risdiction). The [probate] court has exclusive
  denial of compensation or to surcharge as the            legal and equitable jurisdiction of all of the fol-
  court may direct. (Emphasis added.)                      lowing:
  (3) With respect to their interests in the trust, the      (a) A matter that relates to the settlement of a
  beneficiaries of a trust having its principal place        deceased individual’s estate, whether testate
  of administration or having been properly regis-           or intestate, who was at the time of death domi-
  tered in this state are subject to the jurisdiction of     ciled in the county or was at the time of death
  the courts of this state regarding any matter in-          domiciled out of state leaving an estate within
  volving the trust. By accepting a distribution from        the county to be administered, including, but
  such a trust, the recipient submits personally to          not limited to, all of the following proceedings:
  the jurisdiction of the courts of this state regard-         (i) The internal affairs of the estate.
  ing any matter involving the trust.                          (ii) Estate administration, settlement, and dis-
  (4) This section does not preclude other meth-               tribution.
  ods of obtaining jurisdiction over a trustee, ben-           (iii) Declaration of rights that involve an estate,
  eficiary, or other person who receives property              devisee, heir, or fiduciary.
  from the trust.                                              (iv) Construction of a will.
  MTC Sec. 0 (Subject Matter Jurisdiction).                 (v) Determination of heirs.
  [See, Rule 15, below, for the text of MTC section            (vi) Determination of death of an accident or
  7203.]                                                       disaster victim under section 1208.
  MTC Sec. 0 (Venue). [See, Rule 15, below,               (b) A proceeding that concerns the validity, in-
  for the text of MTC section 7204.]                         ternal affairs, or settlement of a trust; the ad-
  MTC Sec. 0 (Miscellaneous Jurisdictional                ministration, distribution, modification, reforma-
  Provisions). (1) If a party objects, the court shall       tion, or termination of a trust; or the declaration
  not entertain a proceeding under section 7203              of rights that involve a trust, trustee, or trust
  that involves a trust that is registered or that has       beneficiary, including, but not limited to, pro-
  its principal place of administration in another           ceedings to do all of the following:
  state, unless either of the following applies:               (i) Appoint or remove a trustee.
    (a) All appropriate parties could not be bound             (ii) Review the fees of a trustee.
    by litigation in the courts of the state where the         (iii) Require, hear, and settle interim or final
    trust is registered or has its principal place of          accounts.
    administration.                                            (iv) Ascertain beneficiaries.
    (b) The interests of justice would otherwise be            (v) Determine a question that arises in the ad-
    seriously impaired.                                        ministration or distribution of a trust, including
  (2) The court may condition a stay or dismissal              a question of construction of a will or trust.
  of a proceeding under this section on the con-               (vi) Instruct a trustee and determine relative to
  sent of a party to jurisdiction of the state in which        a trustee the existence or nonexistence of an
  the trust is registered or has its principal place of        immunity, power, privilege, duty, or right.
  business, grant a continuance, or enter another              (vii) Release registration of a trust.
  appropriate order.                                           (viii) Determine an action or proceeding that
  MTC Sec. 0 (Miscellaneous Jurisdic-                       involves settlement of an irrevocable trust.

                                                                                                                
MiChigan Probate & estate Planning                                                                    Winter 2009


    (c) Except as otherwise provided in section            may order removal of the action or proceeding
    1021 of the revised judicature act of 1961,            to the probate court. If the action or proceeding
    1961 PA 236, MCL 600.1021, a proceeding                is removed to the probate court, the other court
    that concerns a guardianship, conservatorship,         shall forward to the probate court the original of
    or protective proceeding.                              all papers in the action or proceeding. After that
    (d) A proceeding to require, hear, or settle the
                                                           transfer, the other court shall not hear the action
    accounts of a fiduciary and to order, upon re-
                                                           or proceeding, except by appeal or review as
    quest of an interested person, instructions or
    directions to a fiduciary that concern an estate
                                                           provided by law or supreme court rule, and the
    within the court’s jurisdiction. (Emphasis add-        action or proceeding shall be prosecuted in the
    ed.)                                                   probate court as a probate court proceeding.
  EPIC Sec. 0 (Concurrent Jurisdiction;                     (3) The underlying purpose and policy of this
  Removal; Policy). (1) In addition to the jurisdic-       section is to simplify the disposition of an action
  tion conferred by [EPIC] section 1302 and other          or proceeding involving a decedent’s, a protect-
  laws, the [probate] court has concurrent legal           ed individual’s, a ward’s, or a trust estate by con-
  and equitable jurisdiction to do all of the follow-      solidating the probate and other related actions
  ing in regard to an estate of a decedent, pro-           or proceedings in the probate court. (Emphasis
  tected individual, ward, or trust:                       added.)
    (a) Determine a property right or interest.                Rule  - Jurisdiction and Venue of The
    (b) Authorize partition of property.                   Probate Court Concerning a Michigan Trust
    (c) Authorize or compel specific performance
                                                           (MTC section 7105(2)(o); MCL 700.7105(2)(o)).
    of a contract in a joint or mutual will or of a con-
                                                           A Michigan trust is subject to the (subject-matter)
    tract to leave property by will.
    (d) Ascertain if individuals have survived as
                                                           jurisdiction of the Probate Court and venue for
    provided in this act.                                  commencing a proceeding as provided in MTC
    (e) Determine cy-pres or a gift, grant, bequest,       sections 7203 and 7204; MCL 700.7203 and
    or devise in trust or otherwise as provided in         700.7204. These provisions cannot be varied or
    1915 PA 280, MCL 554.351 to 554.353.                   overridden by the settlor or the trust instrument.
    (f) Hear and decide an action or proceeding              MTC Sec. 0 (Principal Place of Trust’s Ad-
    against a distributee of a fiduciary of the es-          ministration). [See, Rule 13, above, for the text
    tate to enforce liability that arises because the        of MTC section 7108, and that section’s rules for
    estate was liable upon some claim or demand              determining a trust’s nexus with Michigan in or-
    before distribution of the estate.                       der for the Michigan courts to exercise jurisdic-
    (g) Impose a constructive trust.                         tion over the trust.]
    (h) Hear and decide a claim by or against a              MTC Sec. 0 (Subject Matter Jurisdiction).
    fiduciary or trustee for the return of property.         (1) The [probate] court has exclusive jurisdiction
    (i) Hear and decide a contract proceeding or             of proceedings in this state brought by a trustee
    action by or against an estate, trust, or ward.          or beneficiary that concern the administration of
    (j) Require, hear, or settle an accounting of an         a trust as provided in [EPIC] section 1302(b) and
    agent under a power of attorney.                         (d).
    (k) Bar an incapacitated or minor wife of her            (2) The [probate] court has concurrent jurisdiction
    dower right.                                             with other courts of this state of other proceed-
                                                             ings that involve a trust as provided in [EPIC]
   (2) If the probate court has concurrent juris-
                                                             section 1303.
diction of an action or proceeding that is pend-             MTC Sec. 0 (Venue). (1) Except as other-
ing in another court [such as the Circuit Court,             wise provided in subsection (2), venue for a pro-
see, MCL 600.605], on the motion of a party to               ceeding involving a trust is as follows:
the action or proceeding and after a finding and               (a) For a proceeding under section 7203 in-
order on the jurisdictional issue, the other court             volving a registered trust, in the place of reg-

 
Winter 2009                                                                   MiChigan Probate & estate Planning


    istration.                                                     2. Public Act 46 of 2009, June 18, 2009 also made
    (b) For a proceeding under section 7203 involv-            conforming amendments to EPIC, which become effective
    ing a trust not registered in this state, in any           April 1, 2010. Many of the EPIC sections cited in this ar-
    place where the trust properly could be regis-             ticle become effective April 1, 2010.
                                                                   3. See, Mark K. Harder, “Some Things Old, Some
    tered and, if the trust is created by will and the
                                                               Things New, Some Things Borrowed, Some Things To Do,”
    estate is not yet closed, in the county in which           49th Annual Probate & Estate Planning Institute (ICLE, Ann
    the decedent’s estate is being administered.               Arbor, MI 2009) for a general overview of the MTC and
    (c) As otherwise specified by court rule.                  its drafting history. Mr. Harder served as the reporter for
  (2) If a trust has no trustee and has not been reg-          the MTC, and is currently writing the MTC Commentary,
  istered, venue for a judicial proceeding for the             which will be published by ICLE in late Winter 2009/early
  appointment of a trustee is as follows:                      Spring 2010. The author gratefully acknowledges the help-
    (a) In a county in this state in which a trust ben-        ful comments of Mr. Harder in writing this article. However,
    eficiary resides.                                          the author assumes full responsibility for the contents of
    (b) In a county in which any trust property is             this article, including any inaccuracies.
                                                                   4. Mark K. Harder, “The Michigan Trust Code: An Over-
    located.
                                                               view,” (August 2009).
    (c) If the trust is created by will, in the county             5. See, Marilyn A. Lankfer, “Drafting Revocable Trusts
    in which the decedent’s estate was or is being             in the Shadow of the Michigan Trust Code,” 49th Annual
    administered.                                              Probate & Estate Planning Institute (ICLE, Ann Arbor, MI
    (d) As otherwise provided by court rule.                   2009) for selected sample drafting language for trusts un-
                                                               der the MTC, including an excellent summary of the tax
                      Conclusion                               and non-tax issues concerning the appointment of a trust
                                                               protector under the MTC, sample language for the execu-
   The MTC is a giant leap forward in modern-
                                                               tion of a will pursuant to the new rules effective April 1,
izing and codifying Michigan’s trust law, which                2010 under EPIC, and issues that may need to be ad-
finds its genesis in British common law. EPIC’s  39
                                                               dressed in drafting durable powers of attorney as a result
implementation in April 2000 of various trust ad-              of the MTC granting various powers to agents acting un-
ministration rules contained in Article VII (MCL               der a durable power of attorney. (“Lankfer.”) Ms. Lankfer
                                                               served on the MTC Drafting Committee.
700.7101–700.8102) was the beginning of a 10
                                                                   6. “Protected individual” means a minor or other indi-
year journey that, on April 1, 2010, will provide              vidual for whom a conservator has been appointed or other
greater certainty in the administration of Mich-               protective order has been made as provided in part 4 of ar-
igan trusts, especially revocable living trusts
              40                                               ticle V [of EPIC]. EPIC section 1106(v); MCL 700.1106(v).
which have become a popular will substitute.                       7. MTC Sec. 7112. The rules of construction in [EPIC]
                                                               sections 2605 to 2608 that apply in this state to the inter-
   Although the MTC is a default statute that es-
                                                               pretation of and disposition of property by will also apply
tate planning attorneys can opt out of by drafting             as appropriate to the interpretation of the terms of a trust
“around” the statute, practitioners must neverthe-             and the disposition of the trust property.
less become familiar with the fifteen mandatory                    8. The settlor’s right to be reimbursed for income taxes
MTC rules; and going forward, should draft and                 must be in the sole absolute and uncontrolled discretion
                                                               of an independent trustee. If the trust instrument requires
administer trusts with these new rules in mind.
                                                               the trustee to reimburse the settlor for income taxes, the
                                                               trust property will be included in the settlor’s gross estate
                                                               for federal estate tax purposes under IRC section 2036 as
                                                               a retained interest in the trust. The retained interest in the
                                                               trust is the settlor’s right to have a debt of the settlor (to wit,
                                                               the settlor’s obligation to pay income taxes) be discharged
                                                               by the trust. Treas. Reg. §20.2036-1(b)(2).
                          Notes                                    9. See, Chapter 2 and Section 4.2(b) of Sebastian V.
                                                               Grassi, Jr. A Practical Guide to Drafting Irrevocable Life In-
   1. Michigan Trust Code section 7101; MCL 700.7101.          surance Trusts (With Sample Forms and Checklists) - Sec-
Effective April 1, 2010, the MTC replaces the current provi-   ond Edition, ALI-ABA, Philadelphia, PA, (800) 253-6397
sions of Article VII of EPIC.                                  (www.ali-aba.org/aliaba/BK45) (“Grassi, Drafting ILITs”)

                                                                                                                             
MiChigan Probate & estate Planning                                                                                  Winter 2009


for a detailed discussion of the grantor trust rules and the       ever and however created. Trust includes, but is not limit-
right of the settlor of an irrevocable trust to be reimbursed      ed to, a trust created or determined by judgment or decree
by the trustee for taxes attributable to the trust’s income.       under which the trust is to be administered in the manner
    10. See, Section 3.10 of Sebastian V. Grassi, Jr., A           of an express trust. Trust does not include a constructive
Practical Guide to Drafting Marital Deduction Trusts (With         trust or a resulting trust, conservatorship, personal repre-
Sample Forms and Checklists), ALI-ABA Philadelphia, PA,            sentative, custodial arrangement under the Michigan uni-
(800) 253-6397 (www.ali-aba.org/aliaba/BK36) (“Grassi,             form transfers to minors act, 1998 PA 433, MCL 554.521
Drafting Martital Deduction Trusts”) for a detailed discus-        to 554.552, business trust providing for a certificate to be
sion of IVQTIP trusts, and a sample IVQTIP trust form.             issued to a beneficiary, common trust fund, voting trust,
    11. MTC Sec. 8204. The amendments and additions                security arrangement, liquidation trust, or trust for the pri-
to article VII enacted by the amendatory act that added            mary purpose of paying debts, dividends, interest, sala-
this section take effect on April 1, 2010.                         ries, wages, profits, pensions, or employee benefits of any
    MTC Sec. 8206. (1) Except as otherwise provided in             kind, or another arrangement under which a person is a
article VII, all of the following apply on the effective date of   nominee or escrowee for another. EPIC section 1107(n);
the amendatory act that added this section:                        MCL 700.1107(n). (Emphasis added.)
    (a) The amendments and additions to article VII en-                “Terms of a trust” or “terms of the trust” means the
acted by the amendatory act that added this section apply          manifestation of the settlor’s intent regarding a trust’s
to all trusts created before, on, or after that effective          provisions as expressed in the trust instrument or as may
date.                                                              be established by other evidence that would be admis-
    (b) The amendments and additions to article VII en-            sible in a judicial proceeding. EPIC section 1107(k); MCL
acted by the amendatory act that added this section apply          700.1107(k).
to all judicial proceedings concerning trusts commenced
on or after that effective date.                                       “Trust instrument” means a governing instrument that
    (c) The amendments and additions to article VII enact-         contains the terms of the trust, including any amend-
ed by the amendatory act that added this section apply to          ment to a term of the trust. MTC section 7103(m); MCL
judicial proceedings concerning trusts commenced before            700.7103(m).
that effective date unless the court finds that application            “Governing instrument” means a deed; will; trust; in-
of a particular provision of the amendments and additions          surance or annuity policy; account with POD designation;
would substantially interfere with the effective conduct of        security registered in beneficiary form (TOD); pension,
the judicial proceedings or prejudice the rights of the par-       profit-sharing, retirement, or similar benefit plan; instru-
ties, in which case the particular provision of the amend-         ment creating or exercising a power of appointment or a
ments and additions does not apply and the superseded              power of attorney; or dispositive, appointive, or nominative
provisions apply.                                                  instrument of any similar type. EPIC section 1104(k); MCL
    (d) Any rule of construction or presumption provided in        700.1104(k).
the amendments and additions to article VII enacted by                 See also, MTC section 7102; MCL 700.7102, which
the amendatory act that added this section applies to trust        states “This article [VII] applies to trusts as defined in
instruments executed before that effective date unless             [EPIC] section 1107.”
there is a clear indication of a contrary intent in the terms          13. “Charitable trust” means a trust, or portion of a
of the trust.                                                      trust, created for a charitable purpose described in sec-
    (2) The amendments and additions to article VII en-            tion 7405(1). MTC section 7102(c); MCL 700.7102(c).
acted by the amendatory act that added this section do not             14. “Settlor” means a person, including a testator, who
impair an accrued right or affect an act done before that          creates a trust. If more than 1 person creates a trust, each
effective date. If a right is acquired, extinguished, or barred    person is a settlor of the portion of the trust property at-
upon the expiration of a prescribed period that has com-           tributable to that person’s contribution. The lapse, release,
menced to run under any other statute before that effective        or waiver of a power of appointment shall not cause the
date, that statute continues to apply to the right even if it      holder of a power of appointment to be treated as a settlor
has been repealed or superseded.                                   of the trust. MTC section 7103(i); MCL 700.7103(i).
    (3) If any provision of the amendments and additions               15. “Revocable,” as applied to a trust, means revo-
to article VII enacted by the amendatory act that added            cable by the settlor without the consent of the trustee or
this section conflicts with any provision of 1846 RS 63,           a person holding an adverse interest. A trust’s character-
MCL 555.1 to 555.27, the provision of article VII prevails.        ization as revocable is not affected by the settlor’s lack of
(Emphasis added.)                                                  capacity to exercise the power of revocation, regardless of
    12. “Trust” includes, but is not limited to, an express        whether an agent of the settlor under a durable power of
trust, private or charitable, with additions to the trust, wher-   attorney, a conservator of the settlor, or a plenary guard-

 
Winter 2009                                                                    MiChigan Probate & estate Planning


ian of the settlor is serving. MTC section 7103(h); MCL              It is clear that a principal may expressly authorize an
700.7103(h).                                                    agent to transfer the principal’s property and to enter into
    16. “Estate” includes the property of the decedent,         agreements on behalf of the principal with third parties.
trust, or other person whose affairs are subject to this act    It is also clear that a principal may authorize an agent to
as the property is originally constituted and as it exists      make gifts of the principal’s assets. The disposition of the
throughout administration. Estate also includes the rights      trust assets at the death of the principal is a deferred gift.
described in [EPIC] sections 3805, 3922, and [MTC sec-          California expressly provides that the power to make gifts
tion] 7606 to collect from others amounts necessary to pay      includes the power to make gifts either outright or in trust.
claims, allowances, and taxes. EPIC section 1104(b); MCL        Cal. Prob. Code §4264(c).
700.1104(b).                                                         The UPOAA allows an agent under a DPA to create or
    17. See, MTC section 7602(5); MCL 700.7602(5),              change a beneficiary designation if the power is specifi-
which states “A settlor’s powers with respect to revocation,    cally granted. UPOAA §201(a)(4).
amendment, or distribution of trust property may be exer-            Comment: A Revocable Living Trust (“RLT”) is not a
cised by an agent under a durable power of attorney only        will. Therefore, in absence of an express statutory prohibi-
to the extent expressly authorized by the terms of the trust    tion, a principal should be permitted to expressly authorize
or the power of attorney.” Because the power to amend or        an agent to create an RLT that disposes of the principal’s
revoke a trust is a subset of the power to create a trust, an   assets at the principal’s death.
agent with express authority contained in a durable power            Hook, Section XII, A, 859-2nd T.M., Durable Powers of
of attorney possesses (at the minimum) the power to cre-        Attorney.
ate (and fund) a revocable trust on behalf of the principal.         See also, In re Estate of Kurrelmeyer, 895 A2d 207 (Vt
See also, EPIC section 1203; MCL 700.1203, which states         2006), where the decedent’s will gave his wife a life es-
that EPIC is supplemented by other principles of law and        tate in real property, remainder to his children. Using the
equity, such as the law of agency (or the Uniform Durable       general authority granted her under a durable power of
Power of Attorney Act, if enacted in Michigan).                 attorney, the wife created a trust and transferred the real
    “Can the principal authorize his agent to create a trust    property to it. Under the trust, she had greater rights in the
which disposes of the principal’s assets after his death?       real property than under the will, and the decedent’s chil-
In the past this was a murky area. With the promulgation        dren contested the validity of the trust. The court held that
of the [Uniform Power of Attorney Act] UPOAA, however,          the trust created pursuant to the durable power of attor-
the trend in the law is to permit an agent under a DPA the      ney and the transfer of the decedent’s real property to the
power to create, amend, revoke, or terminate an inter vi-       trust were valid, finding that the durable power of attorney
vos trust. As a general rule, a principal may authorize an      authorized creation of the trust (under a general grant or
agent to do whatever acts the principal could do person-        powers clause), that creation of the trust was not non-del-
ally unless public policy or an agreement with a third party    egable even though the trust served a function similar to
requires personal performance. Restatement (Third) of           a will, and that by giving the power to convey real estate
Agency §3.04(3). Generally, public policy prohibits a prin-     to the agent, the principal must have anticipated that the
cipal from delegating acts too personal to delegate, such       terms of his will might be altered. The court remanded,
as making or revoking a will. See, e.g., Cal. Prob. Code        however, for consideration of whether the wife, as an
§4265.                                                          agent, breached her duty of loyalty.
    The UPOAA requires that the authority to create,                 18. “Trustee” includes an original, additional, or suc-
amend, revoke, or terminate an inter vivos trust be ex-         cessor trustee, whether or not appointed or confirmed by
pressly granted. UPOAA §201(a)(1). Likewise, some state         the court. EPIC section 1107(o); MCL 700.1107(o).
DPA statutes require that an agent can create a trust for his        19. See, Daniel E. Cogan, “Trust Administration in
principal only if the DPA expressly authorizes the creation     the Shadow of the MTC,” 49th Annual Probate & Estate
of the trust. For example, the Missouri DPA statute states      Planning Institute (ICLE, Ann Arbor, MI 2009). Mr. Cogan
that “Any power of attorney may grant power of authority        served as a member of the MTC Drafting Committee and
to an attorney-in-fact to carry out any of the following ac-    as a member of the Michigan Bankers Association Trust
tions if the actions are expressly authorized in the power of   Counsel Committee. See also, Sebastian V. Grassi, Jr.
attorney: (1) to execute, amend or revoke any trust agree-      “Checklist of Trustee Duties and Common Mistakes Made
ment …” Mo. Rev. Stat. §404.710(6)(1). California and           by Trustees,” 31 Tax Management Estates, Gifts and
Washington also require that the DPA expressly authorize        Trusts Journal 239 (November 9, 2006).
the creation of a trust. Cal. Prob. Code §4264(a); Wash.             20. See, MTC section 7103(g); MCL 700.7103(g) for
Rev. Code §11.94.050. However, neither statute expressly        the definition of a “qualified trust beneficiary.” See, Rule 9,
states that the DPA can authorize a trust that disposes of      below, for the text of MTC section 7103(g).
the principal’s assets at his death.                                 21. The requirement that the trust no longer serve a

                                                                                                                          
MiChigan Probate & estate Planning                                                                                   Winter 2009


material purpose before it can be terminated by the ben-          of a trust beneficiary’s interest. MTC section 7103(j); MCL
eficiaries does not mean that the trust has no remaining          700.7103(j).
function. In order to be material, the purpose remaining to           25. “Support provision” means a provision in a trust
be performed must be of some significance:                        that provides the trustee shall distribute income or princi-
    “Material purposes are not readily to be inferred. A find-    pal or both for the health, education, support, or mainte-
ing of such a purpose generally requires some showing of          nance of a trust beneficiary, or language of similar import.
a particular concern or objective on the part of the settlor,     A provision in a trust that provides a trustee has discretion
such as concern with regard to the beneficiary’s manage-          whether to distribute income or principal or both for these
ment skills, judgment, or level of maturity. Thus, a court        purposes or to select from among a class of beneficiaries
may look for some circumstantial or other evidence indi-          to receive distributions pursuant to the trust provision is
cating that the trust arrangement represented to the settlor      not a support provision, but rather is a discretionary trust
more than a method of allocating the benefits of property         provision. MTC section 7103(k); MCL 700.7103(k).
among multiple beneficiaries, or a means of offering to               26. “Discretionary trust provision” means a provision
the beneficiaries (but not imposing on them) a particular         in a trust, regardless of whether the terms of the trust pro-
advantage. Sometimes, of course, the very nature or de-           vide a standard for the exercise of the trustee’s discretion
sign of a trust suggests its protective nature or some other      and regardless of whether the trust contains a spendthrift
material purpose.” Comment to UTC section 411 (citation           provision, that provides that the trustee has discretion, or
omitted).                                                         words of similar import, to determine 1 or more of the fol-
    22. Sec. 7109. (1) Notice to a person under this article      lowing:
[VII] or the sending of a document to a person under this             (i) Whether to distribute to or for the benefit of an indi-
article shall be accomplished in a manner reasonably suit-        vidual or a class of beneficiaries the income or principal or
able under the circumstances and likely to result in receipt      both of the trust.
of the notice or document. Permissible methods of notice              (ii) The amount, if any, of the income or principal or
or for sending a document include first-class mail, person-       both of the trust to distribute to or for the benefit of an indi-
al delivery, delivery to the person’s last known place of         vidual or a class of beneficiaries.
residence or place of business, or a properly directed and            (iii) Who, if any, among a class of beneficiaries will re-
identified facsimile or electronic message.                       ceive income or principal or both of the trust.
    (2) Notice otherwise required under this article [VII] or a       (iv) Whether the distribution of trust property is from
document otherwise required to be sent under this article         income or principal or both of the trust.
need not be provided to a person whose identity or loca-              (v) When to pay income or principal, except that a
tion is unknown to and not reasonably ascertainable by            power to determine when to distribute income or principal
the trustee.                                                      within or with respect to a calendar or taxable year of the
    (3) Notice under this article or the sending of a docu-       trust is not a discretionary trust provision if the distribution
ment under this article may be waived in writing by the           must be made. MTC section 7103(d); MCL 700.7103(d).
person to be notified or sent the document.                           27. See, Douglas G. Chalgian, “Disability Planning
    23. “Under the ‘completed transaction’ rule which is ad-      in the Shadow of the MTC,” 49th Annual Probate & Es-
hered to by the federal courts, once a tax event occurs           tate Planning Institute (ICLE, Ann Arbor, MI 2009), which
that gives the government a right to tax revenue, a later         discusses the impact of Part 5 of the MTC on disability
state court reformation of a trust that would change the          planning, drafting special needs trusts, spendthrift trusts,
tax result will be ignored even though the reformation pro-       support trusts, discretionary trusts, etc. and the rights of a
ceeding is in strict accordance with state law. Each statu-       beneficiary’s creditors under such trusts. (“Chalgian.”) Mr.
tory qualified reformation is an exception to the completed       Chalgian served as a member of the MTC Drafting Com-
transaction rule that is intended to permit modifications to      mittee.
particular trusts that will have retroactive tax effects. Con-        28. See, Sebastian V. Grassi, Jr., “Estate Planning for a
versely, if a tax event has not yet occurred, the Service         Michigan Family with a Special Needs Child,” 26 Michigan
will honor the prospective tax effects of a reformed trust if     Probate & Estate Planning Journal 11 (Summer 2007).
the reformation is binding on all interested parties—even if      See also, Chalgian, supra.
the reformation is contrary to state law [Rev. Rul. 73-142,           29. “Trust protector” means a person or committee of
1973-1 C.B. 405].” Barry F. Spivey “Completed Transac-            persons appointed pursuant to the terms of the trust who
tions, Qualified Reformation and Bosch: When Does the             has the power to direct certain actions with respect to the
IRS Care about State Law of Trust Reformation?,” 26 AC-           trust. Trust protector does not include either of the follow-
TEC Notes 345 (2001).                                             ing: (i) The settlor of a trust. (ii) The holder of a power
    24. “Spendthrift provision” means a term of a trust           of appointment. MTC section 7103(n); MCL 700.7103(n).
that restrains either the voluntary or involuntary transfer       See also, Lankfer, supra.

 
Winter 2009                                                                        MiChigan Probate & estate Planning


    30. The grantor trust powers that can be held by a                   (i) In relation to a trust, a person that is a trust benefi-
trust protector in a non-fiduciary capacity are described           ciary as defined in section 7103.
in IRC section 675(4) and deal with: (i) the power to vote               (ii) In relation to a charitable trust, a person that is en-
or direct the voting of stock or other securities of a corpo-       titled to enforce the trust.
ration in which the holdings of the grantor and the trust                (iii) In relation to a beneficiary of a beneficiary desig-
are significant from the viewpoint of voting control; (ii) the      nation, a person that is a beneficiary of an insurance or
power to control the investment of the trust funds either           annuity policy, of an account with POD designation, of a
by directing investments or reinvestments, or by vetoing            security registered in beneficiary form (TOD), of a pension,
proposed investments or reinvestments, to the extent that           profit-sharing, retirement, or similar benefit plan, or of an-
the trust funds consist of stocks or securities of corpora-         other nonprobate transfer at death.
tions in which the holdings of the grantor and the trust are             (iv) In relation to a beneficiary designated in a govern-
significant from the viewpoint of voting control; or (iii) the      ing instrument, a person that is a grantee of a deed, de-
power to reacquire the trust corpus by substituting other           visee, trust beneficiary, beneficiary of a beneficiary des-
property of an equivalent value. See, Rev. Rul. 2008-22,            ignation, donee, appointee, taker in default of a power of
2008-16 I.R.B. 796 (April 17, 2008) concerning the power            appointment, or person in whose favor a power of attor-
to reacquire trust corpus.                                          ney or power held in an individual, fiduciary, or represen-
    Practice Point: A commonly used power to create                 tative capacity is exercised. EPIC section 1103(d); MCL
grantor trust status (in certain irrevocable trusts) is for a       700.1103(d).
trust protector or an independent trustee (as defined in                 33. “Distributee” means a person that receives a de-
IRC section 672(c)) to have the power to add charitable             cedent’s property from the decedent’s personal represen-
beneficiaries without the approval or consent of an ad-             tative or trust property from the trustee other than as a
verse party (as that term is defined in IRC section 672(a)).        creditor or purchaser. A trustee of a trust created by will
IRC section 674(c). This power can be held in a fiduciary           is a distributee only to the extent that distributed property
capacity by a trust protector or an independent trustee,            or an increment of the distributed property remains in the
however, some commentators are of the opinion that the              trustee’s hands. A beneficiary of a trust created by will to
person holding the power to add or remove charitable ben-           whom the trustee distributes property received from a per-
eficiaries under IRC section 674(c) should hold that power          sonal representative is a distributee of the personal repre-
in a non-fiduciary capacity. See, ¶301.1[B] of Howard M.            sentative. For the purposes of this subdivision, “trustee of
Zaritsky, “ Open Issues and Close Calls - Using Grantor             a trust created by will” includes a trustee to whom property
Trusts in Modern Estate Planning,” 43 Heckerling Institute          is transferred by will to the extent of the devised property.
on Estate Planning (Matthew Bender/Lexis-Nexis, New-                EPIC section 1103(o); MCL 700.1103(o).
ark, NJ 2009).                                                           34. (1) Subject to subsection (2), a person has knowl-
    31. “A trustee’s discretionary power with respect to trust      edge of a fact if 1 or more of the following apply:
benefits is to be distinguished from a [trustee’s] power of              (a) The person has actual knowledge of it.
appointment. The latter is not subject to fiduciary obliga-              (b) The person has received a notice or notification of
tions and may be exercised arbitrarily within the scope of          it.
the power.” Restatement of The Law Third - Trusts, section               (c) From all the facts and circumstances known to the
50 (comment a).                                                     person at the time in question, the person has reason to
    “A power of appointment is a power that enables the             know it.
donee of the power [i.e., the power holder], acting in a                 (2) An organization that conducts activities through
non-fiduciary capacity, to designate recipients of beneficial       employees has notice or knowledge of a fact involving a
ownership interests in the appointive property.” Restate-           trust only from the time the information was received by
ment of The Law Third Property (Wills and Other Donative            an employee having responsibility to act for the trust or
Transfers), section 17.1 (Tentative Draft No.5, March 27,           from the time the information would have been brought to
2006). (Emphasis added.) See also, Comment g of sec-                the employee’s attention if the organization had exercised
tion 17.1.                                                          reasonable diligence. An organization exercises reason-
    32. “Trust beneficiary” means a person to whom 1 or             able diligence if it maintains reasonable routines for com-
both of the following apply: (i) The person has a present or        municating significant information to the employee having
future beneficial interest in a trust, vested or contingent. (ii)   responsibility to act for the trust and there is reasonable
The person holds a power of appointment over trust prop-            compliance with the routines. Reasonable diligence does
erty in a capacity other than that of trustee. MTC 7103(l);         not require an employee of the organization to communi-
MCL 700.7103(l).                                                    cate information unless the communication is part of the
    “Beneficiary” includes, but is not limited to, the follow-      individual’s regular duties or the individual knows a matter
ing:                                                                involving the trust would be materially affected by the in-

                                                                                                                                
MiChigan Probate & estate Planning                                                                                 Winter 2009


formation. MTC section 7104; MCL 700.7104. (Emphasis              tration in this state.
added.)                                                               38. MTC Sec. 7111. (1) Except as otherwise provid-
    35. See generally, Charles A. Redd, “Modification of          ed in subsection (2), interested persons may enter into a
Duties and Liabilities of Trustees,” 29 ACTEC Journal 114         binding nonjudicial settlement agreement with respect to
(Fall 2003).                                                      any matter involving a trust.
    36. See, Lauren M. Underwood, “Probate Litigation in              (2) A nonjudicial settlement agreement is valid only to
the Shadow of the MTC,” 49th Annual Probate & Estate              the extent it does not violate a material purpose of the trust
Planning Institute (ICLE, Ann Arbor, MI 2009).                    and includes terms and conditions that could be properly
    37. MTC Sec. 7209. (1) The trustee of a trust that has        approved by the court under this article or other applicable
its principal place of administration in this state may reg-      law. A nonjudicial settlement agreement shall not be used
ister the trust in the court at the place designated in the       to accomplish the termination or modification of the trust.
terms of the trust or, if none is designated, then at the prin-       (3) Matters that may be resolved by a nonjudicial settle-
cipal place of administration. For purposes of this article,      ment agreement include any of the following:
the principal place of the trust’s administration is the trust-       (a) The interpretation or construction of the terms of
ee’s usual place of business where the records pertaining         the trust.
to the trust are kept or the trustee’s residence if the trustee       (b) The approval of a trustee’s report or accounting.
does not have such a place of business. For a corporate               (c) Direction to a trustee to perform or to refrain from
trustee, the usual place of business is the business loca-        performing a particular act or to grant to or to withhold from
tion of the primary trust officer for the trust.                  a trustee any power.
    (2) For cotrustees, if not designated in the terms of the         (d) The resignation or appointment of a trustee and the
trust, the principal place of administration is 1 of the fol-     determination of a trustee’s compensation.
lowing:                                                               (e) Transfer of a trust’s principal place of administra-
    (a) If there is only 1 corporate cotrustee, the corporate     tion.
trustee’s usual place of business.                                    (f) Liability of a trustee for an action relating to the
    (b) If there is only 1 professional fiduciary who is an       trust.
individual and no corporate trustee, the professional fidu-           (4) Any interested person or trustee may request the
ciary’s usual place of business or residence.                     court to approve or disapprove a nonjudicial settlement
    (c) If neither subdivision (a) nor (b) applies, the usual     agreement. On a determination that the representation as
place of business or residence of any of the cotrustees as        provided in part 3 was adequate, that the agreement does
agreed upon by them.                                              not violate a material purpose of the trust, and that the
    MTC Sec. 7210. (1) A trust is registered by the filing of     agreement contains terms and conditions the court could
a statement that states the trustee’s name and address            have properly approved, the court shall enter an order ap-
and in which the trustee acknowledges the trusteeship.            proving the agreement.
The statement shall indicate if the trust has been regis-             (5) As used in this section, “interested persons” means
tered elsewhere. The statement shall identify the trust in 1      persons whose consent would be required in order to
of the following manners:                                         achieve a binding settlement were the settlement to be
    (a) For a trust created by will, by the name of the testa-    approved by the court.
tor and the date and place of domiciliary probate.                    39. For additional background on the history of trusts,
    (b) For a written inter-vivos trust, by the name of each      see, Robert Whitman, “Resolution Procedures to Resolve
settlor and the original trustee and the date of the trust        Trust Beneficiary Complaints,” 39 Real Property, Probate
instrument and all amendments existing on the date of             and Trust Journal 829 (Winter 2005); and “The Origin of
registration.                                                     English Trust” in Section 8.37 of Charles E. Rounds, Jr.
    (c) For an oral trust, by information identifying the set-    and Charles E. Rounds, IIII, Loring A Trustee’s Handbook
tlor or other source of property and describing the trust’s       (2009 Edition) (Aspen Publishers, Inc., New York, NY,
time and manner of creation and the terms of the trust,           2009), (800) 638-8437, www.aspenpublishers.com (“Lor-
including the subject matter, beneficiaries, and time of per-     ing”). Loring is updated annually via a new edition (and not
formance.                                                         by pocket supplement), and costs approximately $200 per
    (2) The trust instrument is not required to be filed with     year/edition.
the court as part of the registration of a trust. If a trust is       40. MTC Sec. 8201. (1) Article VII shall be construed
registered elsewhere, registration in this state is ineffec-      and applied to promote its underlying purposes and poli-
tive until the earlier registration is released by order of the   cies.
court where that registration occurred or by an instrument            (2) The following are the underlying purposes and poli-
executed by the trustee and all qualified trust beneficia-        cies of article VII:
ries. The order or instrument shall be filed with the regis-          (a) To make more comprehensive and to clarify the law

 
Winter 2009                                                                    MiChigan Probate & estate Planning


governing trusts in this state.                                     Journal; Wealth Strategies Journal; Practical Tax
    (b) To permit the continued expansion and develop-              Strategies; The Practical Lawyer; The Practical
ment of trust practices through custom, usage, and agree-
ment of the parties.
                                                                    Tax Lawyer; and Tax Ideas. Sebastian is also a
    (c) To foster certainty in the law so that settlors of trusts   winner of the prestigious American Bar Associ-
will have confidence that their instructions will be carried        ation’s Probate & Property “Probate & Trust Ex-
out as expressed in the terms of the trust.                         cellence in Writing Award for Best Practical Use
                                                                    Article.” Sebastian is a frequent lecturer for the
                                                                    State Bar of Michigan’s Institute of Continuing
                                                                    Legal Education. He also serves on the Insti-
                                                                    tute’s Estate Planning Advisory Board, and has
                                                                    served on the Estate Planning Advisory Board
                                                                    of the American Law Institute - American Bar
                                                                    Association (“ALI-ABA”). Elsewhere, Sebastian
                                                                    has lectured at the Electronics Industry Manage-
                                                                    ment College, Beijing, Peoples Republic of Chi-
                                                                    na, at various ACTEC meetings, at various Pro-
                                                                    bate and Estate Planning Bar Associations, The
                                                                    Michigan Probate Registers Annual Conference,
                                                                    The Annual Great Plains Federal Tax Institute,
                   Sebastian V. Grassi, Jr. of
                                                                    The Annual Minnesota Probate and Trust Law
                   Grassi & Toering, PLC, located
                                                                    Section Conference, The Annual Notre Dame
                   in the Detroit suburb of Troy,
                                                                    Tax and Estate Planning Institute, The National
                   Michigan, is a member of the
                                                                    College of Probate Judges, the ALI-ABA, as well
                   Christian Legal Society, where
                                                                    as at the University of Michigan Law School. Se-
                   he served on its national board
                                                                    bastian is the author of three books on estate
                   of directors. Listed in The Best
                                                                    planning and tax matters: A Practical Guide to
                   Lawyers in America, and in
                                                                    Drafting Irrevocable Life Insurance Trusts (With
                   Michigan Super Lawyers, Se-
                                                                    Checklists and Sample Forms) - Second Edition,
bastian is a Fellow of the American College of
                                                                    A Practical Guide to Drafting Marital Deduction
Trust and Estate Counsel (“ACTEC”), and has
                                                                    Trusts (With Checklists and Sample Forms), and
served as a member of the Michigan Probate and
                                                                    A Practical Guide to Drafting Irrevocable Life
Estate Planning Council. Sebastian’s practice
                                                                    Insurance Trusts (With Checklists and Sample
emphasizes business law, business succession
                                                                    Forms). He is also the author of Understanding
planning, estate planning and probate, special
                                                                    Your Eternal Estate Plan.
tax counsel to trustees and executors concerning
complex tax issues, and related real estate mat-
ters. Sebastian has published over 95 articles on
business law, estate planning, and tax matters
in Probate & Property; ACTEC Journal; Estate
Planning; Journal of Practical Estate Planning;
The Journal of Taxation; The Journal of Taxa-
tion of Estates and Trusts; Michigan Bar Journal;
Michigan Probate & Estate Planning Journal;
Michigan Tax Lawyer; Probate Practice Report-
er; Tax Management Estates, Gifts and Trusts


                                                                                                                  
MiChigan Probate & estate Planning                                                            Winter 2009


      Tips for Drafting Revocable Trusts Under the New Michigan Trust Code
                                       By Marilyn A. Lankfer

                  Introduction                        settlor’s probable intention (Section 7412(2));
                                                      3) reform the terms of a trust, even if unambigu-
    The new Michigan Trust Code (MTC or Code)
                                                      ous, to conform the terms to the settlor’s inten-
was enacted into law on June 18, 2009, with an
                                                      tion if it is proved by clear and convincing evi-
effective date of April 1, 2010. Although the MTC
                                                      dence that both the settlor’s intent and the terms
was drafted to preserve long-standing Michigan
                                                      of the trust were affected by a mistake of fact or
trust law, there are a number of provisions in the
new code that will require practitioners to care-     law, whether in expression or inducement (Sec-
fully review their estate planning documents to       tion 7415); and 4) modify the terms of a trust to
determine whether changes need to be made.            achieve the settlor’s tax objectives provided it is
This outline is intended to highlight the more sig-   in a manner that is not contrary to the settlor’s
nificant code provisions affecting the drafting of    probable intention (Section 7416).
estate planning documents.                            Drafting Tip: State the Settlor’s Intention. The
                                                      court’s power to modify the administrative or dis-
               Mandatory Rules                        positive terms because of changed circumstanc-
   For the estate planning attorney, probably the     es, reform the terms because of mistake of fact
most important thing to know about the MTC is         or law, or modify the terms to achieve the set-
that it is a set of default rules. Documents may      tlor’s tax objectives is conditioned, in part, upon
be drafted to override all of the MTC provisions      determining the settlor’s stated purpose or inten-
except the mandatory provisions found in Sec-         tion. To assist the court in these determinations,
tion 7105. These mandatory provisions fall into       the drafter should expressly state where appro-
four general categories: 1) the powers retained       priate the purposes of the trust both in terms of
by the court; 2) the duties of a trustee and trust    its goals with regard to beneficiaries as well as
protector; 3) the rights of third-parties to a trust; its desired tax results.
and 4) the rights of beneficiaries. A number of The Power of the Court to Adjust a Trustee’s
these mandatory rules will be highlighted in this Compensation
article.1
                                                          Another mandatory rule which the estate
The Power of the Court to Modify or Termi-             planning attorney may want to address in the
nate a Trust                                           trust documents is the power of the court under
   One of the more important mandatory rules to Section 7708(2) to adjust a trustee’s compensa-
estate planning attorneys is the power of the court tion specified in the terms of the trust that is un-
to modify or terminate a trust under Part Four of reasonably low or high. (Section 7708(2)). If the
the Code. A court may 1) modify the administra- terms of a trust specify the trustee’s compensa-
tive terms of a trust if continuation on its existing tion, the trustee is entitled to be compensated as
terms would be impracticable or wasteful or im- specified, but the court may allow more or less
pair the trust’s administration (Section 7412(1)); compensation if (1) the duties of the trustee are
2) modify the administrative or dispositive terms substantially different from those contemplated
of a trust or terminate the trust if, because of cir- when the trust was created or (2) the compensa-
cumstances not anticipated by the settlor, modifi- tion specified by the terms of the trust would be
cation or termination will further the settlor’s stat- unreasonably low or high.
ed purpose or, if there is no stated purpose, the Drafting Tip: Explain Why the Compensa-

 0
Winter 2009                                                        MiChigan Probate & estate Planning


tion is Reasonable. The court has the power to         to the extent of the powers, duties, and discre-
modify compensation if it is unreasonably low or       tions granted to him or her under the terms of the
high. If the compensation specified in the trust is    trust; (2) In exercising or refraining from exercis-
on the high side, explain why it is justified. The     ing any power, duty, or discretion, the trust pro-
court can then take this into consideration when       tector must act in good faith and in accordance
reviewing the compensation and may be influ-           with the terms and purposes of the trust and the
enced by the settlor’s explanation.                    interests of the beneficiaries; and (3)The trust
                                                       protector is liable for any loss that results from
Obligations of a Trust Protector                       the breach of his or her fiduciary duties.
    Section 7809(1), another mandatory rule, im-       Drafting Tip: Clearly Define the Trust Protec-
poses obligations on a trust protector. Although       tor’s Duties. If the trust protector is given the
trust protectors have been used frequently by          power to remove and replace the trustee, you
estate planning attorneys prior to the enactment       must clearly state whether or not the trust pro-
of the MTC, there has been no existing Michigan        tector is expected to monitor the actions of the
law defining or imposing duties on them. The           trustee. A 2009 decision of the Missouri Court
Code now does both. A trust protector is defined       of Appeals held that where a trust protector is
as “a person or committee of persons appoint-          given such a power and the trust is silent as to
ed pursuant to the terms of the trust who has          whether the trust protector has a duty to monitor
the power to direct certain actions with respect       the trustee, it is a factual question of determining
to the trust.” (Section 7103(n)). Trust Protector      the grantor’s intent.3
does not include either a settlor or a holder of a     Drafting Tip: Consider Giving the Power to
power of appointment.                                  Appoint a Trust Protector. Consider giving the
Drafting Tips: Beware of Adverse Tax Con-              power to appoint a trust protector when certain
sequences. The definition of a trust protector         decisions need to be made or upon the happen-
is very broad. It includes any person or commit-       ing of certain events so the trust protector only
tee who has any of the following powers (among         serves on an as needed basis. This power to
many other possible powers): to change the dis-        appoint could be given to the trustee, a majority
positive provisions in the trust, to direct invest-    of the current income beneficiaries, or an inde-
ment decisions, to remove and replace the trust-       pendent third party. Again, be careful of adverse
ee, to approve or veto discretionary distributions     tax consequences of giving this power to anyone
to beneficiaries, to turn “grantor trust” provisions   who is not an independent third party.
on or off, to add or remove beneficiaries, and to      Drafting Tip: Consider Including Exculpatory
add, remove, or change powers of appointment.          Provisions for the Trust Protector. As men-
Anyone can serve as a trust protector. In order        tioned earlier, Section 7809(8) permits a trust to
to avoid adverse tax consequences to either the        include exculpatory provisions for a trust protec-
settlor or the trust protector, it is safer to name    tor provided that (1) a trust protector cannot be
an independent third party to serve as the trust       relieved of liability for acts committed in bad faith
protector. For an excellent discussion of the in-      or with reckless indifference to the purposes of
come and estate tax consequences of granting           the trust or the interests of the trust beneficiaries
certain powers to a trust protector, see the ICLE      and (2) the provisions cannot be inserted in the
seminar outline by George F. Bearup, “It’s a Bird,     trust as a result of an abuse by the trust protec-
It’s a Plane, It’s Trust Protector! 2                  tor of a fiduciary or confidential relationship to
    A trust protector, other than a trust protector    the settlor.
who is a beneficiary of the trust, is subject to all      There is, however, an exception under Sec-
of the following duties: (1) Except as provided in     tion 7809(2) that permits a trust protector to act
Section 7809(2), the trust protector is a fiduciary    in a non-fiduciary capacity with regard to admin-

                                                                                                        
MiChigan Probate & estate Planning                                                                Winter 2009


istrative powers described in Section 675(4) of        and of the material facts necessary for them to
the Internal Revenue Code. These administra-           protect their interests. Upon the reasonable re-
tive powers must be exercised in a non-fiduciary       quest of any trust beneficiary, the trustee must
capacity in order to obtain “grantor trust” status.    promptly furnish to the beneficiary a copy of the
They include the following powers: (1) the power       terms of the trust that describe or affect the trust
to vote or direct the voting of stock or other se-     beneficiary’s interest and relevant information
curities of a corporation in which the holdings of     about the trust property.
the grantor and the trust are significant from the         The following two requirements apply only to a
viewpoint of voting control; (2) the power to con-     trustee who accepts a trusteeship, an irrevocable
trol the investment of the trust funds either by di-   trust created, or a revocable trust that becomes
recting investments or reinvestments, or by ve-        irrevocable on or after the effective date of the
toing proposed investments or reinvestments, to        Code, April 1, 2010: (1) Within 63 days after ac-
the extent that the trust funds consist of stocks      cepting a trusteeship, the trustee must notify the
or securities of corporations in which the hold-       qualified trust beneficiaries of the acceptance, of
ings of the grantor and the trust are significant      the court in which the trust is registered, if it is
from the viewpoint of voting control; and (3) the      registered, and of the trustee’s name, address,
power to reacquire the trust corpus by substitut-      and telephone number. (2) Within 63 days after
ing other property of an equivalent value.             the date the trustee acquires knowledge of the
Drafting Tip: Expressly State That These Are           creation of an irrevocable trust, or the date the
Non-Fiduciary Powers. The determination by             trustee acquires knowledge that a formerly revo-
the Internal Revenue Service of whether a power        cable trust has become irrevocable, whether by
is exercised in a fiduciary capacity is a facts and    the death of the settlor or otherwise, the trustee
circumstances test. To make it absolutely clear        must notify the qualified trust beneficiaries of the
that this is a non-fiduciary power, the trust docu-    trust’s existence, of the identity of the settlor or
ment should state that the power is not held in a      settlors, of the court in which the trust is regis-
fiduciary capacity and that it may be exercised        tered, if it is registered, and of the right to request
without the consent of the trustee. Note: Although     a copy of the terms of the trust that describe or
the Code permits a trust protector to act in a non-    affect the trust beneficiary’s interests.
fiduciary capacity with regard to Section 675(4)       Drafting Tip: Include the Notice Requirements
powers, the trust protector may not be relieved        in the Trust. For informational purposes, these
of the requirement that he or she exercise or          notice requirements should be spelled out in the
refrain from exercising any power, duty, or dis-       trust. Most trustees are not going to be aware
cretion in good faith and in accordance with the       of these requirements unless they are informed
terms and purposes of the trust and the interests      through the trust. Consider using the following
of the beneficiaries.                                  provision in the trust document: “After my death,
    Notice Requirements. An additional man-            any successor trustee shall, within 63 days after
datory rule is intended to preserve the notice         accepting the trusteeship, notify in writing the in-
requirements currently found in Section 7303           come and remainder beneficiaries of the trust’s
of EPIC. Section 7814(2)(a) to (c) requires the        existence, the identity of the settlor, of the court
Trustee to provide beneficiaries with the terms of     in which the trust is registered, if any, and of the
the trust and information about the trust’s prop-      right to request a copy of the terms of the trust
erty, and to notify qualified trust beneficiaries of   that describe or affect the trust beneficiary’s in-
an irrevocable trust of the existence of the trust     terests.” Note: Section 7814(2)(d) requires a
and the identity of the trustee. The Trustee must      trustee to notify the qualified trust beneficiaries
keep the qualified trust beneficiaries4 reasonably     in advance of any change in the method or rate
informed about the administration of the trust         of the trustee’s compensation. This requirement

 
Winter 2009                                                           MiChigan Probate & estate Planning


may be modified in the trust document.                    Provisions. Current exculpatory provisions
   In addition to the above mandatory notice re-          should be modified, if necessary, to conform to
quirements, the court has the power to order the          the requirements of Sections 7809(8) and 7908.
trustee to provide statements of account and              Drafting Tip: Relief for Non-diversification. A
other information pursuant to Section 7814(4). If         trust may relieve a trustee of liability for breach
the terms of a trust direct that accounts and in-         of trust for the acquisition or retention of a par-
formation be provided to less than all qualified          ticular asset or asset class or failure to diversify
trust beneficiaries, the court may direct the trust-      investments. See Section 7908(2).
ee to provide statements of account and other
information to persons excluded under the terms           Certificates of Trust
of the trust to the extent and in the manner the
                                                              Prior to the enactment of the MTC, Michigan
court directs.
                                                          law described Certificates of Trust Existence
Drafting Tip: Explain Why Certain Beneficia-
                                                          and Authority only in the context of real estate
ries are Excluded. It is a fairly common practice
to only require accountings to be given to cur-           transactions. The purpose of Section 7913 is to
rent income beneficiaries (particularly when it is        clearly define the minimal requirements of a cer-
a surviving spouse) and not to include all quali-         tificate that third parties can rely on. Instead of
fied trust beneficiaries (e. g., beneficiaries who        furnishing a copy of the trust to a third party, the
would receive the trust assets upon the death of          trustee may furnish a certificate of trust provided
the income beneficiary). Because the court has            it contains all of the following:
the discretionary power to direct the trustee to             •	 The name of the trust and the date of the
provide statements of account and other infor-                  trust instrument and any amendments.
mation to the other qualified trust beneficiaries, it        •	 The name and address of the currently
would be helpful to the court to explain why the                acting trustee.
settlor does not want this information to be given           •	 The powers of the trustee relating to the
to the excluded beneficiaries.                                  purposes for which the certificate is be-
                                                                ing offered.
Hold Harmless Provisions for Trustees and
                                                             •	 The revocability or irrevocability of the
Trust Protectors
                                                                trust and the identity of any person hold-
   The hold harmless provisions for trustees and                ing a power to revoke the trust.
trust protectors are also mandatory rules. Sec-              •	 The authority of co-trustees to sign or
tion 7809(8) provides that the trust may relieve                otherwise authenticate and whether all
the trust protector from liability for breach of his            or less than all are required in order to
or her fiduciary duties provided that the trust pro-            exercise powers of the trustee.
tector may not be relieved of liability if: (1) the          •	 A statement that the trust has not been
trust protector has committed acts in bad faith                 revoked, modified, or amended in any
or with reckless indifference to the purposes of                manner that would cause the represen-
the trust or the interests of the trust beneficiaries,          tations contained in the certificate of trust
or (2) the exculpatory term was inserted as the                 to be incorrect.
result of an abuse by the trust protector of a fi-            The certificate does not, however, need to
duciary or confidential relationship to the settlor.      contain the dispositive terms of the trust. The
Section 7908 also provides that the trust may re-         certificate may be signed or otherwise authen-
lieve the trustee of liability for breach of his or her   ticated by the settlor, any trustee, or an attor-
trust subject to the same conditions imposed on           ney for the settlor or trustee. This is a change
trust protectors in Section 7809(8).                      from the requirements for a real estate certificate
Drafting Tip: Review Current Exculpatory                  which did not permit an individual trustee to sign

                                                                                                          
MiChigan Probate & estate Planning                                                               Winter 2009


the certificate. The certificate must be in the form   ment may provide that waivers may be written or
of an affidavit.                                       oral, or the trust document may omit this provi-
Drafting Tip: A Sample Certificate of Trust is         sion altogether. The better practice may be to re-
attached as Exhibit A.                                 quire in the document that waivers be in writing
                                                       in order to provide documentation of the waiver.
                  Default Rules
                                                       Rules of Construction
   Practitioners not only need to be aware of the
mandatory MTC rules but also the default rules            The rules of construction found in Sec-
which control if not overridden in the trust docu-     tions 2605 to 2608 of EPIC which govern the in-
ment. They may wish to incorporate some of the         terpretation of and disposition of property by will
default provisions in their documents for informa-     also apply as appropriate to the interpretation
tional purposes, omit them because they aren’t         of the terms of a trust and the disposition of the
necessary, or customize them to conform with           trust property. These rules include the provisions
the client’s and/or the practitioner’s preferences.    regarding an increase in securities, accessions,
The following default rules should be carefully        nonademption of specific devises, nonexonera-
reviewed.                                              tion, and ademption by satisfaction. Any or all of
                                                       these rules may be modified in the trust docu-
Methods and Waiver of Notice
                                                       ment.
    The practitioner should review the require-
                                                       Penalty Clauses
ments for notice and sending of documents in
Section 7109 to determine whether his or her               Provisions in trusts that penalize an interested
documents should be revised to include or over-        person for contesting the trust or instituting an-
ride these default provisions. The default provi-      other proceeding relating to the trust will not be
sions require notice and the sending of a docu-        given effect if probable cause exists for instituting
ment to be accomplished in a manner reason-            such a proceeding. Under EPIC Sections 2518
ably suitable under the circumstances and like-        and 3905, a penalty provision in a will is not en-
ly to result in receipt of the notice or document.     forceable if there is probable cause for bringing
The following methods are specifically permitted:      the contest or some other proceeding relating to
first-class mail, personal delivery, delivery to the   the estate. The language in Section 7113 of the
person’s last known place of residence or place        MTC tracks the language in EPIC.
of business, or a properly directed and identified     Drafting Tip: Explain Why the Penalty Is In-
facsimile or electronic message. Notice or the         cluded. If the penalty clause applies to a particu-
sending of a document may be waived in writing         lar individual (such as a difficult child), explain
by the recipient.                                      why the settlor is concerned about that individu-
Drafting Tip: Obtain Recipient’s Consent to E-         al. The reasoning may make it easier for a court
mail. Because of the current problems of “spam”        to determine whether there is probable cause.
e-mail and the fact that notice by e-mail may get
                                                       Modification or Termination of Noncharitable
“caught” in a spam filter, drafters may want to
                                                       Irrevocable Trust by Consent
consider requiring in their trust documents that
if notice is to be sent by e-mail, the Trustee first      The current law in Michigan appears to pro-
obtain the consent of the e-mail recipient to de-      vide that a settlor and the beneficiaries may con-
livery by e-mail and approval by the recipient of      sent to the termination of a trust. See Hein v
the correct e-mail address.                            Hein, 214 Mich App 356, 543 NW2d 19 (1995).         


Drafting Tip: Get Waiver of Notice in Writing.         Because of the concerns about possible adverse
Since this is a default provision, the trust docu-     estate tax consequences if the settlor of a trust

 
Winter 2009                                                         MiChigan Probate & estate Planning


consents to the termination or modification of an       income beneficiaries (or others) rather than as
irrevocable trust, Hein v Hein was not incorpo-         agreed by the qualified trust beneficiaries.
rated into the MTC. The drafters of the MTC did         Drafting Tip: Include Termination Provisions
not intend, however, that this be viewed as an          in the Trust. See sample termination provisions
attempt to reject or overturn the result of Hein v      in attached Exhibit B.
Hein.
                                                        Termination of Trust Under $0,000
    The default provisions of Section 7411 per-
mit a noncharitable irrevocable trust to be modi-           Section 7414(1) permits a trustee to termi-
fied or terminated in any of the following ways:        nate a trust consisting of trust property with a to-
(1) By the court upon the consent of the trustee        tal value of less than $50,000 (adjusted for in-
and the qualified trust beneficiaries, if the court     flation) if the Trustee determines that the value
concludes that the modification or termination of       of the trust does not justify the cost of adminis-
the trust is consistent with the material purpos-       tration. (Section 7414(1)). Upon termination, the
es of the trust or that continuance of the trust is     trustee must distribute the trust property as pro-
not necessary to achieve any material purpose           vided in the terms of the trust. If there is no di-
of the trust; (2) Upon the consent of the quali-        rection in the trust, the property is to be distrib-
fied trust beneficiaries and a trust protector who      uted to the current income beneficiaries of the
is given the power under the terms of the trust to      trust, if any, otherwise as directed by the court.
grant, veto, or withhold approval of termination        Currently Michigan law requires a judicial termi-
or modification of the trust; and (3) By a trustee      nation proceeding if the trust does not include a
or trust protector to whom a power to direct the        power to terminate.
termination or modification of the trust has been       Drafting Tip: Insert Dollar Amount and Recipi-
given by the terms of the trust.                        ents Upon Termination. The practitioner should
    Notice of any proceeding to terminate or mod-       carefully consider whether this is an appropriate
ify a trust must be given to the settlor, or the set-   dollar amount for terminating the trust and wheth-
tlor’s representative if the petitioner has a rea-      er upon termination, the trust property should be
sonable basis to believe the settlor is an inca-        distributed to the current income beneficiaries.
pacitated individual, the trust protector, if any,      For example, if the trust is for the benefit of an
the trustee, and any other person named in the          incapacitated person, a minor, or a person with a
terms of the trust to receive notice of such a pro-     substance abuse drug problem, it would not be
ceeding. Upon termination of the trust, the trust-      appropriate to distribute any amount directly to
ee is to distribute the trust property as agreed by     that person upon termination.
the qualified trust beneficiaries.
                                                        Office of Trustee
Drafting Tips: Clearly Describe in the Docu-
ment Any Rights to Modify or Terminate the                 All of the default provisions of Part 7 govern-
Trust. Consider giving the trust protector (with        ing the office of trustee should be carefully com-
the consent of the qualified trust beneficiaries)       pared to the provisions in the drafter’s trust doc-
the power to grant, veto, or withhold approval of       ument to determine whether they should be in-
the termination or modification of the trust. Con-      corporated into the document or overridden.
sider giving a trustee or trust protector the right     The trust document controls how a person ac-
to modify or terminate the trust under certain cir-     cepts trusteeship and whether that method is ex-
cumstances. Carefully consider the tax conse-           clusive. If no method is spelled out in the trust or
quences of granting someone these rights. You           the method is not made exclusive, then a person
may want to provide that upon termination, the          becomes trustee by accepting delivery of the
trustee is to distribute the trust property to the      trust property, exercising powers of performing

                                                                                                        
MiChigan Probate & estate Planning                                                               Winter 2009


duties as trustee, or otherwise indicating accep-      provides that a trustee is not liable for the act or
tance. (Section 7701).                                 omission of a co-trustee if all of the following ap-
    Section 7703 sets forth the default rules for      ply: (1) the trustee is not unavailable to perform;
Co-trustees, all of which may be modified in the       (2) the trustee is aware of but does not join in the
trust document. Co-trustees must act by majority       act or omission; (3) the trustee dissents in writ-
decision. If a vacancy occurs in a co-trusteeship,     ing to each co-trustee at or before the time of the
the remaining co-trustee or co-trustees may act        act or omission. A trustee who is not aware of an
for the trust. A co-trustee must participate in any    act by a co-trustee is not liable for that act unless
trustee act unless the co-trustee is unavailable       the trustee should have known and the trustee
because of absence, illness, disqualification un-      would have had an affirmative duty to prevent
der other law, or other temporary incapacity or        the action. A dissenting trustee who joins in an
the co-trustee has delegated the performance of        action at the direction of the majority and who
the function to another trustee.                       notifies any co-trustee in writing of the dissent at
    If prompt action is necessary to avoid injury      or before the time of the act is not liable.
to the trust property, the remaining co-trustee or     Drafting Tip: Spell Out the Rules for Co-
a majority of the remaining co-trustees may act        Trustees. Because it is a default rule, the trust
if either of the following applies: (1) a co-trustee   may provide for unanimous (or other) decisions
is unavailable to perform duties because of ab-        by the co-trustees. If there are two trustees and
sence, illness, disqualification under other law,      they disagree, do you want to give a third party
or other temporary incapacity; (2) a co-trustee        (a trust protector) the power to decide? Carefully
who is available fails or refuses to participate in    describe how vacancies are filled. Describe what
the administration of the trust following notice       happens if a co-trustee is unable to act. Does
from the remaining co-trustee or co-trustees.          the successor co-trustee then qualify to act? In-
    By agreement of the trustees, a trustee may        dicate when and how a co-trustee may delegate
delegate to a co-trustee one or both of the fol-       to the other trustee(s). Does there need to be
lowing: (1) any power that is permitted to be del-     agreement among the co-trustees? Does it need
egated pursuant to Section 7817 (v) to an agent        to be in writing? (Best practices would say put
who is not a trustee and (2) any power that can        it in writing.) Describe any limitations on which
only be performed by a trustee, if notice of the       powers may be delegated. Indicate whether no-
delegation is provided to the qualified trust ben-     tice needs to be given to qualified beneficiaries.
eficiaries within 28 days. Unless a delegation is      Describe how a delegation may be revoked.
irrevocable, a trustee may revoke the delega-          Does it need to be in writing? Who gets notice?
tion. The revocation must be in writing and must       If the default provision for voting securities is
be given to all of the remaining co-trustees (and      acceptable, describe it in your trust document.
qualified trust beneficiaries if they were previ-      Otherwise, carefully set out how the co-trustees
ously given notice.)                                   should vote securities. Determine whether you
    This section also provides for voting of secu-     want to include provisions describing the duty of
rities by co-trustees. If only one trustee votes,      a trustee when a co-trustee breaches the trust.
that vote binds all the trustees. If more than one
                                                       Vacancy in Trusteeship; Appointment of
votes, then an act of the majority controls. If more
                                                       Successor
than one votes but the vote is evenly split, each
faction is entitled to vote the securities propor-        Section 7704 defines when a vacancy occurs
tionately.                                             and provides for a successor. If a vacancy oc-
    What are the duties of a trustee when anoth-       curs and one or more co-trustees remain in of-
er co-trustee breaches the trust? Section 7703         fice, the vacancy need not be filled. If a vacancy

 
Winter 2009                                                       MiChigan Probate & estate Planning


occurs in the trusteeship of a noncharitable trust,   agent of the settlor under a durable power of at-
it is filled in the following order of priority: (1) in
                                                      torney may also enforce the charitable trust if the
the manner designated by the terms of the trust;      settlor has expressly given the agent the right to
(2) by a person appointed by the court. If a va-      enforce the trust under a durable power of attor-
cancy occurs in the trusteeship of a charitable       ney.
trust, the vacancy is filled as follows: (1) in the      Section 7602 provides the default rule that
manner designated by the terms of the trust; (2)      trusts are revocable and amendable unless
by a person selected by the charitable beneficia-     the trust states otherwise. In addition, this sec-
ries if the attorney general concurs; (3) by a per-   tion describes how revocation or amendment
son appointed by the court. Whether or not a va-      occurs, and the power others may have to re-
cancy exists or is required to be filled, the court   voke or amend the trust. An agent under a dura-
may appoint an additional trustee or special fidu-    ble power of attorney may exercise the settlor’s
ciary upon the showing of good cause.                 powers with respect to revocation, amendment,
Drafting Tip: Expressly State What Hap-               or distribution of trust property only to the extent
pens When There Is a Vacancy. If there are            expressly authorized by the terms of the trust or
co-trustees, make it clear whether the remain-        the power of attorney. Section 7602(5)).
ing trustee(s) acts alone or with a successor co-     Drafting Tip: Most clients would want their
trustee. Give enough guidance regarding suc-          agent under a durable power of attorney to be
cessor trustees so that you don’t have a vacancy      able to represent them in matters described in
that needs to be filled by a stranger or the court.   Part 3 and to enforce a Charitable Trust under
Build flexibility into the process. Perhaps use a     Section 7405(3). Query though whether a set-
Trust Protector to fill a vacancy if one occurs.      tlor would want his or her agent to be able to
                                                      revoke or amend his or her revocable trust? To
Resignation of Trustee
                                                      the extent the settlor wants an agent to exercise
    A trustee may resign (1) upon at least 28 days any of the above powers, they must be expressly
notice to the qualified trust beneficiaries, the stated in the durable power of attorney.
holders of powers of appointment, and all co-
                                                                              Wills
trustees; or (2) with the approval of the court.
(Section 7705).
                                                      Capacity to Make a Will
           Durable Powers of attorney
                                                         Pursuant to Revised Section 2501 of EPIC,
    Part 3 of the MTC covers representation of an individual 18 years of age or older who has
beneficiaries in matters such as the receipt of “sufficient mental capacity” may make a will.
notice and consent. An agent under a durable EPIC previously required that an individual be
power of attorney may represent and bind the “of sound mind.” In order for an individual to have
principal provided (1) there is no conflict of inter- sufficient mental capacity, he or she must:
est between the agent and the principal with re-        •	 Have the ability to understand that he or
spect to the particular question or dispute; (2) the       she is providing for the disposition of his
agent has been given the authority in the durable          or her property after death.
power of attorney to act with respect to the trust,     •	 Have the ability to know the nature and
and (3) no conservator, plenary guardian, or par-          extent of his or her property.
tial guardian has been appointed for the princi-        •	 Know the natural objects of his or her
pal. (Section 7303(b)).                                    bounty.
    Section 7405(3) permits a settlor to maintain       •	 Have the ability to understand in a rea-
a proceeding to enforce a charitable trust. An             sonable manner the general nature and

                                                                                                      
MiChigan Probate & estate Planning                                                                         Winter 2009


     effect of his or her act in signing the will.        Planning Documents ICLE seminar, January 29, 2009.
This last requirement is new to EPIC. The stan-           Note: Mr. Bearup’s outline was prepared before the MTC
                                                          was finalized to require that Trust Protectors be fiduciaries
dard of capacity to make a will and to make a             except for exercising administrative powers under Internal
trust are now the same.6                                  Revenue Code Section 675(4).
Drafting Tip: Revise Language Re Capacity                     3. Robert T. McLean Irrevocable Trust v. Patrick Davis,
in Wills. The phrase “sufficient mental capacity”         P. C., et al, 2009 WL 162481 (Mo.App.S.D.) decided Jan.
                                                          26, 2009, Rehearing Denied March 2, 2009. Missouri is a
should be substituted for the phrase “of sound
                                                          Uniform Trust Code state, and its trust code does not im-
mind”. Section 2504 sets forth sample language            pose specific duties on a Trust Protector. The court noted
for self-proving a will or codicil. See Exhibit C         that the trust designated the Trust Protector as a fiduciary,
attached.                                                 and the Trust specifically stated that “the Trust Protector
                                                          shall not be liable for any action taken in good faith.” The
                    Conclusion                            concurring opinion noted that absent the trust protector
                                                          doing something in bad faith, he was not liable for his con-
    Many practitioners were around when EPIC              duct.
was enacted, and they appreciate how over-                    4. “Qualified Trust Beneficiary” includes current income
whelming it can be to learn a major new law that          beneficiaries and first tier contingent beneficiaries. See
affects their practice. On the other hand, most           Section 7103(g).
                                                              5. Hein v Hein, 214 Mich App 356, 359 (1995): “…we
gradually became familiar with the statute, and
                                                          hold that a court may terminate an irrevocable spendthrift
it became part of their every day practice. The           trust without the consent of the trustee where the settlor
good news with regard to the MTC is that many             and all the beneficiaries consent to its termination.”
of the provisions incorporate existing Michigan               6. MTC Section 7601: The capacity required to create,
law.                                                      amend, revoke, or add property to a revocable trust, or to
                                                          direct the actions of the trustee of a revocable trust, is the
    Estate planners may want to begin by review-
                                                          same as that required to make a will.
ing their trust documents to make sure they com-
ply with the mandatory provisions of the MTC
and then include or modify the default provisions
as appropriate. They should also consider using
Trust Protectors in special situations; carefully
delineating their powers and duties.
    In addition, Certificates of Trust, Self-Proving                               Marilyn A. Lankfer of Varnum
Wills, and Durable Powers of Attorney should be                                    LLP, Grand Rapids, practices
modified to comply with the new requirements of                                    in the areas of estate planning,
the MTC.                                                                           trust administration, and char-
                                                                                   itable giving. She is a mem-
                                                                                   ber of the Proabate and Es-
                                                                                   tate Planning Section Council
                                                                                   of the State Bar of Michigan
                              Notes                                                and is an active participant
                                                                in the section’s Uniform Trust Code Committee.
                                                                Ms. Lankfer is a fellow of the American College
    1. For a more comprehensive discussion of the man-
                                                                of Trust and Estate Councel and a former officer
datory rules, see the author’s seminar outline “Drafting
Revocable Trusts in the Shadow of the MTC,” presented of the Western Michigan Estate Planning Coun-
at the 49th Annual Estate Planning and Probate Seminar, cil. Ms. Lankfer is a chapter co-author for Michi-
May/June 2009.                                                  gan Revocable Grantor Trusts (ICLE 2d ed), has
    2. It’s a Bird, It’s a Plane, It’s Trust Protector!, George written articles on probate and estate planning,
F. Bearup, presented at the 18th Annual Drafting Estate
                                                                and is a frequent lecturer at ICLE seminars.

 
Winter 2009                                                                 MiChigan Probate & estate Planning


                                                       Exhibit A
                          Sample Certificate of Trust Existence and Authority




                                   CERTIFICATE OF
                           TRUST EXISTENCE AND AUTHORITY


STATE OF MICHIGAN                )
                                 ) ss
COUNTY OF KENT                   )


        On September 8, 2008, Mary J. Apple, having been first duly sworn, says that:
                                                                                  1




. On February 22, 1995, I established the Mary J. Apple Trust. The Trust was amended and completely restated on
September 8, 2008.   2




. My husband, Mark A. Apple, and I are Co-Trustees. Either one of us may act independently of the other on behalf
                                                        3


of the Trust, including signing, authenticating, and exercising powers of the Trustee. My husband and I presently live at
                                                                                      4


333 Bridgewater Street, NW, Grand Rapids, Michigan 49504. When both of us have resigned, been removed, died, or
become disabled, the successor Co-Trustees are Paul Mason and Dirk Fisk.

. The ownership designation to be used on assets transferred to this Trust is:

        Mary J. Apple and Mark A. Apple, Trustees of the Mary J. Apple Trust dated February 22, 1995, as
        amended, and their successors.

. The beneficiary designation for assets and benefits payable to the Trust at my death is:

        The Trustees of the Mary J. Apple Trust dated February 22, 1995, as amended.

. The following provisions are found in the Trust Agreement and may be relied upon as a full statement of the matters
covered by those provisions by anyone dealing with me or with any Successor Trustees:
       ...

        .     Amendment and Revocation

        I may amend or revoke this Agreement at any time by signing a written document describing the
        amendment or declaring the revocation. Unless otherwise directed in the document, the effective date


                                                                                                                     
MiChigan Probate & estate Planning                                                                          Winter 2009


     of the amendment or revocation (the “Change Date”) is the date on which the document is signed.

              (a)     If I am not serving as Trustee, I absolve and hold harmless the Trustee for any action
              which is inconsistent with the amendment or revocation and which is taken after the Change
              Date but before the Trustee receives notice of the amendment or revocation.

              (b)     The Trustee’s duties and responsibilities may not be expanded and the Trustee’s com-
              pensation may not be reduced without the Trustee’s written consent. The Trustee’s consent
              shall be conclusively presumed if the Trustee does not provide me with a written objection
              within 30 days after receiving an amendment.

              (c)     When I die, the Trust shall become irrevocable.
     ...

     .     Common Law and Statutory Powers

     The Trustee shall have the following powers in addition to common law and statutory powers. All of the
     Trustee’s powers are to be liberally construed. Any limitations on the Trustee’s authority in this Article
     Eight shall apply regardless of existing common law and statutory powers.
     ...

     .     Sale

     The Trustee may dispose of any assets at a public or private sale, upon such terms and for such con-
     sideration as the Trustee, in its discretion, finds appropriate.

     .     Investments

     The Trustee may invest the Trust assets in any manner deemed appropriate by the Trustee, even if an
     investment (by reason of its character, amount, proportion to the total trust estate or otherwise) would
     not otherwise be considered appropriate for a trustee.
     ...

     . Mortgages

     The Trustee may sign, foreclose or release any mortgages or security agreements.
     ...

     . Borrowing

     The Trustee may borrow money, execute promissory notes, and deal in margin accounts with a securi-
     ties broker; guarantee any of my husband’s or my personal debt obligations and any debt obligations of
     any business entity in which my husband or I have an ownership interest; and secure any obligations
     and guaranties by mortgage, pledge or assignment of any of the Trust’s assets.


0
Winter 2009                                                                   MiChigan Probate & estate Planning


        ...

        . Michigan Law to Govern

        This Trust Agreement is governed by and shall be interpreted according to the laws of the State of
        Michigan.

. The names and present addresses of all of the successor Trustees named in the Trust Agreement are:

        Name                              Address

        Paul Mason                        111 Place
                                          City, MI 49501

        Dirk Fisk                         222 Street
                                          City, MI 49501

In confirmation and affirmation of the foregoing, I certify that the Trust Agreement remains in full force and effect and
that it has not been revoked, modified, or amended in any manner that would cause the representations contained in
this Certificate to be incorrect.
                               7




Reproductions of this executed original (with reproduced signatures) shall be deemed to be original counterparts of this
Certificate.


                                                            Mary J. Apple, Settlor and Co-Trustee   8




Subscribed and sworn before me in Kent County, Michigan, on September 8, 2008, by Mary J. Apple.



                                                           Joe N. Public
                                                           Notary Public, Kent County, MI
                                                           My commission expires: January 2, 2012


This instrument drafted by:
Marilyn Lankfer
Varnum, Riddering, Schmidt & Howlett LLP
Bridgewater Place, PO Box 352
Grand Rapids, MI 49501-0352 - Telephone 616/336-6000




                                                                                                                        
MiChigan Probate & estate Planning                              Winter 2009


                           Notes

    1. Certificate in form of Affidavit.
    2. Name and date of Trust and amendments.
    3. Names and addresses of current Trustees.
    4. Authority of Co-Trustees to sign or otherwise authen-
ticate and whether all or less than all are required in order
to exercise powers of the Trustee.
    5. The revocability or irrevocability of the Trust and
the identity of any person holding a power to revoke the
Trust.
    6. The powers of the Trustee relating to the purposes
for which the Certificate is being offered.
    7. Statement that the Trust has not been revoked,
modified, or amended in any manner that would cause the
representations to be incorrect.
    8. Signature by settlor, any Trustee, or an attorney for
the settlor or Trustee.




 
Winter 2009                                                                   MiChigan Probate & estate Planning


                                                  Exhibit B
                                        Sample Termination Provisions



Termination of Trusts

Trusts created under this Agreement may be terminated under certain circumstances according to the following provi-
sions:

        (a)     Grounds for Termination. Any trust may be terminated without the consent of all parties:

                (i)     When the continued, separate existence of the trust is not necessary under the circumstances
                then existing for a significant transfer tax or income tax benefit, for asset management assistance for a
                current beneficiary, or for achieving any other significant trust purpose; or

                (ii)    When the principal at the end of any accounting period is reduced to a sum which would be
                impractical to continue in trust and it is reasonably certain that there will be no further additions of any
                sizeable amount to the trust.


        (b)     Who May Terminate a Trust. The parties who may terminate a trust pursuant to this paragraph

        are:



                (i)      A Professional Trustee, acting in its discretion and in accordance with this Article;



                (ii)     A court of competent jurisdiction, acting on the petition of a Trustee or a beneficiary, but only
                following notice to the Trustee, the then income beneficiaries who are competent adults, and the

                competent adult members of the class of contingent remainder beneficiaries.



                (iii)    In the case of the Family Trust established for my wife’s benefit, any Trustee may terminate the

                Trust if the Trustee first obtains the written consent of all of the non–disabled adults who would take the

                Trust assets if my wife died then without having exercised her power of appointment.

Distribution Upon Termination

The principal of a trust that has been terminated pursuant to paragraph 7.2 shall be distributed to the current income


                                                                                                                         
MiChigan Probate & estate Planning                                                                              Winter 2009

beneficiary, or in such other manner as the court may direct in order to carry out my intentions.

Distributions to Minors and Disabled Persons

When a trust is terminated under this Article, distributions to minors or disabled persons are subject to the limitations set
forth in Article Six.

My Intent

My purpose in this paragraph is to provide a guide to a Trustee or a court acting pursuant to the preceding paragraphs. I
have included lifelong generation–skipping trusts for my children in my plan with the intention of minimizing transfer tax-
es for my descendants. If the estate tax is repealed, I would suggest, but I do not require, that any generation–skipping
trust be terminated if the primary beneficiary meets the criteria for distribution of assets which have a generation–skip-
ping transfer tax inclusion ratio other than zero.




 
Winter 2009                                                                      MiChigan Probate & estate Planning


                                                   Exhibit C
                                     Sample Self-Proving Wills and Codicils


I, ___________________, the testator, sign my name to this document on ___________, ____. I have taken an oath,
administered by the officer whose signature and seal appear on this document, swearing that the statements in this
document are true. I declare to that officer that this document is my Will; that I sign it willingly or willingly direct another
to sign for me; that I execute it as my voluntary act for the purposes expressed in this Will; that I am 18 years of age or
older and under no constraint or undue influence; and that I have sufficient mental capacity to make this Will.

                                                          ___________________________________
                                                          (Signature) Testator


We, _________________________________ and _________________________________, the witnesses, sign our
names to this document and have taken an oath, administered by the officer whose signature and seal appear on this
document, to swear that all of the following statements are true: the individual signing this document as the testator ex-
ecutes the document as his or her Will, signs it willingly or willingly directs another to sign for him or her, and executes it
as his or her voluntary act for the purposes expressed in this Will; each of us, in the testator’s presence, signs this Will
as witness to the testator’s signing; and, to the best of our knowledge, the testator is 18 years of age or older, is under
no constraint or undue influence, and has sufficient mental capacity to make this Will.

                                                          ___________________________________
                                                          (Signature) Witness

                                                          ___________________________________
                                                          (Signature) Witness

STATE OF ______________________ )
COUNTY OF ____________________ )

Sworn to and signed in my presence by __________________________________, the testator, and sworn to and
signed in my presence by _________________ and _____________________, witnesses on ________________,
_____.

                                                          ___________________________________
                                                          (SEAL) Signed

                                                          ___________________________________
                                                          (official capacity of officer)
*******
(2)       An attested Will may be made self-proved at any time after its execution by the acknowledgment of the Will by
the testator and the sworn statements of the witnesses to the Will, each made before an officer authorized to administer
oaths under the laws of the state in which the acknowledgment occurs and evidenced by the officer’s certificate, under
the official seal, attached or annexed to the Will in substantially the following form:

                                                                                                                             
MiChigan Probate & estate Planning                                                                                    Winter 2009



STATE OF ______________________ )
COUNTY OF ____________________ )

We, ________________________, and ______________________, ______________________, the testator and the
witnesses, respectively, whose names are signed to the attached Will, sign this document and have taken an oath,
administered by the officer whose signature and seal appear on this document, to swear that all of the following state-
ments are true: the individual signing this document as the Will’s testator executed the Will as his or her Will, signed it
willingly or willingly directed another to sign for him or her, and executed it as his or her voluntary act for the purposes
expressed in the Will; each witness, in the testator’s presence, signed the Will as witness to the testator’s signing; and,
to the best of the witnesses’ knowledge, the testator, at the time of the Will’s execution, was 18 years of age or older,
was under no constraint or undue influence, and had sufficient mental capacity to make this Will.

                                                          ___________________________________
                                                          (Signature) Testator

                                                          ___________________________________
                                                          (Signature) Witness

                                                          ___________________________________
                                                          (Signature) Witness

Sworn to and signed in my presence by __________________________, the testator, and sworn to and signed in my
presence by _______________________ and ____________________, witnesses on _________________, ____.

                                                          ___________________________________
                                                          (SEAL) Signed

                                                          ___________________________________
                                                          (official capacity of officer)
*******
(3)      A Codicil to a Will may be simultaneously executed and attested, and both the Codicil and the original Will
made self-proved, by acknowledgment of the Codicil by the testator and by witnesses’ sworn statements, each made
before an officer authorized to administer oaths under the laws of the state in which execution occurs and evidenced by
the officer’s certificate, under official seal, in substantially the following form:

I, _______________________, the testator, sign my name to this document on _____________, ____. I have taken an
oath, administered by the officer whose signature and seal appear on this document, swearing that the statements in
this document are true. I declare to that officer that this document is a Codicil to my Will; that I sign it willingly or willingly
direct another to sign for me; that I execute it as my voluntary act for the purposes expressed in this Codicil; and that
I am 18 years of age or older and under no constraint or undue influence; and that I have sufficient mental capacity to
make this Codicil.

                                                          ___________________________________
                                                          (Signature) Testator

 
Winter 2009                                                                       MiChigan Probate & estate Planning




We, __________________________ and ________________________, the witnesses, sign our names to this docu-
ment and have taken an oath, administered by the officer whose signature and seal appear on this document, to swear
that all of the following statements are true: the individual signing this document as the testator executes the document
as a Codicil to his or her Will, signs it willingly or willingly directs another to sign for him or her, and executes it as his or
her voluntary act for the purposes expressed in this Codicil; each of us, in the testator’s presence, signs this Codicil as
witness to the testator’s signing; and, to the best of our knowledge, the testator is 18 years of age or older, is under no
constraint or undue influence, and has sufficient mental capacity to make this Codicil.

                                                          ___________________________________
                                                          (Signature) Witness

                                                          ___________________________________
                                                          (Signature) Witness

STATE OF ______________________ )
COUNTY OF ____________________ )

Sworn to and signed in my presence by ___________________, the testator, and sworn to and signed in my presence
by _________________________ and ________________________, witnesses, on __________________, ____.

                                                          ___________________________________
                                                          (SEAL) Signed

                                                          ___________________________________
                                                          (official capacity of officer)
*******
(4)       If necessary to prove the Will’s due execution, a signature affixed to a self-proving sworn statement attached to
a Will is considered a signature affixed to the Will.

*******
(5)       Instead of the testator and witnesses each making a sworn statement before an officer authorized to administer
oaths as prescribed in subsections (1) to (3), a Will or Codicil may be made self-proved by a written statement that is
not a sworn statement. This statement shall state, or incorporate by reference to an attestation clause, the facts regard-
ing the testator and the formalities observed at the signing of the Will or Codicil as prescribed in subsections (1) to (3).
The testator and witnesses shall sign the statement, which must include its execution date and must begin with sub-
stantially the following language: “I certify (or declare) under penalty for perjury under the law of the State of Michigan
that ….”




                                                                                                                              
MiChigan Probate & estate Planning                                                                 Winter 2009


   The Power of Discretion: An Introduction to Creditor Rights and Disability
                   Planning Under the Michigan Trust Code
                                         By Douglas Chalgian

                   Introduction                         5 of the MTC establishes a matrix pursuant to
                                                        which the rights of the creditor are a function of
   The rights of creditor’s to collect against as-
                                                        both the nature of the beneficial interest and the
sets held in trust are expressed in Part 5 of the
                                                        nature of the creditor.1

Michigan Trust Code (the “MTC”). The objective
                                                           According to this matrix, beneficial interests
of this article will be to summarize those rules        come in three varieties: (1) a right to a manda-
and explain how they are organized. This will in-       tory distribution, (2) a right to support under the
clude a discussion of how these rules relate to         terms of a support provision, and (3) a benefi-
the use of so-called “special needs” trusts.            cial interest subject to a discretionary trust provi-
                                                        sion. Meanwhile, creditors come in two variet-
A. The Organization of Part                            ies: (1) so-called “super creditors” and (2) every-
                                                        one else.
    Many key terms used in Part 5 of the MTC are
defined in Part 1 of the MTC. Specifically, Sec-        () Types of Creditors
tion 7103 includes the definitions of an “Ascer-           As indicted above, an important distinction
tainable Standard,” a “Discretionary Trust Provi-       is made between super creditors and all other
sion,” a “Spendthrift Provision,” and a “Support        creditors.
Provision,” among other terms.
    Part 5 is comprised of only eight, relatively       (a) Super Creditors
short, sections. These can be characterized as              The term “super creditors” is not used or de-
follows:                                                fined by the MTC. This term simply provides a
   7501: Introduction                                   shortcut for referencing the grouping of credi-
   7502: Creditor’s Rights and Spendthrift Pro-         tors identified in section 7504. These credi-
   visions.                                             tors are:
   7503: Creditor’s Rights with respect to the             (i) Persons entitled to alimony payments
   Beneficiary of a Support Trust.                         from the beneficiary.
   7504: Super Creditors.                                  (ii) Persons entitled to child support pay-
   7505: Creditor’s Rights with respect to the             ments from the beneficiary.
   Beneficiary of a Discretionary Trust.                   (iii) Persons who have supplied services that
   7506: Creditor’s Rights with respect to the             enhance, preserve, or protect a beneficiary’s
   Settlor of Revocable and Irrevocable Trusts.            interest in the trust, and who have a judg-
   7507: Creditor’s Rights with respect to the             ment for same.
   Beneficiary of a Trust that provides for Man-           (iv) The state of Michigan.
   datory Distributions.                                   (v) The United States Government.
   7508: Creditor’s Rights with respect to Cred-              When a super creditor exists and is subject
   itors of the Trustee                                 to the rules establishing the situations in which
                                                        super creditors may enforce their claims, as ad-
B. The Matrix: Creditor Rights and Beneficial           dressed below, section 7504 (2) provides that a
Interests                                               court:
   In terms of the ability of a creditor to reach as-     …shall order a trustee to satisfy all or part of a
                                                          judgment…only out of all or part of distributions
sets held in trust for a beneficiary-debtor, Part

 
Winter 2009                                                        MiChigan Probate & estate Planning


  of income or principal as they become due.
                                                        …regardless of whether the terms of the trust
(b) Other Creditors                                     provide a standard for the exercise of the trust-
   Types of creditors not specifically identified in    ee’s discretion….
section 7504 are provided no additional rights.         This interpretation is fortified with a clarifying
Their power to collect with respect to a specific statement in the definition of a “support trust.”
beneficial interest is discussed below.              Section 7103(k) states that even if a trust provi-
                                                     sion provides language that appears to be sup-
(2) Types of Beneficiaries                           port language (health, education, maintenance,
   Taking the most protective arrangement first, and support), if there is also language of discre-
and working backwards:                               tion, such a provision will be treated as a discre-
                                                     tionary provision. It states:
(a) Beneficiary of a Discretionary Trust                …A provision in a trust that provides a trustee
                                                        has discretion whether to distribute income or
   Michigan law has always provided, and under          principal or both for these purposes or to select
the MTC will continue to provide, a high level of       from among a class of beneficiaries to receive
protection to assets held for the benefit of a ben-     distributions pursuant to the trust provision is not
eficiary subject to a discretionary standard with       a support provision, but rather is a discretionary
respect to creditors of that beneficiary.               trust provision.
   Section 7505 of the MTC states:                       Further, the definition of a “discretionary trust
  The transferee or creditor of the beneficiary of    provision” clarifies that the creditor protections
  a discretionary trust provision does not have a     afforded beneficiaries of discretionary trusts are
  right to any amount of trust income or principal    applied even when the nature of the trustee dis-
  that may be distributed only in the exercise of     cretion is something less than full discretion over
  the trustee’s discretion, and trust property is not whether or not to make distributions to the ben-
  subject to the enforcement of a judgment until in-  eficiary. Section 7103(d) identifies five specific
  come or principal, or both, is distributed directly
                                                      acts of discretion that would qualify the benefi-
  to the trust beneficiary.
                                                      cial interests as a discretionary interest, only one
   Or, said another way, a creditor of a benefi-
                                                      of which is the traditional: discretion to decide
ciary of a discretionary trust cannot reach assets
                                                      whether or not to make distributions.
that are held in trust for the beneficiary, and may
only be satisfied if and when distributions are ac- (i) Special Needs Trusts
tually made from trust property directly into the        For attorneys who plan for clients with disabili-
hands of the trust beneficiary.                       ties, and more specifically, clients who are receiv-
   Note that 7505 does not make an exception ing or are expected to receive needs-based gov-
for the so-called “super creditors” of 7504, and ernment benefits such as Supplemental Security
further, 7504(3) clarifies that the super creditor Income and Medicaid, the use of discretionary
exceptions are not applicable to beneficial inter- trusts has long been an important tool. So-called
ests in discretionary trusts.                         “special needs trusts” come in two varieties: (1)
   What might be new, or at least clearer, under “self-settled special needs trusts (where the per-
the MTC is how to construe those trusts where son seeking to receive the government benefits
discretionary language seems to be mixed with owns the property that will be held in trust for
language of support or some other ascertainable their benefit), and (2) third-party special needs
standard. Section 7103(d) says that a trust pro- trusts (where one person, typically a parent or
vision establishing a distributional standard is a grandparent, wants to leave a gift to another per-
“discretionary trust provision:”                      son who qualifies for these government benefits

                                                                                                          
MiChigan Probate & estate Planning                                                                   Winter 2009


but wants to make sure that the gift can be used         7503 establishes the ability of other creditors to
to enhance their quality of life without interfering     reach the interest of a beneficiary where that in-
with their ability to continue to receive assistance     terest is subject to a support provision:
through these government programs).                        (a) The interest of a trust beneficiary that is sub-
    Self-settled special needs trusts are a crea-          ject to a support provision may not be trans-
ture of federal statute. Specifically, 42 USC              ferred and the trust property is not subject to the
§1396(p)(d)4. While it is important that these             enforcement of a judgment until income or prin-
                                                           cipal, or both, is distributed directly to the trust
trusts are in fact discretionary trusts, the rea-
                                                           beneficiary. After a distribution to a trust benefi-
son they work (that is, the reason someone can
                                                           ciary whose interest is subject to a support pro-
put their own money in them and then apply for             vision, the income and principal distributed are
these benefits) is that this statute says so. To be        subject to the enforcement of a judgment only to
afforded the protection of these laws, trusts must         the extent that the income or principal, or both, is
comply with other requirements of the statute,             not necessary for the health, education, support,
the specifics of which are outside the scope of            or maintenance of the trust beneficiary.
this article.
            2                                              (b) The use or enjoyment of trust property by a
    On the other hand, third-party special needs           trust beneficiary whose interest is subject to a
trusts are a function of state law. The reason             support provision may not be transferred and
someone can leave property in trust for the ben-           is not subject to the enforcement of a judgment
efit of a person receiving needs-based govern-             against the trust beneficiary.
ment assistance, and not cause them to become               In other words, to collect against an interest
ineligible for those government benefits, is be-         in a support trust, a creditor other than a super
cause Michigan law provides that even a gov-             creditor must (1) have a judgment, (2) can then
ernment creditor is not entitled to reach assets         only collect from property distributed directly to
held in a discretionary trust for that debtor’s ben-     the hands of the beneficiary, and (3) then only
efit. Accordingly, Part 5 of the MTC was inten-          to the extent that the distributed property is not
tionally drafted to allow people to be able to use       needed for that beneficiary’s health, education,
third-party special needs trusts to plan for loved       maintenance, and support. What’s more, if the
ones with disabilities.                                  trust allows trust property to remain in trust for
                                                         the use and enjoyment of the beneficiary, the
(b) Beneficiary of a Support Trust                       property remains immune to collection.
   Section 7103(k) defines a “support provision”         (c) Beneficiary Entitled to Mandatory Distri-
as:                                                      butions
  …a provision in a trust that provides the trustee
  shall distribute income or principal or both for the      The ability of trust beneficiaries to avoid cred-
  health, education, support, or maintenance of a        itors comes to an end at such time, including
  trust beneficiary, or language of similar import.      upon termination of the trust, that the trust pro-
  A provision in a trust that provides a trustee has     vides that the property is required to be distrib-
  discretion whether to distribute income or princi-     uted to the beneficiary. Section 7507 states:
  pal or both for these purposes or to select from         Whether or not a trust contains a spendthrift pro-
  among a class of beneficiaries to receive distri-        vision, a creditor or assignee of a trust beneficia-
  butions pursuant to the trust provision is not a         ry may reach a mandatory distribution of income
  support provision, but rather is a discretionary         or principal, including a distribution upon termi-
  trust provision.                                         nation of the trust, if the trustee has not made
  As discussed above, section 7504 allows su-              the distribution to the trust beneficiary within a
per creditors to collect from distributions from           reasonable time after the designated distribution
a support trust “as they become due.” Section              date.

 0
Winter 2009                                                          MiChigan Probate & estate Planning


D. Spendthrift Provisions                                “self-settled asset protection trusts,” and that has
                                                         not occurred. Section 7506 provides that the as-
    Separate and apart from the issue of the
                                                         sets in a revocable trust held for the benefit of
nature of the beneficial interest is the issue of
                                                         a settlor/beneficiary remain exposed to that set-
whether the beneficiary’s interest is subject to a
                                                         tlor’s creditors, and they must be used to satisfy
spendthrift provision, and the impact such provi-
                                                         the creditors upon the death of the settlor as has
sions have on creditor rights.
                                                         always been the law. Further, assets placed in
    The term “spendthrift provision” is defined in
                                                         an irrevocable trust for the benefit of the settlor/
section 7103(j). It means:
   …a term of a trust that restrains either the volun-
                                                         beneficiary remain available to satisfy creditors
   tary or involuntary transfer of a trust beneficiary’s of the beneficiary, to the extent of the lesser of:
   interest.                                             the claim of the creditor or the maximum amount
    The relevance of a spendthrift provision is of trust property that could be distributed to or for
set forth in section 7502. Specifically, in addi- the benefit of the settlor (excluding amounts that
tion to precluding a beneficiary from being able may be needed to pay the settlor’s taxes during
to transfer their beneficial interest in a trust, sec- his/her lifetime).
                                                                           3



tion 7502(3) provides that with respect to cred- () The Self-Settled Asset Protection Prede-
itors other than super creditors, and excluding ceased Spouse Trust
self-settled trusts, a judgment creditor of a ben-
eficiary whose interest is subject to a spendthrift          That said, there is a curious exception to rule
provision may only reach trust property when it is that under the MTC Michigan does not allow
“distributed directly to the trust beneficiary.”         for self-settled asset protection trusts. Section
                                                         7506(4) provides that:
E. Distributions to Third Parties for the Ben-              (4) An individual who creates a trust shall not
efit of a Beneficiary.                                      be considered a settlor with regard to the indi-
                                                          vidual’s retained beneficial interest in the trust
   It is important to recognize that throughout           that follows the termination of the individual’s
Part 5 of the MTC, even where creditors are not           spouse’s prior beneficial interest in the trust if all
otherwise precluded from enforcing a judgment             of the following apply:
against the beneficiary’s interest, they are limit-         a. The individual creates, or has created, the
ed to reaching property that is distributed directly        trust for the benefit of the individual’s spouse.
to the beneficiary. What this means is that prop-           b. The trust is treated as qualified terminable
erty that is distributed to third parties to pay for        interest property under section 2523(f) of the
things that benefit the beneficiary are not reach-          internal revenue code, 26 USC 2523.
able by these creditors. Also as discussed with             c. The individual retains a beneficial interest in
respect to the support trust provisions, assets             the trust income, trust principal, or both, which
                                                            beneficial interest follows the termination of the
that remain in trust for the use and enjoyment
                                                            individual’s spouse’s prior beneficial interest in
of the beneficiary are likewise outside the reach           the trust.
of the beneficiary’s creditors. What this suggests         In other words, if you know your spouse is dy-
is that drafting provisions that allow the trustee     ing, and if you set up a qualified terminable in-
flexibility in terms of how to provide for a benefi-   terest property (QTIP) trust for said spouse, and
ciary’s needs may provide a higher level of pro-       you retain a beneficial interest in the property fol-
tection from that beneficiary’s creditors.             lowing his/her death, the property in trust for your
F. Creditors of the Settlor                            benefit after your spouse dies will be subject to
                                                       the rules for creditor rights as if you were a bene-
  The MTC was not intended to cause Michi-             ficiary and not the settlor of the trust. This means
gan to become a state that is friendly to so-called

                                                                                                              
MiChigan Probate & estate Planning                                                                        Winter 2009


then that in this limited situation, you could es-                             Notes
tablish a self-settled asset protection trust that
provides for your needs but cannot be reached          1. This matrix is not new to Michigan trust law. Part Five
                                                   of the MTC is largely a codification of Michigan case law
by your creditors. 4
                                                   dealing with creditor rights and specifically those rules as
                       Conclusion                        first announced by the Michigan Supreme Court in Miller
                                                         v Department of Mental Health, 432 Mich 426, 442 NW2d
    “Asset Protection” is a popular concept in es-       617 (1989).
tate planning today, and something some clients              2. For a more complete understanding of the creation
                                                         and administration of Special Needs Trusts in Michigan,
seem to take an interest in. Accordingly, planners       see Chapter 7 of the ICLE publication, Advising the Older
should recognize that while the MTC does not             and Disabled Client, a new rewrite of which was recently
significantly alter the existing law regarding the       released and which was prepared by Attorney Amy R.
rights of creditors to assets held in trust, the clar-   Tripp. Also see the materials prepared by Attorney Se-
ity which the new code provides makes planning           bastian V. Grassi and presented at the 2009 Heckerling
                                                         Institute in Orlando, Florida, and see Mr. Grassi’s article,
for these objectives more straightforward and re-        “A Special Needs Child Requires Special Attention,” Vol 34
liable. The MTC should help attorneys better ex-         Estate Planning (Dec, 2007).
plain creditor rights issues to clients and to draft         3. In addition, transfers to irrevocable trusts would also
so-called “asset protection” provisions into their       be subject to review by creditors in light of Michigan’s laws
trusts with more confidence.                             related to fraud, and more specifically, transfers in fraud
                                                         of creditors.
    With respect to asset protection for beneficia-          4. This change brings Michigan property law into line
ries, the key tools for such planning would in-          with tax law in that both now treat the spouse for whom
volve: (1) selecting the appropriate beneficial          the trust was established as the transferor when the inter-
standard (discretion, support, etc.), (2) consid-        est in the trust reverts to the donor spouse after the donee
ering language which would allow the trustee to          spouse’s death.
                                                             5. For a more detailed discussion of situations in which
retain assets in trust for benefit of beneficiary,       drafting for creditor protections may be appropriate, see
and/or (3) to make distributions from trust to third     “Drafting Trusts with Prophylactic Planning Provisions–
parties for the benefit of beneficiaries, as well as     How Far Should You Go?” Chalgian, MI Probate & Estate
(4) the possibility of including provisions that al-     Planning J, Vol 28, No. 2 (Spring 2009).
low a trustee and/or a trust protector to convert
one type of beneficial interest into another type
of interest.5


    Although hardly the Mecca for self-settled
asset protection trusts, the MTC establishes at
least two situations where planners may begin
to see possibilities for protection of a settlor’s
assets through self-settled trusts: (1) self-settled
trusts for payment of taxes and (2) self-settled
QTIP retained interests trusts.




 
Winter 2009                                            MiChigan Probate & estate Planning


                    Douglas G. Chalgian, of Chal-
                    gian & Tripp Law Offices PLLC,
                    East Lansing, practices in the
                    areas of elder law, estate plan-
                    ning, special needs planning,
                    and probate litigation. Mr.
                    Chalgian specializes in Med-
                    icaid planning, guardianships
                    and conservatorships, and
will and trust contests. A member of the National
Association of Elder Law Attorneys, he is a Cer-
tified Elder Law Attorney by the National Elder
Law Foundation. Mr. Chalgian is a member of
the Probate and Estate Planning Section Coun-
cil of the State Bar of Michigan and is a former
chair of the Bar’s Elder Law and Advocacy Sec-
tion. He is a regular speaker on elder law issues
for ICLE and other organizations, and a previous
contributor to the Michigan Probate and Estate
Planning Journal, as well as the Michigan Bar
Journal, the Elder Law Advocate, and Michigan
Lawyers Weekly. Mr. Chalgian also is a coedi-
tor and chapter author for Advising the Older or
Disabled Client (ICLE 3d ed 2004 & Supp). He is
involved in various community activities, includ-
ing as a member of the board of directors of the
Alzheimer’s Association, Great Lakes Chapter;
the Huntington’s Disease Association, Michigan
Chapter; the Michigan Society of Gerontology;
and the Thomas M. Cooley Law School’s Sixty
Plus, Inc., Elderlaw Clinic.




                                                                                      
MiChigan Probate & estate Planning                                                              Winter 2009


   Recent Decisions in Michigan                      then sued Genaw and Unum to recover the mon-
 Probate, Trust, and Estate Planning                 ies remitted to Unum for the estate. The probate
                                                     court granted partial summary disposition in favor
                 Law
                                                     of the personal representative against Genaw in
           By Hon. Phillip E. Harter                 the amount of $111,000. The probate court or-
                                                     dered that the funds remaining in Genaw’s bank
  Insurance Proceeds—Spouse—Divorce
                                                     account in the amount of $42,659, paid to her by
        —Beneficiary Designation
                                                     Unum, be seized and held in escrow in partial
                                                     satisfaction of the judgment. In addition, the pro-
Genaw v Genaw, No , 00 Mich App
                                                     bate court granted partial summary disposition
LEXIS 0 (Oct , 00)
                                                     in favor of the personal representative against
    In 2001, the decedent obtained an insurance      Unum in the amount of $111,000, with a set off
policy with Unum Life Insurance Company val-         for $42,659, the amount recovered from Genaw.
ued at $111,000 and designated his wife, Cin-        Unum appealed. The appeal focused exclusive-
dy Genaw, as his beneficiary. The decedent and       ly on the interpretation and meaning of MCL
Genaw divorced on July 3, 2006. The divorce          552.101(2).
judgment specifically contained a waiver provi-         MCL 552.101(2) states:
sion that extinguished both parties’ respective        Each judgment of divorce or judgment of sepa-
interests in any insurance policy on the other’s       rate maintenance shall determine all rights of
life. Shortly after the divorce, the decedent was      the wife in and to the proceeds of any policy or
killed in an automobile accident. His beneficia-       contract of life insurance, endowment, or annu-
                                                       ity upon the life of the husband in which the wife
ry designation on the life insurance policy with
                                                       was named or designated as beneficiary, or to
Unum had not been changed.                             which the wife became entitled by assignment
    On October 2, 2006, a loss report was com-         or change of beneficiary during the marriage or
pleted that listed Genaw as the claimant and           in anticipation of marriage. If the judgment of
designated her relationship to the decedent as         divorce or judgment of separate maintenance
an “ex-spouse.” Shortly thereafter, Genaw filed        does not determine the rights of the wife in and
a claim for benefits and indicated on the form         to a policy of life insurance, endowment, or an-
that the decedent was divorced. His death certifi-     nuity, the policy shall be payable to the estate of
cate was also submitted with the claim indicating      the husband or to the named beneficiary if the
that the decedent was divorced. Unum conduct-          husband so designates. However, the company
ed an investigation and determined that benefits       issuing the policy shall be discharged of all li-
                                                       ability on the policy by payment of its proceeds
were payable pursuant to its policy. Shortly after
                                                       in accordance with the terms of the policy un-
receiving a copy of the beneficiary designation        less before the payment the company receives
form, which continued to list Genaw as the policy      written notice, by or on behalf of the insured or
beneficiary, Unum remitted payment to her in the       the estate of the insured, 1 of the heirs of the
full amount of the policy.                             insured, or any other person having an interest
    Approximately one month later, a personal          in the policy, of a claim under the policy and the
representative was appointed for the decedent’s        divorce. (Emphasis added)
estate. The personal representative became              In affirming the probate court, the court of ap-
aware of the existence of the Unum policy and        peals began by stating that the purpose of MCL
made a claim on behalf of the estate on January      552.101 is to resolve the situation where a di-
16, 2007. Unum denied the claim based upon           vorced wife could inadvertently receive the pro-
the policy already having been discharged by         ceeds of a forgotten insurance policy. They re-
payment to Genaw. The personal representative        jected the contention of Unum and the dissent

 
Winter 2009                                                           MiChigan Probate & estate Planning


that the language of MCL 552.101(2) does not              Surcharge—Attorney—Restricted Account—
encompass notice of a claim asserted by a ben-            Jurisdiction
eficiary and that the information provided by
Genaw, which merely alerted Unum to the exis-             In re Estate of Graves, No , 00 Mich
tence of a divorce without submission of an ac-           App LEXIS  (Oct , 00)
tual copy of the judgment or its explicit terms,              Calvin Graves, a minor, was involved in an
was insufficient to place the insurer on notice or        automobile accident on January 20, 2000. His
to impose liability for payment of the insurance          mother, Preshus Graves, commenced a civil ac-
proceeds consistent with the policy’s beneficiary         tion arising from the accident. She, also, was ap-
designation. As to who may provide such notice,           pointed as conservator for Calvin Graves. Wil-
the court of appeals pointed out the phrase, “or          liam R. Ford was her attorney. The probate court
any other person having an interest in the poli-          issued letters of conservatorship to Preshus
cy” would certainly include the beneficiary of the        Graves containing the following restriction:
policy. The statute is purposefully broad and en-             Funds to be received may not be used without
compassing and requires an inclusive definition           prior written authority of the Court. Funds are to
of who may satisfy the definition of “any other           be deposited in an account; certificate of depos-
person having an interest in the policy.” As to           it; money market certificate; or a combination of
the information provided, the court of appeals            these, in a bank; credit union; or savings and loan
pointed out that the statute only required notice         association insured by an instrumentality of the
“of a claim...and the divorce.” It did not require        federal government which accepts these condi-
detailed information. Interpreting the statute as         tions: The funds may not be withdrawn from the
merely requiring notice of the existence of a di-         depository until further order of the Court. Own-
vorce fulfills the intended purpose of the statute        ership of the funds must be in the conservator
of trying to preclude the inadvertent payment of          as fiduciary of the minor. The depository must
benefits to the wrong person.                             complete a form entitled “Verification of Deposit
    In the present case, Unum received a claim            in Fiduciary Account” and “Agreement on With-
                                                          drawal of Funds” and mail this form to this Court
from Genaw, which specifically acknowledged
                                                          within five days from initial receipt of funds. The
both her status as the ex-wife of the decedent
                                                          depository will thereafter, at least annually, and
and the existence of a divorce. This was enough
                                                          as requested, furnish this Court a Verification of
to require Unum to investigate further before re-
                                                          Funds on Deposit form. No real estate asset of
mitting payment of the benefits to the designat-
                                                          the estate may be sold without further order of
ed beneficiary. Pursuant to the statute, an insur-        the Court.
ance company is only “discharged” from the im-                Preshus Graves, through Ford as her attorney,
position of liability if it pays the benefits in accor-   filed an acceptance of appointment and bond of
dance with the policy designation and does not            fiduciary to secure her appointment. Ford re-
receive written notice of a claim and a divorce.          ceived “Notice to Attorney of Duties Under Con-
The court of appeals held that the information            servatorship of a Minor” that included the follow-
was submitted by a proper party and was suf-              ing instructions:
ficient to meet the notice requirements imposed               Upon receipt of funds, you must accompa-
by the statutory language. Therefore, Unum was            ny the fiduciary of the estate to the bank, credit
not automatically absolved of its liability for pay-      union, or savings and loan association of their
ment of the proceeds to the designated benefi-            choice to deposit the funds in an insured account
ciary.                                                    or certificate of deposit which identifies the ac-

                                                                                                         
MiChigan Probate & estate Planning                                                              Winter 2009


count as being a fiduciary account. You are to         and did not participate in the hearing. The spe-
see that the fiduciary furnishes the depository a      cial fiduciary informed the court that he had re-
copy of the Letters of Authority setting forth any     leased Ford, and Preshus Graves agreed to sign
limitations of powers and that the depository un-      a promissory note to repay the money. No order
derstands and accepts the funds with these limi-       was entered pertaining to Ford.
tations. You are further to see that the represen-        Preshus Graves did not sign the promissory
tative of the depository executes a Verification of    note or repay anything to the estate. The trial
Deposit in Fiduciary Account Form, which must          court issued a show cause order and a bench
be returned to this Court within 5 days from the       warrant for her arrest. Her whereabouts even-
deposit.                                               tually became unknown. More than six months
    Preshus Graves also received a “notice to fi-      later, the special fiduciary filed a notice of defi-
duciary of duties” that similarly specified that       ciency stating the estate had received no assets.
“ownership of the funds must be in the conser-         On September 7, 2005, the special fiduciary filed
vator as fiduciary for the minor.”                     a motion to compel Ford to produce copies of the
    Preshus Graves subsequently petitioned the         checks issued to Preshus Graves “to determine
probate court, through Ford as her attorney, to        whether or not there is any liability of individuals
approve a settlement in the personal injury law-       or institutions to reimburse the Estate for the net
suit. The court approved the settlement for a to-      settlement.” The check copies were produced.
tal of $6,122. Ford issued two checks from his         The special fiduciary then filed a new petition
client trust account, for $2,200 and $3,922, pay-      to surcharge Comerica Bank, Preshus Graves,
able directly to Preshus Graves, individually. She     and Ford. The petition was similar to the claims
cashed the checks and never placed any of the          made in 2004 alleging that Ford failed to take
proceeds in a restricted account or other account      appropriate and necessary measures to ensure
for the benefit of Calvin Graves. Ford claimed he      that the checks were deposited into a proper re-
advised Preshus Graves to keep the money in a          stricted account.
separate account, but he did not accompany her            The parties all filed motions for summary dis-
to the bank or communicate with the bank as he         position against each other. Ford asserted that
had been instructed by the court notice. Preshus       the claims against him were barred pursuant to
Graves admitted that Ford gave her a Verifica-         the doctrine of res judicata because he had been
tion of Deposit form, but she did not complete or      released on May 12, 2004. Ford also asserted
return it. The probate court, after sending Ford       that the probate court lacked jurisdiction. He ar-
and Preshus Graves repeated notices that they          gued that the only possible basis for the claims
had failed to file an inventory and failed to file a   against him sounded in professional negligence
verification of funds, removed Preshus Graves          and that “there was never any basis to sur-
as conservator.                                        charge” him in the first place. The probate court
    The probate court appointed a special fiducia-     granted summary disposition against Ford in fa-
ry. The special fiduciary immediately filed a peti-    vor of the special fiduciary. The probate court
tion to surcharge Preshus Graves and Ford for          based its ruling on the fact that even though the
$6,000 plus fees, costs, and interest. The trial       Letter of Conservatorship was restricted, Ford
court held a hearing on May 12, 2004. Preshus          issued two checks to Preshus Graves, individu-
Graves and Ford arrived at the hearing ready           ally, and those check were never properly de-
to participate. Ford told the special fiduciary pri-   posited. Ford appealed, and the court of appeals
or to the hearing that he had informed Preshus         affirmed the probate court.
Graves of her duties, and the special fiduciary           The court of appeals first rejected the argu-
told Ford he would be released. Ford then left         ment that the probate court lacked subject mat-

 
Winter 2009                                                        MiChigan Probate & estate Planning


ter jurisdiction. They stated that the probate court   inapplicable because of a change in the known
has exclusive jurisdiction over “a proceeding that     facts.
concerns a guardianship, conservatorship or                Finally, the court of appeals rejected Ford’s
protective proceeding.” MCL 700.1305(c). Addi-         argument that there exists no authority under
tionally, the probate court has concurrent sub-        which the probate court could sanction him be-
ject matter jurisdiction in cases involving pro-       cause he did not violate any order, statute, rule
tected individuals to “hear and decide a claim by      or other law. The court agreed that Ford did not
or against a fiduciary or trustee for the return of    violate any court order. However, Ford was Pre-
property” and to “hear and decide a contract pro-      shus Graves’ attorney, but because she was a
ceeding or action by or against an estate, trust or    personal representative, Ford’s “client” effec-
ward.” MCL 700.1303(1)(h-i) They go on to state        tively includes the estate, not just the fiducia-
that the purpose of the concurrent jurisdiction is     ry thereof, in her personal capacity. Therefore,
“to simplify the disposition of an action or pro-      they concluded the attorney would be subject
ceeding involving a decedent’s, a protected indi-      to a proceeding to surcharge pursuant to MCR
vidual’s, a ward’s or a trust estate by consolidat-    8.122 by a replacement fiduciary. (MCR 8.122
ing the probate and other related actions or pro-      is the rule governing claims by clients against
ceeding in the probate court.” MCL 700.1303(3).        attorneys.) A conservator is also a fiduciary of
The court of appeals concluded that this is a case     an estate, subject to the same obligations and
that concerns a conservatorship and in which the       standards as a trustee. A court is permitted to
probate court is hearing and deciding an action        impose a surcharge for unauthorized acts. Ford
by the estate for the return of property, and it is    engaged in an unauthorized act by issuing Cal-
within the context of an already-existing probate      vin Graves’ money to a person other than Calvin
case that is more efficiently and simply resolved      Graves’ conservator. The checks were issued
by keeping it in the probate court.                    to her in her individual capacity. Therefore, they
   The court of appeals next rejected Ford’s ar-       were simply made out to an unauthorized third
gument that the claims against him were barred         party, resulting in Calvin Graves’ estate losing
by res judicata. The court began by stating the        the money altogether.
requirement of res judicata. “For the doctrine [of         The court of appeals concluded that there
res judicata] to apply (1) the former suit must        was no genuine question of material fact that
have been decided on the merits, (2) the issues        Ford gave Calvin Graves’ settlement money to
in the second action were or could have been           the wrong person, that he failed to execute his
resolved in the former one, and (3) both actions       duty to refrain from disgorging Calvin Graves’
must involve the same parties or their privies.”       money to unauthorized third parties, and that as
The court then pointed out that in this case there     a consequence the money was never received
was no decision on the merits in any prior action      into Calvin Graves’ estate. The probate court’s
since no order issued concerning Ford. Further,        conclusion that Ford was liable for the surcharge
the May 12, 2004, hearing was part of the same         against him was correct.
ongoing action regarding the administration of             I agree that an attorney should be liable under
Calvin Graves’ estate and res judicata is not ap-      the circumstances of this case. However, I be-
plicable within the same action. “Finally, the first   lieve the reasoning used by the court of appeals
petition was based only on the fact that Calvin        to reach such liability is flawed. The court justi-
Graves’ settlement proceeds had not been prop-         fied holding the attorney liable by stating:
erly deposited. Because Ford did not disclose              Ford was Preshus Graves’ attorney, but be-
significant facts pertaining to the checks he is-      cause she was a personal representative, Ford’s
sued to Preshus Graves, res judicata would be          “client” effectively includes the estate, not just

                                                                                                      
MiChigan Probate & estate Planning                                                            Winter 2009


the fiduciary thereof in her personal capaci-            What should we take from this case? First, at-
ty. See Steinway v Bolden, 185 Mich App 234           torneys who do not follow the instructions of the
(1990). As a consequence, the attorney would          court in protecting and handling the assets of a
be subject to a proceeding to surcharge pursu-        protected individual may be held liable for a loss
ant to MCR 8.122.                                     suffered by the protected individual’s estate. Sec-
    The above language infers that Ford was the       ond, I believe we should still follow the mandate
attorney for the estate. This ignores MCR 5.117       of MCR 5.117(A) that an attorney represents the
(A) which states, “An attorney filing an appear-      fiduciary and not the estate until such time as the
ance on behalf of a fiduciary shall represent the     court of appeals specifically addresses this rule.
fiduciary.” An official note to this court rule ex-
plains “Subrule A, amended effective April 1,
1992, clarifies that the attorney represent the
fiduciary or trustee and not the estate.” The
amendment of the rule was a response to Stein-
way and the confusion over whether an attorney
represented the estate or the fiduciary. Clearly,
the attorney represents the fiduciary and not the
estate according to MCR 5.117(A). I do not be-                          Hon. Phillip E. Harter is
lieve the court of appeals was intentionally dis-                       a judge with the Calhoun
approving MCR 5.117(A). If that was their intent,                       County Probate Court, Battle
they would have explicitly done so. Unfortunate-                        Creek. He was chairperson of
ly, the case may be read as doing so and lead                           the Michigan Supreme Court
us back into the confusion over representation                          Task Force on Guardianships
existing before the rule was adopted.                                   and Conservatorships and a
    Probate courts have a responsibility to protect                     member of the Michigan Su-
the assets of protected individuals. They gener-                        preme Court bar examination
ally accomplish this by requiring the conservator     staff (1976-1991). He is currently a member of
to be bonded in the case of adults. In the case of    the Calhoun County Bar Association, a fellow of
minors, it is generally accomplished by requiring     the Michigan Bar Foundation, and a member of
assets to be placed in restricted accounts. This      the Bar of the U.S. Court of Appeals and of the
saves the minor from the burden of a bond pre-        Bar of the U.S. Supreme Court. Judge Harter is
mium. However, there is a danger of assets be-        the immediate past chairperson of the State Bar
ing misappropriated by the unbonded conserva-         of Michigan Probate and Estate Planning Sec-
tor between the conservator’s receipt of the as-      tion, a former chairperson of the Probate Law
sets and their placement in a restricted account.     Committee, and a former chairperson of the Pro-
Probate courts usually rely upon the attorneys        bate Rules Committee of the Michigan Probate
who received the proceeds of a settlement to fill     Judges Association. He reviews cases for the
the gap by physically seeing the assets deposit-      Michigan Probate and Estate Planning Journal
ed in restricted accounts. Attorneys are truly per-   and has lectured at ICLE’s Annual Probate and
forming as officers of the court in doing so. When    Estate Planning Institute for many years.
an attorney fails to perform his duty to the court
and fails to give the settlement proceeds to the
minor or the minor’s conservator or other individ-
ual who may be authorized to receive them, he
or she should be held liable.

 
 Winter 2009                                                         MiChigan Probate & estate Planning



               Legislative Report                       collect a $35 fee. Supposedly, this record would
                                                        be a non-public record.
           By Harold G. Schuitmaker
                                                            House Bills 0 and  allow designa-
                                                        tion of a funeral representative to make funeral
   Trust Code—I want to, once again, call your          arrangements. And House Bill 0 would allow
attention to the effective date of the Michigan         an individual to designate a person to make fu-
Trust Code (MCL 700.1103 et seq), which is April        neral decisions and require that the individual’s
1, 2010. Watch for the ICLE programs, including         instructions be followed. All three of these bills
the May and June Probate and Estate Planning            have received support from the Probate and Es-
Institutes.                                             tate Planning Council of the State Bar.
   Senate Bills  and  are now Public Act              The Michigan House of Representatives has
87 of 2009 (MCL 451.921 - 451.931) and Public           passed House Bill , House Bill 0,
Act 88 of 2009 (MCL 450.2124 et seq). These             House Bill , House Bill , and House
laws enact the Uniform Prudent Management of            Bill 0, which are a part of a package of senior
Institutional Funds.                                    abuse laws to make embezzlement, fraud, and
   There are several bill concerning powers of          financial exploitation crimes.
attorney, including:                                        Senate Bill  uncouples the Federal Es-
   House Bill  provides that a person des-          tate Tax from the Michigan Inheritance Tax. The
ignated as an attorney-in-fact must: (1) sign an        Michigan exemption would be $2,000,000 less
acceptance of the designation; (2) act in the           the value of all qualified family and business in-
best interest of the principal; (3) keep the prin-      terests. The tax would equal the maximum al-
cipal informed of his/her actions and account to        lowable federal credit under the IRS code. This
the principal; (4) not make gifts unless specifi-       tax would be on the entire estate as set forth on
cally authorized by the power of attorney; (5) not      Form 706.
commingle the principal’s assets with accounts              Senate Bill  would amend the penal code
of others; (6) use the principal’s assets for the       to punish fraud, deceit, misrepresentation, or
benefit of the principal only; (7) if requested, pro-   unjust enrichment to obtain a vulnerable adult’s
vide an accounting at any time to the principal;        money or property.
(8) maintain records of every transaction; and (9)          Senate Bill  would amend EPIC so that
retain experts, as reasonably required, to com-         a person convicted of a crime or who abused,
ply with his/her duties and to pay for such ser-        neglected, or exploited a person would forfeit all
vices from the estate of the principal. Further, the    benefits of the decedent’s estate.
attorney-in-fact may be compensated for his/her             Senate Bill , among other things, makes
services, and may be prosecuted and punished            it a felony to obtain the signature of any person
for any criminal acts while performing his/her du-      with the intent to cheat or defraud.
ties.                                                       Senate Bill , recently introduced, would
   House Bill  would enact the Uniform              make it a felony to (a) obtain a signature with in-
Power of Attorney Act.                                  tent to defraud; and (b) incorporate common law
   House Bill  provides that a power of at-         fraud or cheating as a crime.
torney made by a person over 60 years of age,               Senate Bill 00 would regulate variable an-
or a vulnerable adult, must be deposited with the       nuity contracts as securities.
court in the county of residence. The principal’s
name, address, and social security number or
driver’s license number must be on the front of
the envelope to be deposited. The court would
                                                                                                       
    MiChigan Probate & estate Planning               Winter 2009


                   Harold G. Schuitmaker, of
                   Schuitmaker, Cooper, Schuit-
                   maker & Cypher, P.C., Paw
                   Paw, is admitted to the Michi-
                   gan and Florida bars, practic-
                   es in the areas of estate plan-
                   ning and probate, municipal
                   law, corporations, and real es-
                   tate. Mr. Schuitmaker is a Fel-
low of the Michigan State Bar Foundation, and
holds an AV Peer Review rating and an ICLE
Certificate of Completion in the Probate and Es-
tate Planning Program. He is current president
of the Probate and Estate Planning Section of
the State Bar of Michigan, a member of the Pro-
bate Forms Committee, and is a former member
of the Probate Court Rules Committee. He also
formerly served on the State Board of Medicine
for 10 years. Mr. Schuitmaker is a member of the
National Association of Elder Law Attorneys, the
Kalamazoo County Bar Association, and the Van
Buren County Bar Association. He also serves in
numerous civic and charitable organizations. He
is a past president of the Rotary District Founda-
tion, a Level II Certified Assessing Officer with
the State Assessor Board, and a member of the
Chemical Bank Shoreline Kalamazoo Communi-
ty Board. Mr. Schuitmaker is a regular contribu-
tor to the Michigan Probate and Estate Planning
Journal.




    0
Winter 2009                                                                                   spring 2009
                                                                    MiChigan Probate & estate Planning


 Ethics and Unauthorized Practice of                    from continuing to represent anybody when a
                Law                                     dispute breaks out. At worst, the attorney can
                                                        be sanctioned for ethics violations. For example,
                                                        an attorney in Smith v Hastie, 367 SC 410, 626
              By Fred Rolf and Josh Ard                 SE2d 13 (2005) established a family limited part-
                                                        nership even though the husband and wife were
     Estate planners today are doing more than          undergoing marital counseling at the time. The
preparing wills and trusts. It is increasingly com-     attorney did not explain the consequences to the
mon to plan an entity (corporation, LLC, or part-       wife of what could happen if a divorce were filed.
nership) to facilitate plans for the next genera-       The court found that the wife presented a satis-
tion. The use of an entity can be for non-busi-         factory case to indicate fraud and breach of fidu-
ness purposes, such as preserving the family            ciary duty.
vacation home or cottage.                                   There can be tension between the duty to
     In an article in the summer issue of the AC-       disclose and the duty to maintain confidentiali-
TEC Journal (35 ACTEC J 2), Prof. Mary Rad-             ty. Prof. Radford argues that several New York
ford of Georgia State University College of Law         cases can impose two contradictory duties on at-
described ethical challenges in multi-family plan-      torneys.
ning situations. The title of Prof. Radford’s article       Her general advice in family entity planning is
is “Ethical Challenges in Representing Families         the following:
in Family Limited Partnerships.” The lessons of           1. Move slowly and deliberately when tak-
this article are well worth consideration by Michi-          ing on any family representation.
gan practitioners.                                        2. Identify who your client is.
     In most jurisdictions, including Michigan, the       3. Bring the whole family together to dis-
entity itself is the client. There is a Michigan eth-        cuss the representation and memorialize
ics opinion on point (CI-747). While CI-747 pre-             all agreements in one or more engage-
dates the Michigan Rules of Professional Con-                ment letters.
duct (MRPC) as it was issued in 1982, there is            4. When a client asks the lawyer to keep
little reason to believe that the result would be            information confidential, encourage the
different under the MRPC. CI-747 and Prof.                   client to reveal the information himself.
Radford’s article both consider the situation of
                                                                         Duty of Loyalty
a conflict between the entity as a whole and the
interests of the principals in the entity. Both give       Trust and estate (“TE”) lawyers often team with
the same advice—be careful and avoid conflicts.         other professionals (CPAs, CLUs, and financial
The situation is even more fraught with challeng-       advisors) to help achieve a client’s goals. Nor-
es when the principals are not just business col-       mally, this type of teamwork is beneficial to the
leagues but family members. Family members              client, as it brings multi-disciplinary expertise to
are much more likely to consider the lawyer for         solving the client’s problems. Each professional
the entity to be “their” lawyer.                        brings an area of expertise to bear on solving the
     Problems can arise when family unity later         client’s problem. TE lawyers must be mindful of
fractures. A family member’s divorce, or a threat       our duties to clients under the MRPC.
of divorce, can raise entity valuation issues. The         In the last several years prominent lawyers
family matriarch’s or patriarch’s loss of capaci-       have been sued by their clients. A leading TE
ty can ignite family conflicts. The fallout can be      lawyer has been sued by clients who became
negative for the “family” attorney. At best, the at-    disenchanted with the results of a life insurance/
torney may have conflicts that prevent him/her          tax-saving strategy. In the cases, it was alleged

                                                                                                        
MiChigan Probate & estate Planning                                                          Winter 2009


that the attorney was too close with insurance       tion, the Consumer Law Section, and the Legal
company agents.                                      Education and Professional Standards Commit-
   Many financial “advisors” are seeking referrals   tee of the State Bar of Michigan, Mr. Ard is cur-
from TE lawyers. When making referrals to advi-      rently chair of the Standing Committee on the
sors, the writers of this column suggest you pro-    Unauthorized Practice of Law. He also formerly
vide the client with multiple names. Further, do     served as the research attorney at Thomas M.
not accept fees from an advisor retained by the      Cooley’s Sixty Plus Elderlaw Clinic. Mr. Ard is
client. TE lawyers should read the MRPC 1.6,         vice president of the Ingham County Bar Associ-
Confidentiality, and MRPC 1.8, Conflict of Inter-    ation and administrator of the probate, elder law,
est, from time to time. Bottom line—watch your       and consumer law lists for the State Bar.
referrals to financial and insurance advisors.




                  Ramon F. (Fred) Rolf, Jr., of
                  Currie Kendall PLC, Midland,
                  practices in the area of pro-
                  bate and estate planning. He
                  is a member and past chair-
                  person of the Probate and Es-
                  tate Planning Section’s Unau-
                  thorized Practice and Multidis-
                  ciplinary Practice Committee.
Mr. Rolf also is a past president of the North-
eastern Michigan Estate Planning Council and
a Fellow of the American College of Trust and
Estate Counsel.



                  W. Josh Ard of the Law Of-
                  fice of Josh Ard, PLLC in Wil-
                  liamston, Michigan, practices
                  in the areas of elder law, pro-
                  bate law, consumer law, and
                  administrative law. Mr. Ard
                  specializes in special needs
                  planning and planning and
                  dealing with incapacity. For-
mer chair of the Elder Law and Advocacy Sec-


 
MiChigan Probate & estate Planning                                                                    Winter 2009


                                   state bar of Michigan
                            Members of section Council—2009–2010

                                                  Officers

  Chairperson:                       ViCe-Chairperson:                      Treasurer:
  harold g. schuitmaker              george W. gregory                      marilyn lankfer
     181 West Michigan ave.                401 s. old Woodward,                   333 bridge st., nW
     ste. 1                                ste. 456                               P.o. box 352
     Paw Paw, Mi 49079                     birmingham, Mi 48009                   grand rapids, Mi 49501
  Chairperson-eleCT:                   seCreTary:
Douglas g. Chalgian                  mark k. harDer
      139 W. lake lansing rd.,             85 e. 8th st.
      ste. 200                             ste. 310
      east lansing, Mi 48823               holland, Mi 49423

                                             Council Members

Term expires 2010:                   Term expires 2011:                     Term expires 2012:
susan M. allan                       robin d. ferriby                       William J. ard
      P.o. box 75000                        333 W. fort st., #2010                  1340 Trotters ln.
      detroit, Mi 48275                     detroit, Mi 48226                       Williamston, Mi 48895
amy n. Morrisey                      J. david Kerr                          ellen sugrue hyman
      345 s. division st.                   205 s. Main st.                         P.o. box 1023
      ann arbor, Mi 48104                   Mount Pleasant, Mi 48858                okemos, Mi 48805
hon darlene a. o’brien               shaheen i. imami                       Patricia M. ouellette
      101 e. huron st.                      31300 northwestern highway              2400 lake lansing rd., ste. f
      ann arbor, Mi 48107                   farmington hills, Mi 48334              lansing, Mi 48912
rebecca a. schnelz                   hon david M. Murkowski                 James b. steward
      1200 n. Telegraph rd.                                                         205 s. Main st.
                                            180 ottawa ave. nW,
      Pontiac, Mi 48341                                                             ishpeming, Mi 49849
                                            ste. 9500C
                                                                            James P. spica
Thomas f. sweeney                           grand rapids, Mi 49503                  660 Woodward, ste. 2290
      255 s. old Woodward, 3rd fl.   richard J. siriani                             detroit, Mi 48226
      birmingham, Mi 48009                  30150 Telegraph rd., ste. 371
Marlaine C. Teahan                                                          robert P. Tiplady ii
                                            bingham farms, Mi 48025                 2723 s. state st., ste. 400
      2125 University Park dr.,      robert M. Taylor
      ste. 250                                                                      ann arbor, Mi 48104
                                            151 s. rose st., ste 900
      okemos, Mi 48864                      Kalamazoo, Mi 49007




 
Winter 2009                                                             MiChigan Probate & estate Planning



                                                   Ex Officio

raymond T. huetteman, Jr.              John e. bos                             Kenneth e. Konop
      1298 Pepperidge Way                     139 W. lake lansing rd.,                840 W. long lake rd.,
      ann arbor, Mi 48105                     ste. 200                                ste. 200
Joe C. foster Jr.                             lansing, Mi 48823                       Troy, Mi 48098
      2125 University Park dr.,        W. Michael Van haren                    John a. scott
      ste. 250                                111 lyon st. nW, ste. 900               1000 S. Garfield, Ste. 3
      okemos, Mi 48864                        grand rapids, Mi 49503                  Traverse City, Mi 49686
russell M. Paquette                    robert b. Joslyn                        Dirk C. Hoffius
      19701 Vernier road, ste. 290            200 Maple Park blvd., ste. 201          333 bridge st. nW,
      harper Woods, Mi 48225                  st. Clair shores, Mi 48081              P.o. box 352
James a. Kendall                       robert d. brower, Jr.                          grand rapids, Mi 49501
      6024 eastman ave.,                      250 Monroe ave nW, ste 800       henry M. grix
      Midland, Mi 48640                       grand rapids, Mi 49503                  38525 Woodward ave.,
James h. loPrete                       John d. Mabley                                 ste. 2000
      40950 Woodward ave.,                    31313 northwestern hwy.,                Bloomfield Hills, MI 48304
      ste. 306                                ste. 215                         Phillip e. harter
      Bloomfield Hills, MI 48304              farmington hills, Mi 48334              Calhoun County Probate Court
                                                                                      161 e Michigan ave
everett r. Zack                        raymond h. dresser, Jr.
                                                                                      battle Creek, Mi 49014
      2125 University Park dr.,               112 s. Monroe st.
                                                                               Michael J. McClory
      ste. 250                                sturgis, Mi 49091
                                                                                      2 Woodward ave.,
      okemos, Mi 48864                 John h. Martin                                 1307 CaYMC
douglas J. rasmussen                          400 Terrace st., P.o. box 900           detroit, Mi 48226-5423
      500 Woodward ave., ste. 3500            Muskegon, Mi 49443               douglas a. Mielock
      detroit, Mi 48226                Patricia gormely Prince                        313 s. Washington sq.
susan s. Westerman                            31300 northwestern hwy.                 lansing, Mi 48933-2144
      345 s. division st.                     farmington hills, Mi 48334       lauren M. Underwood
      ann arbor, Mi 48104              brian V. howe                                  32100 Telegraph, ste. 200
fredric a. sytsma                             8253 new haven Way,                     bingham farms, Mi 48025
      333 bridge st., nW,                     ste. 102                         nancy l. little
      P.o. box 352                            Canton, Mi 48187                        2400 lake lansing rd., ste. f
      grand rapids, Mi 49501           richard C. lowe                                lansing, Mi 48912
stephen W. Jones                              2375 Woodlake dr.,               coMMissioner Liaison
      200 e. long lake rd., ste. 110          ste. 380
                                                                               lori a. buiteweg
      Bloomfield Hills, MI 48304              okemos, Mi 48864
                                                                                     121 W. Washington st.,
                                                                                     ste. 300
                                                                                     ann arbor, Mi 48104




                                                                                                               
MiChigan Probate & estate Planning                                                                                   Winter 2009


                                        Probate and estate Planning section
                                         2009-2010 Committee assignments
Editor’s note: The Probate and Estate Planning Council welcomes your participation on committees. If you are interested in
serving on any of the committees listed below, please contact Nancy L. Little, Chair, or the chair of the committee on which you
would like to serve.
internal governanCe                              douglas a. Mielock, Chair                        Melisa M. W. Mysliwiec
                                                   nancy l. little
  harold schuitmaker, Chair                                                                  state Bar JournaL
                                                   lauren M. Underwood
  douglas Chalgian, Chair elect                                                                amy M. Morrissey, Chair
                                              reLations with state Bar
Budget                                                                                       technoLogy and eLectronic
                                              Mission: in addition to maintaining
                                                                                             coMMunication
Mission: To develop the annual                relations with the state bar, this
                                              committee will work with the state             Mission: To develop the section Web
budget and to alert Council as to                                                            site and listserv and to monitor and
                                              bar to develop a plan for our section
revenue and spending trends.                                                                 evaluate the content of electronic
                                              on civic education, marketing/press
   Mark harder, Chair                         releases, and the state bar’s new              communication between and among
     harold schuitmaker                       initiative to publicize the good deeds         the Council and section Members.
                                              of lawyers to the general public.                 William J. ard, Chair
ByLaws                                                                                             John r. dresser
                                                 Thomas f. sweeney, Chair
  Marilyn lankfer, Chair                            John r. dresser
   robert P. Tiplady                                Michael J. McClory                       legislation anD lobbying
                                                    amy Morrissey
MichaeL w. irish award                                                                       LegisLation coMMittee
                                                    derek a. Walters
Mission: To honor a practitioner                                                               John r. dresser, Co-chair
                                              annuaL Meeting                                   harold C. schuitmaker, Co-chair
(supported by recommendations
                                              Mission: To arrange the annual                      William J. ard
from his or her peers) whose                  meeting at a time and place and                     george W. gregory
contributions to the Section reflect          with an agenda that will accomplish                 Mark Kellogg
the high standards of professionalism         necessary section business and will
                                              address, as appropriate, matters               uniforM Power of attorney act
and selflessness exemplified by
                                              of professional concern to the                 Mission: To review the Uniform
Michael W. irish.                                                                            Power of attorney act.
                                              Membership.
  brian V. howe, Chair                           douglas Chalgian, Chair                       daniel Marsh, Chair
    hon. Phillip e. harter                                                                        susan allen
                                                                                                  William J. ard
    Marilyn lankfer                           eDuCational anD
                                                                                                  Kristen arnett
                                              aDvoCaCy serviCes For
Long-range PLanning                                                                               douglas g. Chalgian
                                              seCtion MeMbers
Mission: To refine the Section’s                                                                  daniel e. Cogan
                                              aMicus curiae                                       Kristen r. gross
strategic Plan through periodic
                                                ellen sugrue-hyman, Chair                         liam K. healy
review and to identify priorities and              Melisa M. W. Mysliwiec                         James lampertiues
methods for implementing those                     derek a. Walters                               Michele Marquardt
priorities so as to meet the evolving                                                             stanford J. Mall
                                              continuing education and annuaL
needs of section members.                                                                         deb Mitton
                                              ProBate seMinar
                                                                                                  Wendy M. Parr
  douglas g. Chalgian, Co-chair                 george gregory, Chair                             ellen sugrue-hyman
  lauren M. Underwood, Co-chair               PaMPhLets                                           derek a. Walters
noMinations                                     ellen sugrue-hyman, Chair                    Michigan trust code
                                                   William J. ard                            Mission: To review the Uniform
Mission: To select nominees for                    Kathy goetsch
Council who are committed to                                                                 Trust Code and to determine the
                                                   Mark r. Pasquali                          need for adopting such legislation in
the probate and estate planning                    rebecca a. schnelz                        Michigan.
practice and who are candidates                    James b. steward
                                                                                               Mark K. harder, Chair
for leadership of our diverse and             section JournaL                                     daniel e. Cogan
changing section.                               nancy l. little, Chair                            douglas g. Chalgian

 
Winter 2009                                                                         MiChigan Probate & estate Planning


     david Kerr                                    Kristen d. arnett                           lorraine new
     John dresser                                  hon. Kathryn a. george                      Patricia M. ouellette
     Marilyn lankfer                               Kevin W. Manning                            Christine M. savage
     douglas a. Mielock                            rebecca a. schnelz                     guardianshiPs and conservatorshiPs
     hon. david M. Murkowski                       lauren M. Underwood
     John sharp                                                                           Mission: To identify and to participate
                                              uniforMity of Practice                      in arriving at practical solutions to
     bob Taylor
     robert P. Tiplady                        Mission: To determine local practice        perceived and actual abuses under
     James spica                              issues that could be conformed to a         current law and court rules.
     Tess sullivan                            standard of Michigan probate and               Constance brigman, Chair
     Marlaine C. Teahan                       trust practice and to work with probate           rhonda fleming
     Prof. lawrence Waggoner                  registers and other stakeholders in               hon. david M. Murkowski
                                              achieving uniformity of probate and trust         rebecca a. schnelz
uniforM PrinciPaL and incoMe act              practice throughout the state.
revisions                                                                                 Business Law and Business Law
                                                 derek a. Walters, Chair                  section Liaison
  Mark K. harder, Chair                             rhonda M. Clark-Kreuer
   daniel e. Cogan                                                                          John r. dresser, Chair
                                                    Cindy rude                                 daniel P. Marsh
   Marguerite Munson lentz
   Patricia ouellette                                                                     eLder Law section Liaison
   robert P. Tiplady                          PraCtiCe issues, relateD
                                                                                            amy r. Tripp, Chair
                                              areas, anD liaisons
                                                                                              William J. ard
ProFessionalisM anD                           ad hoc coMMittee on guardianshiP/               Melisa M. W. Mysliwiec
stanDarDs                                     conservatorshiP Jurisdiction
                                                                                          faMiLy Law section Liaison
ethics                                          douglas g. Chalgian, Chair                  Patricia M. ouellette, Chair
                                                  William J. ard
  david Kerr, Chair                               Constance brigman                       reaL ProPerty section Liaison
    Marilyn lankfer                                                                         daniel P. Marsh
                                                  Michael J. McClory
unauthorized Practice and                         hon. david M. Murkowski                 state Bar section to section action
MuLtidisciPLinary Practice                        rebecca a. schnelz                      teaM Liaison
  bob Taylor, Chair                               James b. steward
                                                                                            robert P. Tiplady, Chair
    shaheen i. imami                          charitaBLe giving/exeMPt
    Patricia ouellette                                                                    tax and tax section Liaison
                                              organizations
    amy Tripp                                                                               lorraine new, Chair
                                              Mission: To educate practitioners about
sPeciaLization and certification              charitable giving and to determine the      state Bar Liaison
  James b. steward, Chair                     need for Michigan legislation authorizing     richard J. siriani
     William J. ard                           exempt organizations to serve as trustees   court ruLes and forMs coMMittee
     george W. gregory                        of charitable trusts.                       Liaison
     Wendy Parr                                 robin d. ferriby, Chair                     Marlaine C. Teahan, Chair
     richard J. siriani                           Mark Kellogg                                 douglas g. Chalgian
Practice ManageMent                               daniel P. Marsh                              hon. Phillip harter
  Patricia M. ouellette, Chair                    Tracy sonneborn                              ellen sugrue-hyman
                                                  Marlaine Teahan                              douglas a. Mielock
                                                                                               Mark r. Pasquali
aDMinistration oF JustiCe                     coMMittee on sPeciaL ProJects
                                                                                               harold schuitmaker
contested and uncontested ProBate               amy M. Morrissey, Co-Chair
                                                richard J. siriani, Co-Chair              trust institutions and MBa Liaison
Proceedings
                                                                                            susan allen, Chair
Mission: To monitor forms, procedures,        transfer tax
                                                                                              Tess sullivan
standard jury instructions, and legislation   Mission: To monitor developments
so as to facilitate the administration        regarding transer taxes, particularly       ProBate Judges association Liaison
of prompt and consistent justice in           at the state level, and to recommend          hon. Phillip harter
contested and uncontested probate court       any appropriate action for the state of       hon. Kathryn a. george
proceedings and through alternative           Michigan.                                     hon. darlene a. o’brien
dispute resolution.
                                                Thomas f. sweeney, Chair                  Law schooL Liaison
  shaheen i. imami, Co-Chair                      george W. gregory                         William J. ard
  douglas g. Chalgian, Co-Chair                   Marguerite Munson lentz

                                                                                                                              

				
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