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A Better Partnership


Feb 2014
February 12, 2014

Lawmakers Strengthen Michigan’s Trust Code to Ensure That Death Benefits Can Be Paid to Insurance Trusts

The Michigan Legislature recently passed and Governor Snyder signed into law two bills that clarify who is eligible to receive death benefits from insurance trusts.

The bills, which amend the Michigan Trust Code and the Insurance Code, were a reaction to a 2005 federal lawsuit - Chawla ex rel. Giesinger v Transamerica Occidental Life Insurance Co. – that challenged an insurance company’s refusal to pay a death benefit to the trustee of a trust.  The amendment to the Michigan Trust Code is based on changes approved by the Uniform Law Commission in 2010 to the Uniform Trust Code on which Michigan law is based. 

A U.S. District Court in Maryland had ruled that insurers weren’t required to pay death benefits to a trustee who administered an insurance trust. That ruling was later reversed by a federal appeals court, but the case caused concern among lawyers, estate planners, trust departments and clients, said Mark Harder, an estate planning attorney at Warner Norcross & Judd who served as Chair of the Committee that drafted the Michigan Trust Code.

“This legislation significantly reduces concerns about who has an insurable interest in an insurance trust,” Harder said. The legislation is significant because life insurance trusts often involve millions of dollars and are frequently used as part of estate plans to protect family businesses and mitigate the effects of estate taxes.

If the U.S. District Court’s initial ruling had not been overturned, insurance companies might have refused to pay the death benefit to the trust of the insurance trust, and instead simply refunded the premiums after a policyholder died, Harder said.

The amendment to Michigan Trust Code makes clear that trustees of insurance trusts have an insurable interest when the life insurance policies pay death benefits to the trusts for the benefit of parents, grandparents, great-grandparents, children, grandchildren, great-grandchildren, aunts, uncles, nieces, and nephews of the insured, as well as stepchildren.

“This should resolve the matter in the vast majority, if not all, situations in which a trustee of an irrevocable life insurance trust owns and is the beneficiary of a life insurance policy,” Harder said.

If you have questions about this legislation or another estate planning-related legal development, please contact Mark Harder ( or 616.396.3225) or any other member of the Labor and Trusts and Estates Group at Warner Norcross & Judd.

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