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Nov 2009
16
November 16, 2009

Michigan Trust Code: A Major Change in the Legal Landscape

Michigan has historically relied on an incomplete mix of statutes and case law regarding trusts, resulting in numerous gaps and unanswered questions about the law. The Michigan Trust Code changes this. The Code takes effect April 1, 2010, and will provide Michigan with its first comprehensive law governing the creation, administration, modification, and termination of trusts. The Code applies to all trusts administered in Michigan, whether established before, on or after the effective date.

The MTC is based upon the Uniform Trust Code. Some form of the UTC is now the law in twenty states and the District of Columbia and legislation is pending in several additional states.

The Code provides several benefits:

  • You and we will have greater certainty regarding the law.

  • It modernizes trust law to reflect current uses of trusts and practices in their administration.

  • Because it is based on a uniform statute, we and the courts will be able to look to other states for guidance on what the law means and how to apply it.

What does this mean for you and your planning or existing trusts?

The Michigan Trust Code is a "default" statute. Only around a dozen provisions of the statute are mandatory. For our clients for whom we design or draft or help administer trusts, this means the terms of your trust will be valid and respected even if the terms are different or inconsistent with the Code's provisions. As a result, we can help you create trusts that meet the needs of you and your family.

For our clients serving as trustee, we will have greater certainty about the law and can more readily guide you in the proper administration of existing trusts. In addition, the Code contains many provisions that will ease the administration of trusts and reduce the risk of trustee liability for improper administration.

We do not believe our clients with existing trusts will need to make major changes or modifications to their estate plans as a result of this new law. However, the only way to be certain is to schedule a meeting with your WNJ estate planning attorney.

There are several categories of clients for whom a review of their planning is especially warranted as a result of the passage of the Michigan Trust Code. These include clients:

  • With ownership interests in family or closely held businesses

  • Whose planning includes a "trust protector" (a trust protector is someone, whether or not called a trust protector, who has the power to direct actions with respect to the trust. Examples of these kinds of powers include the power to remove or appoint trustees, direct or approve distributions, or modify or terminate the trust)

  • With specific or unusual intentions or purposes related to the creation and administration of trusts, where the document may not fully and obviously reflect the client's intent or purposes

Moreover, we find that many clients do not review their estate plans often enough. If your estate plan has not been reviewed within the past three to five years, changes to family circumstances, changes in the value and nature of assets, the evolving tax laws, as well as the new Michigan Trust Code mean that you should meet with us to review your planning and determine whether changes are warranted.

All members of Warner Norcross & Judd's Trusts and Estates Group are familiar with the new Michigan Trust Code and are available to advise you on how it will affect your planning and the trusts you are administering or from which you receive benefits. We encourage you to consult with your WNJ attorney to discuss the impact of this major development in the law in this area.

Editor's Note: Mark Harder, who is a partner in the firm's Holland office, serves as Chair and Reporter for the Michigan Trust Code Committee of the Probate and Estate Planning Section of the State Bar of Michigan. As Chair, he led the six-year drafting effort, negotiated key terms with other stakeholders, and testified before the Michigan legislature. With our former partner and current of counsel attorney John H. Martin, Mark is coauthoring "Estates and Protected Individuals Code and Michigan Trust Code with Reporters' Commentaries," which will be the leading treatise on Michigan's probate and trust codes.

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