Bill Text: MI HB6129 | 2017-2018 | 99th Legislature | Introduced
Bill Title: Probate; trusts; powers and duties of a directed trustee; provide for. Amends sec. 7704 of 1998 PA 386 (MCL 700.7704) & adds sec. 7703b.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2018-12-31 - Assigned Pa 662'18 [HB6129 Detail]
Download: Michigan-2017-HB6129-Introduced.html
HOUSE BILL No. 6129
June 7, 2018, Introduced by Reps. Kesto, Iden and Calley and referred to the Committee on Law and Justice.
A bill to amend 1998 PA 386, entitled
"Estates and protected individuals code,"
by amending section 7704 (MCL 700.7704), as added by 2009 PA 46,
and by adding section 7703b.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 7703b. (1) A trust instrument may include a separate
trustees provision.
(2) While a separate trustees provision applies, the whole
trusteeship of the aggregate trust is divided, under the terms of
the separate trustees provision, into discrete sets of separately
accepted fiduciary responsibilities, with each discrete set
separately allocated to 1 or another of the aggregate trust's
separate trustees. All of the following apply while a separate
trustees provision applies:
(a) Except as provided in subdivision (c), the aggregate
trust's separate trustees are not treated as cotrustees in their
relations to one another. With regard to the common title to the
trust property described in subdivision (c)(i), all of the
following apply:
(i) A separate investment trustee accepts the common title
only for purposes of performing the trustee investment function
described by the governing separate trustees provision for the
benefit of the trust beneficiaries.
(ii) A separate distributions trustee accepts the common title
only for purposes of administering a discretionary trust provision
specified in the governing separate trustees provision for the
benefit of the trust beneficiaries affected by the specified
discretionary trust provisions.
(iii) A separate resultant trustee accepts the common title
only for purposes of performing all trustee functions not allocated
by the governing separate trustees provision to either of the
following:
(A) A separate investment trustee, if any.
(B) A separate distributions trustee.
(b) A separate trustee shall act on its own authority with
respect to each of its separate trustee functions. A separate
trustee does not need approval from any other separate trustee to
conduct its separate trustee functions.
(c) The aggregate trust's separate trustees are treated as
cotrustees in their relations to one another only for the following
purposes:
(i) Taking, holding, transferring, and defending title to
trust property.
(ii) Determining venue and interested persons in proceedings
concerning the aggregate trust.
(iii) Liability, if any, for income, property, or other taxes
attributable to trust property.
(iv) The privileges and immunities of cotrustees under general
principles of law and equity to comment to a settlor or beneficiary
of a trust or others on one another's performance of fiduciary
duties.
(d) The aggregate trust's separate trustees are not cotrustees
for either of the following purposes:
(i) Joinder of necessary parties in a proceeding for breach of
trust.
(ii) The requirement in section 7402 that the same person is
not the sole trustee and sole beneficiary of a trust. If the
aggregate trust has only 1 beneficiary, the beneficiary may not be
a separate trustee of the trust unless both of the following apply:
(A) The separate trustee comprises a cotrusteeship of which
the beneficiary is a cotrustee.
(B) The trust instrument prohibits the beneficiary from
serving alone.
(e) A separate trustee shall not accept the separate trust
associated with, or, except as otherwise provided in this
subdivision, participate in or provide advice regarding the
performance of, a separate trustee function of any other separate
trustee of the aggregate trust. Ministerial acts performed by 1
separate trustee in connection with a separate trustee function of
another separate trustee of the aggregate trust are not considered
an acceptance of the separate trust associated with the separate
trustee function of the other separate trustee. As used in this
subdivision, "ministerial acts" includes any of the following:
(i) Confirming that an investment or distribution directive of
another separate trustee has been carried out.
(ii) Recording and reporting the actions of another separate
trustee or conferring with another separate trustee for purposes of
administrative coordination or efficiency.
(f) A separate trustee does not have a duty to petition the
court or to take other affirmative action to ensure that any
vacancy in any separate trusteeship is filled. If a separate
trustee petitions the court or takes other affirmative action to
ensure that a vacancy in a separate trusteeship is filled, both of
the following apply:
(i) The separate trustee is not considered to have accepted
the separate trust associated with the vacant separate trusteeship.
(ii) The separate trustee does not have a duty to petition the
court or take other affirmative action to ensure that any other
vacancy in a separate trusteeship is filled.
(3) A separate trustees provision must determine all of the
following:
(a) If there is a separate investment trustee, that the
separate investment trustee shall perform the trustee investment
function.
(b) That 1 or more separate distributions trustees, if any,
shall exercise discretion under 1 or more specified discretionary
trust provisions.
(c) Which of the aggregate trust's separate trustees shall
perform, during any period in which the aggregate trust is not a
unitrust, the function of allocating between principal and income,
for fiduciary accounting purposes, receipts and disbursements or
distributions affected by the separate trustees' separate trustee
functions.
(d) Which of the aggregate trust's separate trustees is
responsible for preparation and filing of tax and information
returns for the aggregate trust and for responding on behalf of the
aggregate trust to inquiries from governmental agencies.
(e) Which of the aggregate trust's separate trustees is
responsible for responding to a proceeding challenging a purpose or
the validity of the trust.
(f) Which of the aggregate trust's separate trustees is
responsible for determining whether at any time cash or other
property will be loaned by the trust to any of the following:
(i) One or more trust beneficiaries.
(ii) One or more business enterprises in which a trust
beneficiary has an ownership interest.
(iii) One or more business enterprises in which the aggregate
trust itself has an ownership interest.
(g) For a separate investment trustee, whether the separate
investment trustee or the separate resultant trustee shall
determine the aggregate trust's asset allocation for investment
purposes.
(h) That the separate resultant trustee is responsible for the
custody of the aggregate trust's property.
(4) With regard to a separate trustee function of a separate
trustee, all of the following apply:
(a) The separate trustee has all of the duties and powers of a
trustee described in this part and part 8 of this article.
(b) The separate trustee is subject to control by both of the
following in the same circumstances as would be a trustee or
cotrusteeship that is not a separate trustee:
(i) Each settlor of a revocable trust.
(ii) A holder of a power to direct a trustee, if any.
(c) The separate trustee is required to seek or consider the
advice of a designated trust advisor, if any, in the same
circumstances as would a trustee or cotrusteeship that is not a
separate trustee.
(5) If a separate trustee comprises a cotrusteeship, with
regard to a separate trustee function of the separate trustee, the
cotrustees have all of the duties and powers of cotrustees
described in this part.
(6) A separate trustee has the duty to inform and report on
each of its separate trustee functions to both of the following:
(a) Trust beneficiaries as described in section 7814. However,
a separate trustee is not required to provide a beneficiary a
report that the separate trustee knows will duplicate a report that
another separate trustee of the aggregate trust provided or will
provide to the beneficiary.
(b) Each other separate trustee of the aggregate trust as is
reasonably necessary for the other separate trustee to perform a
separate trustee function of the other separate trustee.
(7) A separate trustee does not have a duty to do any of the
following:
(a) Monitor or review the actions of any other separate
trustee of the aggregate trust.
(b) Notify or warn a settlor or beneficiary of the aggregate
trust of a breach of trust or possible breach of trust on the part
of any other separate trustee.
(8) If a separate trustee notifies or warns a settlor or
beneficiary as described in subsection (7)(b), both of the
following apply:
(a) The separate trustee is not considered to have accepted
the separate trust associated with the separate trustee function of
the other separate trustee.
(b) The separate trustee does not have a duty to notify or
warn a settlor or beneficiary of any other breach or possible
breach of trust on the part of any other separate trustee.
(9) Absent clear and convincing evidence of collusion in a
breach of trust, all of the following apply:
(a) A separate trustee is not liable for the act or omission
of any other separate trustee of the aggregate trust.
(b) A separate trustee in breach of a trustee duty of a
separate trustee function of the separate trustee is the only
separate trustee of the aggregate trust obliged to defend or
otherwise respond to any proceeding brought by a trust beneficiary
regarding that breach.
(c) Except as provided in subdivision (d), a separate trustee
is liable to trust beneficiaries for breach of a trustee duty of a
separate trustee function of the separate trustee as if the other
separate trustees of the aggregate trust were not in office and the
separate trustee were the sole trustee of the aggregate trust.
(d) A separate trustee may be liable concerning a trustee
function of another separate trustee of the aggregate trust only
for the separate trustee's own actions in the performance of
ministerial acts pursuant to the other separate trustee's
instruction and only to the extent the separate trustee acts in bad
faith.
(10) As used in this section:
(a) "Affirmative action" by a separate trustee does not
include a failure to act.
(b) "Aggregate trust" means the inclusive set of separate
relations of trust to be separately accepted by the separate
trustees under a given separate trustees provision.
(c) "Cotrusteeship" means a set of 1 or more cotrustees whose
relations to one another in respect of trust property is governed
by section 7703.
(d) "Separate distributions trustee" means a person or a
cotrusteeship that is designated by a separate trustees provision
to exercise discretion as a trustee or trustees under a
discretionary trust provision.
(e) "Separate investment trustee" means a person or a
cotrusteeship that is designated by a separate trustees provision
to perform the trustee investment function as a trustee or
trustees.
(f) "Separate resultant trustee" means a person or a
cotrusteeship that is designated as a trustee or trustees to
perform all trustee functions not allocated by the separate
trustees provision to a separate investment trustee or to any
separate distributions trustee.
(g) "Separate trustee" means a separate resultant trustee,
separate investment trustee, or separate distributions trustee.
(h) "Separate trustees provision" means a trust provision that
designates or provides a method of designating both of the
following:
(i) A separate resultant trustee.
(ii) A separate investment trustee or 1 or more separate
distributions trustees.
(i) "Separate trusteeship" means the office of a separate
trustee.
(j) "Trustee investment function" means a trustee function
expressly allocated by the separate trustees provision to a
separate investment trustee. A trustee investment function may be
broadly or narrowly defined by the separate trustees provision and
may include any of the following:
(i) Determining for trust investment purposes the retention,
purchase, sale, assignment, exchange, tender, or encumbrance of
trust property and the investment and reinvestment of undistributed
income and principal of the aggregate trust.
(ii) Management, control, and exercise of voting powers
related directly or indirectly to any trust asset.
(iii) For nonpublicly traded investments or property for which
there is no readily available market value, determining the
methodology for valuing the property and the frequency of
valuations.
Sec. 7704. (1) A vacancy in a trusteeship occurs if 1 or more
of the following occur:
(a) A person designated as trustee rejects the trusteeship.
(b) A person designated as trustee cannot be identified or
does not exist.
(c) A trustee resigns.
(d) A trustee is disqualified or removed.
(e) A trustee dies.
(f) A guardian or conservator is appointed for an individual
serving as trustee.
(2) If 1 or more cotrustees remain in office, a vacancy in a
trusteeship need not be filled. Though any separate trustee may
comprise a cotrusteeship, the relation between respective separate
trustees serving under a given separate trustees provision is not
itself
a cotrusteeship. A vacancy in a
trusteeship shall must be
filled if the vacancy leaves either of the following:
(a)
A trust has no that is not subject to a separate trustees
provision as of the time of the vacancy without any remaining
trustee.
(b) Any of the several separate trusteeships governed by an
operative separate trustees provision without any remaining
trustee.
(3) If a vacancy in a trusteeship of a noncharitable trust is
to
be filled, the vacancy shall must
be filled in the following
order of priority:
(a) In the manner designated by the terms of the trust.
(b) By a person appointed by the court.
(4) If a vacancy in a trusteeship of a charitable trust is to
be
filled, the vacancy shall must
be filled in the following order
of priority:
(a) In the manner designated by the terms of the trust.
(b) By a person selected by the charitable organizations
expressly designated to receive distributions under the terms of
the trust if the attorney general concurs in the selection.
(c) By a person appointed by the court.
(5) Whether or not a vacancy in a trusteeship exists or is
required to be filled, the court may appoint an additional trustee
or special fiduciary upon the showing of good cause.
(6) As used in this section, "cotrusteeship", "separate
trustee", "separate trustees provision", and "separate trusteeship"
mean those terms as defined in section 7703b.
