Bill Text: MI HB6130 | 2017-2018 | 99th Legislature | Engrossed
Bill Title: Probate; trusts; powers and duties of a directed trustee; provide for. Amends 1998 PA 386 (MCL 700.1101 - 700.8206) by adding sec. 7703a.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2018-12-31 - Assigned Pa 663'18 [HB6130 Detail]
Download: Michigan-2017-HB6130-Engrossed.html
HB-6130, As Passed House, November 28, 2018
SUBSTITUTE FOR
HOUSE BILL NO. 6130
A bill to amend 1998 PA 386, entitled
"Estates and protected individuals code,"
(MCL 700.1101 to 700.8206) by adding section 7703a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 7703a. (1) Excepting the rules of construction in
subsection (2), this section does not apply to:
(a) A power of appointment that is intended to be held by the
donee in a nonfiduciary capacity.
(b) A power that is intended to be held in a nonfiduciary
capacity that enables the holder to create a power of appointment,
regardless of whether the created power is intended to be held by
the donee of the created power in a fiduciary or a nonfiduciary
capacity.
(c) A power to appoint or remove a trustee or trust director.
(d) A power of a settlor over a trust to the extent the
settlor has a power to revoke the trust.
(e) A power of a beneficiary over a trust to the extent the
exercise or nonexercise of the power affects either of the
following:
(i) The beneficial interest of the beneficiary.
(ii) The beneficial interest of another beneficiary
represented by the beneficiary under part 3 of this article with
respect to the exercise or nonexercise of the power.
(f) A power over a trust if both of the following apply:
(i) The terms of the trust provide that the power is held in a
nonfiduciary capacity.
(ii) The power must be held in a nonfiduciary capacity to
achieve the settlor's tax objectives under the internal revenue
code of 1986, 26 USC 1 to 9834.
(2) All of the following rules of construction apply to powers
under a trust:
(a) A power described in subsection (1) that is intended to be
held in a nonfiduciary capacity is not subject to fiduciary
constraint and may be exercised by the holder in any manner
consistent with the scope of the power and any express requirements
or limitations imposed by the terms of the trust. A trustee shall
take action to comply with the exercise or nonexercise of a power
described in this subdivision. A trustee is not liable for taking
an action required under this subdivision. However, a trustee shall
not comply with the exercise or nonexercise of a power described in
this subdivision if the exercise or nonexercise was obtained with
the trustee's collusion or by the trustee's fraud and compliance
would be in pursuance of that collusion or fraud.
(b) Except as provided in subdivision (c), all of the
following powers are intended to be held in a nonfiduciary capacity
if granted to a person other than a trustee of the trust:
(i) A power of appointment, including a power of appointment
in the form of a power to do any of the following:
(A) Adjust between principal and income.
(B) Convert to or from a unitrust.
(C) Modify, reform, or terminate the trust.
(D) Distribute trust assets in further trust.
(ii) A power that enables the holder to create a power of
appointment.
(c) A power to do any of the following is intended to be held
in a fiduciary capacity even though the holder is not a trustee of
the trust if the holder otherwise does not have a beneficial
interest in the trust:
(i) Adjust between principal and income.
(ii) Convert to or from a unitrust.
(iii) Modify, reform, or terminate the trust.
(iv) Distribute trust assets in further trust.
(3) Subject to subsection (4), the terms of a trust may grant
a power of direction to a trust director. Both of the following
rules of construction apply to powers of direction:
(a) A trust director may exercise any further power
appropriate to the exercise or nonexercise of the director's power
of direction.
(b) Trust directors with joint powers must act by majority
decision.
(4) A trust director is subject to the same rules as a trustee
in a like position and under similar circumstances in the exercise
or nonexercise of a power of direction or a further power under
subsection (3)(a) regarding both of the following:
(a) A payback provision in the terms of the trust necessary
for compliance with the reimbursement requirements of Medicaid law
in section 1917 of the social security act, 42 USC 1396p(d)(4)(A).
(b) A charitable interest in the trust, including required
notices regarding the interest to the attorney general.
(5) Subject to subsection (6), both of the following apply
with respect to a power of direction or a further power under
subsection (3)(a):
(a) A trust director has the same fiduciary duty and liability
in the exercise or nonexercise of the power as a sole trustee in a
like position and under similar circumstances if the power is held
individually or, if the power is held jointly with a trustee or
another trust director, as a cotrustee in a like position and under
similar circumstances.
(b) A term of a trust that relieves a trust director from
liability for breach of fiduciary duty is unenforceable to the
extent that either of the following applies:
(i) The term relieves the trust director of liability for acts
committed in bad faith or with reckless indifference to the
purposes of the trust or the interests of the trust beneficiaries.
(ii) The term was inserted as the result of an abuse by the
trust director of a fiduciary or confidential relationship to the
settlor.
(6) If a trust director is licensed, certified, or otherwise
authorized or permitted by law other than this section to provide
health care in the ordinary course of the director's business or
practice of a profession, to the extent the director acts in that
capacity, the director has no duty or liability under this section.
(7) A directed trustee shall take action to comply with the
exercise or nonexercise of a power of direction or further power of
a trust director under subsection (3)(a). A directed trustee is not
liable for taking an action required under this subsection.
However, a directed trustee shall not comply with the exercise or
nonexercise of a power described in this subsection if the exercise
or nonexercise was obtained with the directed trustee's collusion
or by the directed trustee's fraud and compliance would be in
pursuance of that collusion or fraud.
(8) An exercise of a power of direction under which a trust
director may release a trustee or another trust director from
liability for breach of trust is not effective if any of the
following apply:
(a) The breach involved the trustee's or other director's bad
faith or reckless indifference to the purposes of the trust or the
interests of the trust beneficiaries.
(b) The release was induced by improper conduct of the trustee
or other director in procuring the release.
(c) At the time of the release, the director did not know the
material facts relating to the breach.
(9) Subject to subsection (11), a trustee shall provide
information to a trust director to the extent the information is
reasonably related to both of the following:
(a) The powers or duties of the trustee.
(b) The powers or duties of the director.
(10) Subject to subsection (13), a trust director shall
provide information to a trustee or another trust director to the
extent the information is reasonably related to both of the
following:
(a) The powers or duties of the director.
(b) The powers or duties of the trustee or other director.
(11) A trustee does not have a duty to do either of the
following:
(a) Monitor a trust director.
(b) Inform or give advice to a settlor, beneficiary, trustee,
or trust director concerning an instance in which the trustee might
have acted differently than the director.
(12) By taking an action described in subsection (11), a
trustee does not assume the duty excluded by subsection (11).
(13) A trust director does not have a duty to do either of the
following:
(a) Monitor a trustee or another trust director.
(b) Inform or give advice to a settlor, beneficiary, trustee,
or another trust director concerning an instance in which the
director might have acted differently than a trustee or another
trust director.
(14) By taking an action described in subsection (13), a trust
director does not assume the duty excluded by subsection (13).
(15) A trustee that acts in reliance on information provided
by a trust director is not liable for a breach of trust to the
extent the breach resulted from the reliance if the trustee's
reliance is not in bad faith.
(16) A trust director that acts in reliance on information
provided by a trustee or another trust director is not liable for a
breach of trust to the extent the breach resulted from the reliance
if the trust director's reliance is not in bad faith.
(17) An action against a trust director for breach of trust
must be commenced within the same limitation period as an action
for breach of trust against a trustee in a like position and under
similar circumstances under section 7905.
(18) A report or accounting has the same effect on the
limitation period for an action against a trust director for breach
of trust that the report or accounting would have in an action for
breach of trust against a trustee in a like position and under
similar circumstances under section 7905.
(19) In an action against a trust director for breach of
trust, the director may assert the same defenses a trustee in a
like position and under similar circumstances could assert in an
action for breach of trust against the trustee.
(20) By accepting appointment as a trust director, the
director submits personally to jurisdiction in this state regarding
any matter related to a power or duty of the director. This section
does not preclude use of another method to obtain jurisdiction over
a trust director.
(21) The rules applicable to a trusteeship apply to a trust
directorship regarding all of the following matters:
(a) Acceptance under section 7701(1).
(b) Giving of bond to secure performance under section 7702.
(c) Reasonable compensation under section 7708.
(d) Resignation under section 7705.
(e) Removal under section 7706.
(f) Vacancy and appointment of successors under section 7704,
treating any instance in which 2 or more trust directors have the
same power of direction as analogous to a cotrusteeship for
purposes of section 7704(2).
(22) The application of this section with respect to a given
trust is subject to both of the following:
(a) If the trust was created before the effective date of the
amendatory act that added this section, this section applies only
to decisions or actions taken on or after that date.
(b) If the trust's principal place of administration is
changed to this state on or after the effective date of the
amendatory act that added this section, this section applies only
to decisions or actions taken on or after the date of the change.
(23) In applying and construing the provisions of this section
that are based on the uniform directed trust act, weight should be
given to the goal of promoting uniformity in the law on directed
trusteeships among the states that have enacted the uniform
directed trust act.
(24) As used in section:
(a) "Breach of trust" includes a violation by a trust director
or trustee of a duty imposed on that director or trustee by the
terms of the trust or by this article.
(b) "Directed trustee" means a trustee that is subject to a
power of direction.
(c) "Donee" means that term as defined in section 2 of the
powers of appointment act of 1967, 1967 PA 224, MCL 556.112.
(d) "Power of appointment" means that term as defined in
section 2 of the powers of appointment act of 1967, 1967 PA 224,
MCL 556.112.
(e) "Power of direction" means a power over a trust granted by
the terms of the trust to the extent the power is exercisable while
the person to whom it is granted is not serving as a trustee. Power
of direction includes a power over the investment, management, or
distribution of trust property or other matters of trust
administration. Power of direction does not include the powers
described in subsection (1).
(f) "Trust director" means an organization permitted to
exercise trust powers in this state as described in section 1105(2)
of the banking code of 1999, 1999 PA 276, MCL 487.11105, or an
individual, if that person is granted a power of direction whether
or not either of the following applies:
(i) The terms of the trust refer to the person as a trust
director.
(ii) The person is a beneficiary or settlor of the trust.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 99th Legislature are
enacted into law:
(a) House Bill No. 6129.
(b) House Bill No. 6131.
