Bill Text: MI HB6131 | 2017-2018 | 99th Legislature | Enrolled
Bill Title: Probate; trusts; powers and duties of a directed trustee; provide for. Amends secs. 7103, 7105, 7108, 7411 & 7703 of 1998 PA 386 (MCL 700.7103 et seq.) & repeals sec. 7809 of 1998 PA 386 (MCL 700.7809).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2018-12-31 - Assigned Pa 664'18 [HB6131 Detail]
Download: Michigan-2017-HB6131-Enrolled.html
STATE OF MICHIGAN
99TH LEGISLATURE
REGULAR SESSION OF 2018
Introduced by Reps. Iden, Kesto and Calley
ENROLLED HOUSE BILL No. 6131
AN ACT to amend 1998 PA 386, entitled “An act to codify, revise, consolidate, and classify aspects of the law relating to wills and intestacy, relating to the administration and distribution of estates of certain individuals, relating to trusts, and relating to the affairs of certain individuals under legal incapacity; to provide for the powers and procedures of the court that has jurisdiction over these matters; to provide for the validity and effect of certain transfers, contracts, and deposits that relate to death; to provide procedures to facilitate enforcement of certain trusts; and to repeal acts and parts of acts,” by amending sections 7103, 7105, 7108, 7411, and 7703 (MCL 700.7103, 700.7105, 700.7108, 700.7411, and 700.7703), section 7103 as amended by 2012 PA 483, sections 7105 and 7411 as amended by 2010 PA 325, and sections 7108 and 7703 as added by 2009 PA 46; and to repeal acts and parts of acts.
The People of the State of Michigan enact:
Sec. 7103. As used in this article:
(a) “Action”, with respect to a trustee, includes an act or a failure to act.
(b) “Ascertainable standard” means a standard relating to an individual’s health, education, support, or maintenance within the meaning of section 2041(b)(1)(A) or 2514(c)(1) of the internal revenue code of 1986, 26 USC 2041 and 2514.
(c) “Charitable trust” means a trust, or portion of a trust, created for a charitable purpose described in section 7405(1).
(d) “Discretionary trust provision” means a provision in a trust, regardless of whether the terms of the trust provide a standard for the exercise of the trustee’s discretion and regardless of whether the trust contains a spendthrift provision, that provides that the trustee has discretion, or words of similar import, to determine 1 or more of the following:
(i) Whether to distribute to or for the benefit of an individual or a class of beneficiaries the income or principal or both of the trust.
(ii) The amount, if any, of the income or principal or both of the trust to distribute to or for the benefit of an individual or a class of beneficiaries.
(iii) Who, if any, among a class of beneficiaries will receive income or principal or both of the trust.
(iv) Whether the distribution of trust property is from income or principal or both of the trust.
(v) When to pay income or principal, except that a power to determine when to distribute income or principal within or with respect to a calendar or taxable year of the trust is not a discretionary trust provision if the distribution must be made.
(e) “Interests of the trust beneficiaries” means the beneficial interests provided in the terms of the trust.
(f) “Power of withdrawal” means a presently exercisable general power of appointment other than a power that is either of the following:
(i) Exercisable by a trustee and limited by an ascertainable standard.
(ii) Exercisable by another person only on consent of the trustee or a person holding an adverse interest.
(g) “Qualified trust beneficiary” means a trust beneficiary to whom 1 or more of the following apply on the date the trust beneficiary’s qualification is determined:
(i) The trust beneficiary is a distributee or permissible distributee of trust income or principal.
(ii) The trust beneficiary would be a distributee or permissible distributee of trust income or principal if the interests of the distributees under the trust described in subparagraph (i) terminated on that date without causing the trust to terminate.
(iii) The trust beneficiary would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.
(h) “Revocable”, as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest. A trust’s characterization as revocable is not affected by the settlor’s lack of capacity to exercise the power of revocation, regardless of whether an agent of the settlor under a durable power of attorney, a conservator of the settlor, or a plenary guardian of the settlor is serving.
(i) “Settlor” means a person, including a testator or a trustee, who creates a trust. If more than 1 person creates a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution. The lapse, release, or waiver of a power of appointment does not cause the holder of a power of appointment to be treated as a settlor of the trust.
(j) “Spendthrift provision” means a term of a trust that restrains either the voluntary or involuntary transfer of a trust beneficiary’s interest.
(k) “Support provision” means a provision in a trust that provides the trustee shall distribute income or principal or both for the health, education, support, or maintenance of a trust beneficiary, or language of similar import. A provision in a trust that provides a trustee has discretion whether to distribute income or principal or both for these purposes or to select from among a class of beneficiaries to receive distributions under the trust provision is not a support provision, but rather is a discretionary trust provision.
(l) “Trust beneficiary” means a person to whom 1 or both of the following apply:
(i) The person has a present or future beneficial interest in a trust, vested or contingent.
(ii) The person holds a power of appointment over trust property in a capacity other than that of trustee or trust director.
(m) “Trust director” means that term as defined in section 7703a.
(n) “Trust instrument” means a governing instrument that contains the terms of the trust, including any amendment to a term of the trust.
Sec. 7105. (1) Except as otherwise provided in the terms of the trust, this article governs the duties and powers of a trustee, relations among trustees, and the rights and interests of a trust beneficiary.
(2) The terms of a trust prevail over any provision of this article except the following:
(a) The requirements under sections 7401 and 7402(1)(e) for creating a trust.
(b) Except as otherwise provided in sections 7703a and 7703b, the duty of a trustee to administer a trust in accordance with section 7801.
(c) The requirement under section 7404 that the trust have a purpose that is lawful, not contrary to public policy, and possible to achieve.
(d) The power of the court to modify or terminate a trust under sections 7410, 7412(1) to (3), 7414(2), 7415, and 7416.
(e) The effect of a spendthrift provision, a support provision, and a discretionary trust provision on the rights of certain creditors and assignees to reach a trust as provided in part 5.
(f) The power of the court under section 7702 to require, dispense with, or modify or terminate a bond.
(g) The power of the court under section 7708(2) to adjust a trustee’s compensation specified in the terms of the trust that is unreasonably low or high.
(h) The obligations imposed on a trust director in section 7703a(4) and (5).
(i) The duty under section 7814(2)(a) to (c) to provide beneficiaries with the terms of the trust and information about the trust’s property, and to notify qualified trust beneficiaries of an irrevocable trust of the existence of the trust and the identity of the trustee.
(j) The power of the court to order the trustee to provide statements of account and other information under section 7814(4).
(k) The effect of an exculpatory term under section 7703a(5)(b) or 7908.
(l) The effect of a release of a trustee or trust director from liability for breach of trust under section 7703a(8).
(m) The rights under sections 7910 to 7913 of a person other than a trustee or beneficiary.
(n) Periods of limitation under this article for commencing a judicial proceeding.
(o) The power of the court to take action and exercise jurisdiction.
(p) The subject-matter jurisdiction of the court and venue for commencing a proceeding as provided in sections 7203 and 7204.
(q) The requirement under section 7113 that a provision in a trust that purports to penalize an interested person for contesting the trust or instituting another proceeding relating to the trust shall not be given effect if probable cause exists for instituting a proceeding contesting the trust or another proceeding relating to the trust.
(r) The requirement under section 7703b(2)(d) regarding the eligibility of a trust’s sole beneficiary to be a separate trustee as that term is defined in section 7703b.
Sec. 7108. (1) Without precluding other means for establishing a sufficient connection with the designated jurisdiction, terms of a trust designating the principal place of administration are valid and controlling if any of the following apply:
(a) A trustee’s principal place of business is located in or a trustee is a resident of the designated jurisdiction.
(b) A trust director’s principal place of business is located in, or a trust director is a resident of, the designated jurisdiction.
(c) All or part of the administration occurs in the designated jurisdiction.
(2) A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the qualified trust beneficiaries.
(3) Without precluding the right of the court to order, approve, or disapprove a transfer, the trustee, in furtherance of the duty prescribed by subsection (2), may transfer the trust’s principal place of administration to another state or to a jurisdiction outside of the United States.
(4) The trustee shall notify the qualified trust beneficiaries in writing of a proposed transfer of a trust’s principal place of administration not less than 63 days before initiating the transfer. The notice of proposed transfer must include all of the following:
(a) The name of the jurisdiction to which the principal place of administration is to be transferred.
(b) The address and telephone number at the new location at which the trustee can be contacted.
(c) An explanation of the reasons for the proposed transfer.
(d) The date on which the proposed transfer is anticipated to occur.
(e) In a conspicuous manner, the date, not less than 63 days after the giving of the notice, by which a qualified trust beneficiary must notify the trustee in writing of an objection to the proposed transfer.
(5) The authority of a trustee under this section to transfer a trust’s principal place of administration without the approval of the court terminates if a qualified trust beneficiary notifies the trustee in writing of an objection to the proposed transfer on or before the date specified in the notice.
(6) In connection with a transfer of the trust’s principal place of administration, the trustee may transfer some or all of the trust property to a successor trustee designated in the terms of the trust or appointed under section 7704.
(7) The view of an adult beneficiary must be given weight in determining the suitability of the trustee and the place of administration.
Sec. 7411. (1) Subject to subsection (2), a noncharitable irrevocable trust may be modified or terminated in any of the following ways:
(a) By the court on the consent of the trustee and the qualified trust beneficiaries, if the court concludes that the modification or termination of the trust is consistent with the material purposes of the trust or that continuance of the trust is not necessary to achieve any material purpose of the trust.
(b) On the consent of the qualified trust beneficiaries and a person or committee that is given the power under the terms of the trust to grant, veto, or withhold approval of termination or modification of the trust.
(c) By a trustee or other person or committee that is given a power by the terms of the trust to direct the termination or modification of the trust.
(2) Subsection (1) does not apply to irrevocable trusts created before or to revocable trusts that become irrevocable before April 1, 2010.
(3) Notice of any proceeding to terminate or modify a trust must be given to the settlor, the settlor’s representative if the petitioner has a reasonable basis to believe the settlor is an incapacitated individual, the trust director, if any, a powerholder described in subsection (1)(b) or (c), if any, the trustee, and any other person named in the terms of the trust to receive notice of such a proceeding.
(4) On termination of a trust under subsection (1), the trustee shall distribute the trust property as agreed by the qualified trust beneficiaries.
(5) If the trustee fails or refuses to consent, or fewer than all of the qualified trust beneficiaries consent, to a proposed modification or termination of the trust under subsection (1), the modification or termination may be approved by the court if the court is satisfied that both of the following apply:
(a) If the trustee and all of the qualified trust beneficiaries had consented, the trust could have been modified or terminated under this section.
(b) The interests of a qualified trust beneficiary who does not consent will be adequately protected.
(6) As used in this section, “settlor’s representative” means the settlor’s agent under a durable power of attorney, if the agent is known to the petitioner, or, if an agent has not been appointed, the settlor’s conservator, plenary guardian, or partial guardian.
Sec. 7703. (1) Except as otherwise provided in this section, cotrustees shall act by majority decision.
(2) A cotrustee shall participate in the performance of a trustee’s function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other law, or other temporary incapacity or the cotrustee has properly delegated the performance of the function to another trustee.
(3) If prompt action is necessary to avoid injury to the trust property, the remaining cotrustee or a majority of the remaining cotrustees may act for the trust if either of the following applies:
(a) A cotrustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity.
(b) A cotrustee who is available fails or refuses to participate in the administration of the trust following notice from the remaining cotrustee or cotrustees.
(4) By agreement of the trustees, a trustee may delegate to a cotrustee 1 or both of the following:
(a) Any power that is permitted to be delegated under section 7817(v) to an agent who is not a trustee.
(b) Any power that can only be performed by a trustee, if notice of the delegation is provided to the qualified trust beneficiaries within 28 days.
(5) Unless a delegation under subsection (4) was irrevocable, a trustee may revoke the delegation previously made. A revocation under this subsection must be in writing and must be given to all of the remaining cotrustees. If notice of the delegation was required to be provided to the qualified trust beneficiaries, notice of the revocation must be given to the qualified trust beneficiaries within 28 days after the revocation.
(6) If 2 or more trustees own securities, their acts with respect to voting have 1 of the following effects:
(a) If only 1 trustee votes, in person or by proxy, that trustee’s act binds all of the trustees.
(b) If more than 1 trustee votes, in person or by proxy, the act of the majority so voting binds all of the trustees.
(c) If more than 1 trustee votes, in person or by proxy, but the vote is evenly split on a particular matter, each faction is entitled to vote the securities proportionately.
(7) A trustee is not liable for the action or omission of a cotrustee if all of the following apply:
(a) The trustee is not unavailable to perform a trustee’s function because of absence, illness, disqualification under other law, or other incapacity or has not properly delegated the performance of the function to a cotrustee.
(b) The trustee is aware of but does not join in the action or omission of the cotrustee.
(c) The trustee dissents in writing to each cotrustee at or before the time of the action or omission.
(8) A trustee that is not aware of an action by a cotrustee is not liable for that action unless the trustee should have known that the action would be taken and, if the trustee had known, would have had an affirmative duty to take action to prevent the action.
(9) A dissenting trustee that joins in an action at the direction of the majority of the trustees and that notified any cotrustee in writing of the dissent at or before the time of the action is not liable for the action.
(10) Notwithstanding any provision in this section, the terms of a trust may relieve a cotrustee from duty and liability with respect to another cotrustee’s exercise or nonexercise of a power of the other cotrustee to the same extent that a directed trustee described in section 7703a may be relieved from duty and liability with respect to a trust director’s power of direction under section 7703a.
Enacting section 1. Section 7809 of the estates and protected individuals code, 1998 PA 386, MCL 700.7809, is repealed.
Enacting section 2. 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. 6130.
Clerk of the House of Representatives
Secretary of the Senate
Approved
Governor
