Bill Text: MI SB0597 | 2015-2016 | 98th Legislature | Chaptered
Bill Title: Probate; trusts; qualified dispositions in trust act; enact. Creates new act.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2016-12-13 - Assigned Pa 0330'16 With Immediate Effect [SB0597 Detail]
Download: Michigan-2015-SB0597-Chaptered.html
Act No. 330
Public Acts of 2016
Approved by the Governor
December 8, 2016
Filed with the Secretary of State
December 8, 2016
EFFECTIVE DATE: March 8, 2017
STATE OF MICHIGAN
98TH LEGISLATURE
REGULAR SESSION OF 2016
Introduced by Senator Schuitmaker
ENROLLED SENATE BILL No. 597
AN ACT relating to certain trusts; to provide for the powers and procedures of the court that has jurisdiction of certain trusts; to provide for the validity and effect of certain transfers and contracts that relate to certain trusts; to provide remedies; and to provide procedures to facilitate enforcement of certain trusts.
The People of the State of Michigan enact:
Sec. 1. This act shall be known and may be cited as the “qualified dispositions in trust act”.
Sec. 2. As used in this act:
(a) “Advisor” means a person who is given authority by the terms of a trust instrument to remove, appoint, or both, 1 or more trustees or to direct, consent to, approve, or veto a trustee’s actual or proposed investment or distribution decisions. A person is considered an advisor even if the person is denominated by another title, such as trust protector. Any person may serve as an advisor.
(b) “Ascertainable standard” means that term as defined in section 7103 of the estates and protected individuals code, 1998 PA 386, MCL 700.7103.
(c) “Claim” means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
(d) “Creditor” means, with respect to a transferor, a person who has a claim whether directly or indirectly.
(e) “Debt” means liability on a claim.
(f) “Discretionary trust provision” means that term as defined in section 7103 of the estates and protected individuals code, 1998 PA 386, MCL 700.7103.
(g) “Disposition” means a transfer of property that either creates a new fiduciary relation between at least 1 trustee and a trust beneficiary or newly subjects property to a preexisting fiduciary relation between at least 1 trustee and a trust beneficiary. The transfer may be by conveyance or assignment, by exercise of a power of appointment, including a power to substitute 1 trustee for another or to add 1 or more new trustees, or a power of revocation or amendment or, except as provided in this subdivision, by disclaimer, release, or relinquishment. A disposition, however, does not include a disclaimer, release, or relinquishment of property that was previously the subject of a qualified disposition. For purposes of this subdivision, as between a given trustee and a given beneficiary, a new fiduciary relation is created whenever the terms of the governing trust instrument are materially altered including alteration by an election described in section 5(6) with respect to the trust beneficiary in question.
(h) “Distribution decision” means a decision regarding the distribution of trust property to or for the benefit of a trust beneficiary. Distribution decision also includes a decision regarding whether to make or guaranty a loan to or for the benefit of a trust beneficiary.
(i) “Fiduciary disposition” means a disposition made by a trustee acting in a fiduciary capacity.
(j) “Fiduciary qualified disposition” means a qualified disposition made by a trustee acting in a fiduciary capacity.
(k) “General power of appointment” means a general power as that term is defined in section 2 of the powers of appointment act of 1967, 1967 PA 224, MCL 556.112. However, a power exercisable in favor of the donee, his or her estate, his or her creditors, or the creditors of his or her estate that is limited by an ascertainable standard is not a general power of appointment.
(l) “Investment decision” means a decision regarding whether or not to purchase, sell, exchange, tender, or pledge any trust property. Investment decision also includes decisions regarding other transactions affecting the ownership of or rights in any trust property, other than distribution decisions. Unless otherwise provided in the trust instrument, investment decision includes a decision regarding whether to make or guaranty a loan to or on behalf of an entity in which the trust owns an interest, directly or indirectly, in the entity’s debt or equity.
(m) “Organization” means that term as defined in section 1106 of the estates and protected individuals code, 1998 PA 386, MCL 700.1106.
(n) “Person” means that term as defined in section 1106 of the estates and protected individuals code, 1998 PA 386, MCL 700.1106.
(o) “Property” means that term as defined in section 1106 of the estates and protected individuals code, 1998 PA 386, MCL 700.1106.
(p) “Qualified disposition” means, subject to subparagraphs (iii) and (iv), a disposition after which both subparagraphs (i) and (ii) apply to the subject property:
(i) The subject property is owned by 1 or more trustees at least 1 of whom is a qualified trustee.
(ii) The subject property is governed by a trust instrument including, but not limited to, a trust instrument as modified by an election described in section 5(6), under which the transferor only has rights, powers, and interests that are permitted by section 4(2).
(iii) A disposition is not a qualified disposition to the extent that, at the time of the disposition, the transferor is in arrears on a child support obligation by more than 30 days.
(iv) A disposition is not a qualified disposition if a transferor or any person that is related or subordinate to the transferor within the meaning of section 672(c) of the internal revenue code of 1986, 26 USC 672(c), may act as an advisor. For the purposes of this subparagraph, act as an advisor does not include the power to direct the investment decisions of the trust, the power to veto a distribution from the trust, or the right to remove a trustee or advisor and to appoint a new trustee or advisor.
(q) “Qualified trust beneficiary” means that term as defined in section 7103 of the estates and protected individuals code, 1998 PA 386, MCL 700.7103.
(r) “Qualified trustee” means a person, other than the transferor, who meets all of the following conditions:
(i) For an individual, the individual is a resident of this state or, in all other cases, is authorized by the law of this state to act as a trustee and whose activities are subject to supervision by the department of insurance and financial services, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, or the Office of Thrift Supervision.
(ii) The person maintains or arranges for custody in this state of some or all of the property that is the subject of the qualified disposition and administers all or part of the trust in this state.
(iii) The person’s usual place of business where some of the records pertaining to the trust are kept is located in this state or, if the person does not have such a place of business, the person’s residence is in this state. For a corporate trustee, the usual place of business is the business location of the primary trust officer.
(s) “Retirement benefit” means an interest in 1 of the following types of assets if payable to a trust as a beneficiary or owned by the trust: a qualified or nonqualified annuity; a benefit under a qualified or nonqualified plan of deferred compensation; any account in, or benefit payable under, any pension, profit-sharing, stock bonus, or other qualified retirement plan; any individual retirement account or trust; and all benefits under a plan or arrangement that is established under section 401, 403, 408, 408A, or 457 or a similar provision of the internal revenue code of 1986, 26 USC 401, 403, 408, 408A, and 457.
(t) “Settlor” means that term as defined in section 7103 of the estates and protected individuals code, 1998 PA 386, MCL 700.7103.
(u) “Special power of appointment” means a special power as defined in section 2 of the powers of appointment act of 1967, 1967 PA 224, MCL 556.112.
(v) “Spendthrift provision” means that term as defined in section 7103 of the estates and protected individuals code, 1998 PA 386, MCL 700.7103.
(w) “Spouse” and “former spouse” mean only an individual to whom the transferor was married at, or before, the time the qualified disposition is made.
(x) “Support provision” means that term as defined in section 7103 of the estates and protected individuals code, 1998 PA 386, MCL 700.7103.
(y) “Transferor” means any of the following, as applicable:
(i) A person and, for more than 1 owner of undivided interests, each of several persons, who, as a beneficial owner of certain property, or as the holder of a general power of appointment over certain property, directly or indirectly, makes a disposition of the property or causes a disposition to be made.
(ii) For a fiduciary disposition, the person or persons who, as of the time of the fiduciary disposition, most recently fit the description in subparagraph (i) with respect to the property subject to the fiduciary disposition.
(z) “Trust beneficiary” means that term as defined in section 7103 of the estates and protected individuals code, 1998 PA 386, MCL 700.7103.
(aa) “Trust instrument” means an instrument appointing a qualified trustee or qualified trustees for the property that is the subject of a disposition to which all of the following apply:
(i) The instrument expressly incorporates the law of this state to govern the validity, construction, and administration of the trust.
(ii) The instrument is irrevocable.
(iii) The instrument provides that the interest of the transferor or other trust beneficiary in trust property may not be transferred, assigned, pledged, or mortgaged, whether voluntarily or involuntarily, before the qualified trustee or qualified trustees actually distribute trust property to the trust beneficiary, and that provision of the trust instrument is considered a restriction on the transfer of the transferor’s beneficial interest in the trust that is enforceable under applicable nonbankruptcy law within the meaning of section 541(c)(2) of the bankruptcy code 11 USC 541(c)(2).
Sec. 3. (1) The probate court has exclusive jurisdiction over an action that addresses either of the following questions:
(a) Whether a transfer is a qualified disposition.
(b) The extent of the transferor’s interest in, or the income from, a qualified disposition.
(2) The probate court has concurrent jurisdiction over an action brought under section 5(2).
(3) Venue for a proceeding under subsection (1) or (2) is as follows:
(a) For a trust registered under section 7209 of the estates and protected individuals code, 1998 PA 386, MCL 700.7209, the place of registration.
(b) For a trust that is not registered, in any place where the trust properly could be registered.
(4) If a trust has no qualified trustee and has not been registered, and there is no place in this state where the trust properly could be registered, venue for a proceeding under subsection (1) or (2) is in the following order of priority, except to the extent otherwise provided by court rule:
(a) In a county in this state in which the immediately preceding qualified trustee had its usual place of business or residence.
(b) In a county in this state in which a trust beneficiary resides.
(c) In a county in this state in which any trust property is located.
(d) In any county in this state.
Sec. 4. (1) A transferor has only the powers and rights that are conferred by the trust instrument. Except as otherwise provided in subsection (2), a transferor does not have powers or rights with respect to the property that is the subject of a qualified disposition or the income from the property, and any agreement or understanding that purports to grant or permit the retention of any greater powers or rights is void.
(2) A trust instrument may provide for 1 or more of the following rights, powers, or interests, none of which grants or is considered, either alone or in any combination, a power to revoke a trust:
(a) The transferor’s power to direct the investment decisions of the trust.
(b) The transferor’s power to veto a distribution from the trust.
(c) A special power of appointment exercisable by will or other written instrument of the transferor effective only on the transferor’s death.
(d) The transferor’s potential or actual receipt of income, including rights to the income retained in the trust instrument.
(e) The transferor’s potential or actual receipt of income or principal from a charitable remainder unitrust or charitable remainder annuity trust as those terms are defined in section 664 of the internal revenue code of 1986, 26 USC 664; and the transferor’s right, at any time by written instrument delivered to the trustee, to release the transferor’s interest in the trust, in whole or in part, in favor of a charitable organization that has or charitable organizations that have a succeeding beneficial interest in the trust.
(f) The transferor’s potential or actual receipt of income or principal from a grantor retained annuity trust or grantor retained unitrust as those terms are described in section 2702 of the internal revenue code of 1986, 26 USC 2702, or the transferor’s receipt each year of a percentage, not to exceed 5%, as provided in the governing instrument of the initial value of the trust property which value may be described either as a percentage or a fixed amount or determined from time to time under the governing instrument.
(g) The transferor’s potential or actual receipt or use of principal if the potential or actual receipt or use of principal would be the result of a trustee’s acting under any of the following:
(i) A discretionary trust provision.
(ii) A support provision.
(iii) The direction of an advisor acting under a discretionary trust provision or support provision.
(h) The transferor’s right to remove a trustee or advisor and to appoint a new trustee or advisor.
(i) The transferor’s potential or actual use of real property held under a qualified personal residence trust within the meaning of that term as described in section 2702(c) of the internal revenue code of 1986, 26 USC 2702(c), or the transferor’s possession and enjoyment of a qualified annuity interest within the meaning of that term as described in 26 CFR 25.2702-5(c)(8).
(j) The transferor’s potential or actual receipt of income or principal to pay, in whole or in part, income taxes due on income of the trust if the potential or actual receipt of income or principal is under a provision in the trust instrument that expressly provides for the payment of those taxes and if the potential or actual receipt of income or principal would be the result of a qualified trustee’s or qualified trustees’ acting in any of the following ways:
(i) In the qualified trustee’s or qualified trustees’ discretion or under a mandatory direction in the trust instrument.
(ii) At the direction of an advisor who is acting in the advisor’s discretion.
(k) After the transferor’s death, the power of a qualified trustee to pay the transferor’s debts, the expenses of administering the transferor’s estate, or any estate or inheritance tax imposed on or with respect to the transferor’s estate, without regard to the source of the payment.
(l) The transferor’s actual or potential receipt of a minimum required distribution as defined in 26 USC 4974(b) with respect to a retirement benefit.
Sec. 5. (1) Notwithstanding any other provision of this act, with respect to any qualified disposition, a creditor has only the rights provided in this section and section 7.
(2) For an action brought by a creditor for an attachment or other provisional remedy against property that is the subject of a qualified disposition or for avoidance of a qualified disposition, all of the following apply:
(a) Except for the limitation period provided under subsection (3), the action may only be brought under sections 4 and 5 of the uniform fraudulent transfer act, 1998 PA 434, MCL 566.34 and 566.35.
(b) For a creditor whose claim arose after a qualified disposition, the action must involve a qualified disposition that was made with actual intent to defraud the creditor.
(c) The allegations in the action must be proved by clear and convincing evidence.
(3) A person shall not bring or maintain an action under subsection (2) unless the action is commenced within either of the following periods:
(a) If the claim arose before the qualified disposition was made, on the later of the following:
(i) Two years after the qualified disposition was made or the obligation was incurred.
(ii) One year after the qualified disposition or obligation was or could reasonably have been discovered by the claimant, if the person who is or may be liable for any claim fraudulently concealed the existence of the claim or the identity of any person who is liable for the claim from the knowledge of the person entitled to sue on the claim.
(b) If the claim arose concurrent with or after the qualified disposition, 2 years after the qualified disposition was made.
(4) If a trust beneficiary who has an interest in a qualified disposition or in property that is subject to a qualified disposition is a party to an action for annulment of a marriage, divorce, or separate maintenance, all of the following apply:
(a) If the trust beneficiary is not the transferor of the qualified disposition, the trust beneficiary’s interest in the qualified disposition or in property that is the subject of the qualified disposition is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary’s real or personal estate, and shall not be awarded to the trust beneficiary’s spouse in a judgment for annulment of a marriage, divorce, or separate maintenance.
(b) If the trust beneficiary is the transferor of the qualified disposition, the trust beneficiary’s interest in the qualified disposition or in property that is the subject of the qualified disposition is not considered marital property, is not considered, directly or indirectly, part of the trust beneficiary’s real or personal estate, and shall not be awarded to the trust beneficiary’s spouse in a judgment for annulment of a marriage, divorce, or separate maintenance if either of the following apply:
(i) The trust beneficiary transferred the property that is the subject of the qualified disposition more than 30 days before the trust beneficiary’s marriage that is the subject of the action.
(ii) The parties to the marriage agree that this subdivision applies to the qualified disposition.
(c) If subdivisions (a) and (b) do not apply, subsections (2) and (3) do not limit the transferor’s spouse’s property division claims.
(5) Except as otherwise provided in subdivision (a), a fiduciary qualified disposition is considered made as of the time the property that is subject to the disposition was first transferred to the trustee who is making the fiduciary qualified disposition, or any predecessor of that trustee in an unbroken succession of fiduciary ownership of the property, in a form that meets either of the following requirements:
(a) The requirements of a qualified disposition. If the property that is subject to the qualified disposition was first transferred to the trustee making the disposition or the predecessor trustee before the effective date of this act in a form that would otherwise meet the requirements of a qualified disposition, the qualified disposition is considered to have been made as of the effective date of this act.
(b) Both of the following requirements:
(i) The requirements of section 2(p)(ii).
(ii) The requirements to be considered a qualified disposition or its equivalent under the laws of another state.
(6) If a trustee of an existing trust proposes to make a disposition that, but for the exercise of authority granted in this subsection, would not be a qualified disposition because of a nonconforming power of appointment of the transferor, the trustee may modify the trust instrument by delivering to the qualified trustee an irrevocable written election to modify the nonconforming power of appointment to conform to the requirements of section 4(2)(c) or section 4(2)(k). An irrevocable written election described in this section must include both of the following:
(a) A description of the modified power of appointment.
(b) The transferor’s written consent to the modification. The transferor’s consent is not a disposition.
(7) With respect to a qualified disposition, a creditor does not have a claim or cause of action against any of the following:
(a) The trustee of a trust that is the subject of a qualified disposition.
(b) An advisor of a trust that is the subject of a qualified disposition.
(c) A person involved in the counseling, drafting, preparation, execution, or funding of a trust that is the subject of a qualified disposition.
(8) If more than 1 qualified disposition is made by means of the same trust instrument, all of the following apply:
(a) With respect to a prior qualified disposition, both of the following apply:
(i) The making of a subsequent qualified disposition is disregarded in determining whether a creditor’s claim is extinguished as provided in subsection (3).
(ii) The making of a subsequent qualified disposition is disregarded in determining, as provided in subsection (4), whether a trust beneficiary’s interest in a qualified disposition or in property that is the subject of a qualified disposition is considered marital property, is considered part of a trust beneficiary’s real or personal estate, or may be awarded to the trust beneficiary’s spouse in a judgment for annulment of a marriage, divorce, or separate maintenance.
(b) A distribution to a trust beneficiary is considered to have been made from the most recent qualified disposition.
(9) In an action against a trustee that received property in a qualified disposition, if a court takes any action declining to apply the law of this state in determining the validity, construction, or administration of the trust, or the effect of a spendthrift provision in the trust instrument, the trustee shall immediately on the court’s action, and without the further order of any court, cease in all respects to be trustee of the trust. The former trustee does not have any power described in section 4(2) except to convey the trust property to the successor trustee and, at the former trustee’s election, to petition the court for appointment of a successor trustee and collect its attorney fees, costs, and expenses. If the trust instrument does not provide for a successor trustee and the trust would otherwise be without a trustee, all of the following apply:
(a) The probate court, on the request of a qualified trust beneficiary of the trust, shall appoint a successor trustee on the terms and conditions it determines to be consistent with the purposes of the trust and this act.
(b) A former trustee may, but has no duty to, petition the probate court to appoint a successor trustee if a petition for appointment of a successor trustee is not brought by a qualified trust beneficiary within 30 days after the date on which the former trustee ceases to be a trustee of the trust. If the former trustee elects to petition for the appointment of a successor trustee, the former trustee is entitled to reimbursement for all attorney fees, costs, and expenses associated with the petition, and the amount of the attorney fees, costs, and expenses is a lien against the trust’s property.
(10) A valid lien attaching to property before a qualified disposition of the property survives the disposition, and the trustee takes title to the property subject to the valid lien and the trustee is subject to any agreements that created or perfected the valid lien.
(11) A written agreement between a transferor and a creditor may provide for any of the following:
(a) The transferor will have a continuing or periodic obligation to disclose any qualified dispositions to the creditor.
(b) A qualified disposition will require the prior written approval of the creditor.
(c) That the transferor is under those other obligations as the creditor may require with respect to qualified dispositions.
(12) If a transfer that would otherwise be a qualified disposition violates an agreement with a creditor described in subsection (11), with respect to the creditor only, the transfer is not a qualified disposition and this act does not affect the rights of the creditor.
Sec. 6. (1) Except as provided in subsection (6), for purposes of this section, a “qualified affidavit” means an affidavit in which the transferor states that at the time of the transfer of the property to the trust all of the following apply:
(a) The transferor has full right, title, and authority to transfer the property to the trust.
(b) The transfer of the property to the trust will not render the transferor insolvent.
(c) The transferor does not intend to defraud a creditor by transferring the property to the trust.
(d) The transferor does not know of or have reason to know of any pending or threatened court actions against the transferor, except for those court actions identified by the transferor on an attachment to the affidavit.
(e) The transferor is not involved in any administrative proceedings, except for those administrative proceedings identified on an attachment to the affidavit.
(f) The transferor is not currently in arrears on a child support obligation by more than 30 days.
(g) The transferor does not contemplate filing for relief under the bankruptcy code, 11 USC 101 to 1532.
(h) The property being transferred to the trust was not derived from unlawful activities.
(2) The transferor shall sign a qualified affidavit before a qualified disposition is made.
(3) A qualified affidavit is defective if it materially fails to meet the criteria set forth in subsection (1), except that a qualified affidavit is not defective because of any of the following:
(a) Nonsubstantive variances from the language set forth in subsection (1).
(b) Statements or representations in addition to those set forth in subsection (1) if the statements or representations do not contradict those required by subsection (1).
(c) Technical errors in administering an oath if the errors were not the fault of the transferor and the transferor reasonably relied on another person to prepare or administer the oath.
(4) A qualified affidavit is not required in any of the following circumstances:
(a) From the settlor for a fiduciary qualified disposition.
(b) From a transferor who is not the settlor of the qualified disposition, except to the extent the transferor is a beneficiary of the qualified disposition and the property subject to the qualified disposition was not previously subject to a qualified disposition with respect to which the transferor signed a qualified affidavit.
(c) In connection with dispositions that are part of, required by, or the direct result of a prior qualified disposition supported by a qualified affidavit that otherwise complies with the requirements of subsection (1).
(5) If a qualified affidavit is required by this section, and a transferor fails to timely sign a qualified affidavit or signs a defective affidavit, the failure or defect may be considered as evidence in an action described in section 5(2) to the extent permitted by the Michigan rules of evidence, but the validity of the qualified disposition is not affected in any other way because of the failure or defect.
(6) If subsection (4)(b) applies, the required affidavit must omit the statements described in subsection (1)(a) and (c), and include a statement that the qualified disposition is not intended to defraud any creditor.
Sec. 7. (1) A qualified disposition may be avoided only to the extent necessary to satisfy or provide for the present value, taking into consideration any uncertainty of the transferor’s debt to the creditor at whose instance the disposition had been avoided.
(2) If all or any portion of a qualified disposition is avoided as provided in subsection (1), all of the following apply:
(a) If the court is satisfied that a trustee has not acted in bad faith in accepting or administering the property that is the subject of the qualified disposition, both of the following apply:
(i) The trustee has a lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorney fees, incurred by the trustee in the defense of an action to avoid the qualified disposition. The lien has priority over all other liens against the property, whether or not the other liens accrued or were recorded before the accrual of the lien created by this act.
(ii) The qualified disposition is avoided subject to the fees, costs, preexisting rights, claims, and interests of the trustee and of any predecessor trustee that has not acted in bad faith.
(b) If the court is satisfied that a trust beneficiary has not acted in bad faith, the avoidance of the qualified disposition is subject to the right of the trust beneficiary to retain any distribution received before the creditor’s commencement of an action to avoid the qualified disposition. It is presumed that the trust beneficiary, including a trust beneficiary who is also a transferor of the trust, did not act in bad faith merely by creating the trust or by accepting a distribution made under the terms of the trust.
(c) For purposes of this subsection, it is presumed that a trustee did not act in bad faith merely by accepting the property, with or without a qualified affidavit, or by making any distribution under the terms of the trust.
(3) A creditor has the burden of proving by clear and convincing evidence that a trustee or trust beneficiary acted in bad faith as required under subsection (2), except that, for a trust beneficiary who is also the transferor, the burden on the creditor is to prove that the transferor-beneficiary acted in bad faith by a preponderance of the evidence. This subsection provides substantive not procedural rights.
(4) With respect to a qualified disposition, a levy, attachment, garnishment, notice of lien, sequestration, or other legal or equitable process is permitted only in those circumstances permitted by this act.
(5) Notwithstanding any other provision of this act or section 13 of the powers of appointment act of 1967, 1967 PA 224, MCL 556.123, a creditor does not have a right against the interest of a trust beneficiary in a trust or portion of a trust that was a qualified disposition solely because the trust beneficiary has the right to authorize or direct the trustee to pay all or part of the trust property in satisfaction of estate or inheritance taxes imposed on or with respect to the trust beneficiary’s postdeath estate, or the debts of the trust beneficiary’s postdeath estate, or the expenses of administering the trust beneficiary’s postdeath estate, unless the trust beneficiary actually directs the payment of the taxes, debts, or expenses, and then only to the extent of the direction.
(6) Except as otherwise provided in the trust instrument, if a married couple make a qualified disposition of property and, immediately before the qualified disposition, the property, any part of the property, or any accumulation to the property was, under applicable law, owned by the married couple as tenants by the entireties, then notwithstanding the qualified disposition, the property, any part of the property, or any accumulation to the property is, while held in trust during the lifetime of both spouses, treated as though it were tenancy by the entireties property. In an action concerning whether a creditor of either or both spouses may recover the debt from the trust, on avoidance of the qualified disposition, the sole remedy available to the creditor with respect to trust property treated as though it were tenancy by the entireties property is an order directing the trustee to transfer the property to both spouses as tenants by the entireties.
(7) Except as otherwise provided in subsection (6), on avoidance of a qualified disposition to the extent permitted under subsection (1), the sole remedy available to the creditor is an order directing the trustee to transfer to the transferor the amount necessary to satisfy the transferor’s debt to the creditor at whose instance the disposition has been avoided.
Sec. 8. (1) If a person serving as qualified trustee ceases to meet the requirements of a qualified trustee and there remains no trustee that meets the requirements of a qualified trustee, the person serving as qualified trustee is considered to have resigned as of the time of the cessation, and the successor qualified trustee provided for in the trust instrument becomes a qualified trustee of the trust on the successor qualified trustee’s acceptance of trusteeship, or in the absence of a successor qualified trustee provided for in the trust instrument, the probate court shall, on petition of a qualified trust beneficiary, appoint a successor qualified trustee.
(2) A disposition that was a qualified disposition does not cease to be considered a qualified disposition as a result of a subsequent vacancy in the position of qualified trustee if a successor qualified trustee is appointed or a proceeding for the appointment of a successor qualified trustee is commenced within a reasonable time after a person with authority to appoint a qualified trustee or commence a proceeding to appoint a qualified trustee knows of the vacancy.
Sec. 9. (1) A trust beneficiary does not have the power or capacity to transfer any of the income from a trust or portion of a trust that is a qualified disposition by his or her order, voluntary or involuntary, or by an order or direction of a court.
(2) Except as otherwise provided in this act, the interest of a beneficiary in a trust or portion of a trust that is a qualified disposition is not subject to a process of attachment issued against the beneficiary, and may not be taken in execution under any form of legal process directed against the beneficiary, trustee, trust estate, or any part of the income of the trust estate, but the whole of the trust estate and the income of the trust estate must go to and be applied by the trustee solely for the benefit of the beneficiary, free, clear, and discharged of and from all obligations of the beneficiary.
(3) The trustee of a qualified disposition shall disregard and oppose an assignment or other act, voluntary or involuntary, that is attempted contrary to this section. The trustee is entitled to reimbursement for all attorney fees, costs, and expenses associated with carrying out this duty, and the amount of the attorney fees, costs, and expenses is a lien against the property that is the subject of the qualified disposition. A trustee is not liable, and a trust beneficiary or any successor trust beneficiary does not have a claim or cause of action against a trustee, for a breach of this duty unless the trustee’s breach was in bad faith or the result of reckless indifference to the purposes of the trust or the interests of the trust beneficiaries.
(4) This section does not prohibit a beneficiary from disclaiming an interest in a trust or portion of a trust that is a qualified disposition or from exercising a power of appointment.
Sec. 10. (1) Subject to section 5(5), this act applies to qualified dispositions made on or after the effective date of this act.
(2) If any provision of this act conflicts with any provision of chapter 63 of 1846 RS 63, MCL 555.1 to 555.28, or the estates and protected individuals code, 1998 PA 386, MCL 700.1101 to 700.8206, the provision of this act prevails.
Enacting section 1. This act takes effect 90 days after the date it is enacted into law.
Enacting section 2. This act does not take effect unless House Bill No. 5504 of the 98th Legislature is enacted into law.
This act is ordered to take immediate effect.
Secretary of the Senate
Clerk of the House of Representatives
Approved
Governor
