Royal Oak Trusts Lawyer
Professional and Quality Legal Guidance
Like wills, trusts are important documents that establish terms for asset distribution to specified heirs. Whether you seek to draft a trust document or understand an existing one, it is important to speak with an experienced attorney. Our legal professionals at Little & Boylan PLLC can take a look at your situation and provide you with the quality legal guidance you deserve.
What Is a Trust?
Under the Michigan Trust Code (MTC), the capacity required to create, amend, revoke, or add property to a revocable trust is the same as that required to make a will. In a trust, the trustee is the person who holds legal title to property for the beneficiary, and the person who creates the trust is usually called a grantor or settlor. Trusts may take different forms depending on an individual’s needs and goals:
- Revocable Trust — can be amended during the grantor’s lifetime
- Irrevocable Trust — cannot be amended
- Living Trust — created while the grantor is alive, and property put into the trust is not subject to probate
- Testamentary Trust — created as part of a will and takes effect when the grantor dies
Note that unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust in any of the following ways:
- by substantially complying with a method provided in the terms of the trust; or
if the terms of the trust do not provide a method or the method provided
is not expressly made exclusive:
- if the trust is created pursuant to a writing manifesting clear and convincing evidence of the settlor's intent to revoke or amend the trust; or
- if the trust is an oral trust, by any method manifesting clear and convincing evidence of the settlor's intent.
Responsibilities of a Trustee
A trustee may be responsible for:
- locating, safeguarding, and inventorying all trust assets, including real estate; personal property, like household items; securities, such as stocks and bonds; bank accounts; life insurance policies; and retirement, profit-sharing, and deferred compensation accounts;
- paying debts, expenses, and costs, as well as settling creditors’ claims;
- keeping records of all transactions and disbursements;
- communicating with and reporting to beneficiaries;
- administering the trust, which may include investing assets;
- distributing assets in accordance with the trust terms.
In addition, Michigan law also imposes other specific responsibilities like loyalty, impartiality when there is more than one beneficiary, care and prudence in administration, and separation of the trust assets from the trustee’s own assets.
Be aware that a trust document may contain provisions for removing trustees. If that is the case, a beneficiary may be able to proceed under the terms of the trust document. If the document does not include trustee removal provisions, or if those provisions are not adequate under the circumstances, Michigan law may remove the trustee in the case of:
- a serious breach of trust by the trustee;
- impairment of trust administration on account of lack of cooperation among co-trustees;
- a court determination that removal best serves the purposes of the trust because of a trustee’s unfitness, unwillingness, or persistent failure to administer the trust effectively.
Any violation of a duty owed to beneficiaries constitutes a breach of trust by the trustee. In the event of a breach of trust, the court has broad discretion to order relief in addition to removal to protect the trust property or beneficiaries’ interests. A trustee also may be liable for damages for a breach of trust, and the amount of damages is set by the statute as the greater of the loss in value of the trust property and distributions or the profit the trustee made on account of the breach.
Benefits of Creating a Trust
Trusts are capable of lasting a very long time, which allows the grantor great control over what will happen to their assets in the future. One benefit of a trust is that it is not subject to probate, which is a court process in which a will is validated and the decedent’s estate is administered. By not being subject to probate, trusts avoid time-consuming court proceedings and associated costs.
Trusts also safeguard the decedent’s wishes, as they preclude the need for guardianship. For instance, if the grantor loses the ability to make decisions, their decisions could already have been made via a trust at a time when they had full mental capacity. As a result, they will not need a guardian to help make decisions for them in their later diminished state. Trusts can also safeguard a person’s assets. As discussed above, a trust creator can condition asset allocation to family members on the occurrence of certain events, or place restrictions on beneficiaries’ receipt of assets. This can be useful when an intended beneficiary is a minor.
Questions? Call (248) 809-1402.
If you have questions about creating or understanding a trust document, consult an experienced attorney immediately. Trusts are important documents that can hold a lot of power regarding asset and estate distribution, so it is advisable to work with a legal professional to ensure you address your points of concern appropriately.