In April, 2010 the new Michigan Trust Code became the law in Michigan. Why the need for a new law regarding trusts?
First, Michigan has a comprehensive set of laws regarding wills that went into effect in 1998 (the “Estates and Protected Individuals Code” or “EPIC”). However, trusts (especially the revocable living trusts) were becoming very common. People like trust since they permit their owners to avoid probate, reduce taxes, create greater confidentiality, flexibility and reduce contestability. Therefore, a similar comprehensive body of law was needed for the vast and burgeoning area of trusts.
Second, there were various differences and ambiguities regarding trusts that tended to create or increase litigation. For example the new trust laws include, but are not limited to, provisions stating that: a) the same standard of competency to make a will is the standard to create a revocable trust, b) trusts that become effective after the date of the new law are revocable unless they explicitly state otherwise; c) a settlor of a charitable trust now has the standing to enforce the terms of that trust; d) EPIC provisions related to “no contest” provisions, ademption and exoneration now apply to trusts as well as to wills; e) there is now a statute of limitations for challenges to the validity of trusts used as will substitutes.
The Michigan Trust Code relies upon an existing law called the “Uniform Trust Code” or “UTC” as the starting point for many of its provisions. However, it did not adopt that law verbatim. It draws from both the UTC and the Michigan statutory and common law to preserve long-established procedures and practices regarding trusts in Michigan while also filling the gaps and resolving ambiguities. The drafters of the new Trust Code argue that the new law provides certainty, modernizes the law of trust, provides uniformity with other states, creates a level economic playing field for Michigan banks (eliminating some unfavorable laws that made banks seek other states for corporate trusteeships) while at the same time preserving well established Michigan law regarding trusts.
Those establishing trusts now after the new law will be subject to the provisions of the new law. However, what about those who already have trusts, do they need to take any action or amend their existing trusts? Many estate planning attorneys are creating a simple amendment that can be added to existing trust to conform them to the new law. If your attorney is offering such services it would be wise to take advantage of them. Or, if there are specific concerns, be sure to discuss them with an estate planning attorney. At Heritage Elder Law we are available to answer questions pertaining to the new law.
