Types of Trusts in Michigan
Revocable Living Trusts – These are what most people use in their estate planning. These trusts can be changed or terminated at any time during the life of the person who made the trust, which we will call the “trust maker,” and the assets can be used in any way the trust maker sees fit. For tax and other purposes, a trust maker and his or her trust are treated as one and the same during the trust maker’s lifetime. At the death of the trust maker (or the last surviving trust maker if there are more than one), even a revocable trust becomes irrevocable. The trust also becomes essentially irrevocable if the trust maker becomes incapacitated, as well.
Irrevocable Trusts – The terms of these trust agreements cannot be changed, including the beneficiaries and distributions or how successor trustees are selected. A court might allow certain modifications under special circumstances, but generally an irrevocable trust must be governed by the agreement that is in place at the time it is established or becomes irrevocable.
Trustee Appointment and Duties
The person in charge of managing and distributing the trust’s assets and paying the trust’s debts is called the Trustee. A person who is named trustee must accept that position, which is typically accomplished by signing a document called an Acceptance of Trust.
Some duties a trustee must perform include notifying creditors, making an inventory of trust assets and values, selecting investment and divestment decisions under the “prudent investor rule,” deciding whether certain beneficiaries meet criteria for distributions under the trust, as well as other more involved decisions that occur on a regular basis, like what types of medical or educational expenses should be reimbursed.As soon as the appointed trustee accepts the appointment, he or she will act as the fiduciary of the trust and must manage the trust’s assets and affairs as required by the trust agreement and applicable law. The appointment is for the period described in the trust agreement, but is typically for life or until the trustee becomes incapacitated, resigns, or complete the trust administration.
Personal Liability of Trustee
If the trust assets will not be completely distributed for a number of years, then the trustee must develop an investment policy and manage the trust investments according to that policy. If the policy does not meet the prudent investor rule or the trustee fails to follow the policy, he or she might be held personally liable for investment losses.
Because each trust is different, it is often extremely helpful for the trustee to meet with an attorney soon after accepting his or her appointment and then periodically thereafter to make sure the trust is being administered properly. We offer fixed fees for many of these services, which the trustee is able to charge to the trust.
Free Initial Consultations
Whether you have just become a successor trustee or have recently come upon some complications with your trust administration, we provide a free initial consultation to help you decide if you are on the right track. Please call or email us today to schedule an appointment for a free initial consultation to discuss your rights and obligations as successor trustee of a Michigan Trust.