Essentials of Trust Execution in Michigan
A trust is a legal arrangement where the grantor gives a third party, the trustee, the right to hold title on property or assets for the sake of third-party beneficiaries. Trusts are set up to provide clear guidance about what is to happen to your assets after you pass away. A living, or revocable, trust allows a person, your successor trustee, you create to manage the assets in your trust while you are alive and can be amended at any time. A trust may be revocable or irrevocable. Trusts have many purposes, such as avoiding probate, protecting family members , or minimizing estate taxes.
Execution is the process of making the trust legal and binding. This means that the grantor must sign the trust. Unlike a will that need’s to be submitted to the Probate Court for it to be proven and thus valid, the execution of a trust simply requires the grantor to sign the document. By signing the document, the grantor makes the trust legal and binding. Even though the trust does not have to be submitted to the probate court, for organizational purposes it is a good idea to attach a signed certificate from the grantor and the trustee stating that the trust is valid after the death of the grantor and that the trustee has the full power to act on behalf of the trust.
Requirements for a Trust to be Lawfully Created
A trust is created in Michigan by the formal words "in trust" or other words showing the intention to create a trust and "a sufficiently certain description of the trust res and the beneficiaries," or more generally by language that clearly shows the作者的intent创造一个信任。The law only requires that the words "used must manifest an intention to create a trust, no matter what mthe words used."Where such intent exists, the "trust will not fail for want of certainty…if the terms of the trust can be ascertained with reasonable certainty."vIt is not necessary that the terms of the trust be certain; they need only be ascertainable. The wording of the trust instrument may control the rights of beneficiaries; however, mutual intent of the trustee and settlor will also be considered in determining the trust terms.Under Michigan law, a trust can be created for any purpose except everything listed under MCL 700.7409. Under MCL 700.7401(b), a trust cannot be formed for the following purposes: 1. An illegalpurpose 2. Divorcing a spouse or minor child 3. Bailment of property in which the trustee holds a lien 4. Evading laws or defraud creditors 5. Giving a power of appointment to one other than the intended devisee For a trust created after October 1, 1993 to be valid, it must comply with the statutory requirements of a Michigan trust as set forth in MCL 700.7401(c) in one of the following ways: 1. It must be transferor-created revocable trust 2. It must be a trust created by a decedent by will (testamentary trust) 3. It must be a trust created by a decedent during life under a power of appointment into a testamentary trust 4. It must be a statutory trust pursuant to MCL 555.95 5. It must be a statutory land trust under MCL 554.1 et. seq.(f) Whether it was created by private instrument, deed, will or declaration, it should be noted that an inter vivos trust is a revocable trust unless it expressly states otherwise at the time of creation.Trusts must be administered solely for the benefit of the beneficiaries (MCL 700.7408). The legal rights and duties of the parties must be defined in the deed or document creating the trust. If no provision is made therein, the law implies the provisions. The agreement must designate the person to take the trust property upon termination of the trust. Trusts are generally governed by the Michigan Trust Code, MCL 700.7801 et. seq.
Proper Execution of a Trust in Michigan
At a base level, executing your trust means signing it. This sounds simple, and it is, but there are some important steps you need to take to make sure your trust is fully executed and legally binding in the state of Michigan. When couples create estate plans in Michigan, they usually set up a revocable living trust to govern the distribution of their assets. This is because there are many advantages to having a revocable living trust. Once the trust is executed, its language will govern the distribution of assets from one spouse to the other after death, as well as how the assets in the trust are disposed of upon the death of both spouses to either family or friends, depending on your wishes. In order for this to happen properly, the trust needs to be properly executed.
The first step for trust execution in Michigan is to draft the trust. This is where you go through your entire list of assets and decide which assets you would like to fund into your trust estate. You need to know whether the estate will be funded during your lifetime or upon your death. For example, if you have retirement accounts or life insurance benefits that would pay upon your death, you would want to name your revocable living trust as a beneficiary. A trust generally will not hold an asset unless the trust is named as the beneficiary of that asset. In order for your trust to be valid, you must sign at least one original under oath before a notary public or a person authorized to take acknowledgments (requirements may vary by state). The trust document must also contain a self-proving affidavit signed by witnesses. The trust will almost certainly require witnesses on the execution page, depending on the type of trust you use. The witnesses must also be present when the trust-maker is signing the trust document and must then sign the witness affidavit.
Common Issues with Executing a Trust
The execution of a trust in Michigan is subject to the same challenges as that associated with a will or any other estate planning instrument. In particular, trust contests can occur when there is ambiguity in the trust documents, when beneficiaries are disputing certain aspects of the trust due to uncertainty in the language, and when the language used in a trust may suggest the existence of grounds to challenge its validity.
An example of ambiguity is seen when provisions in a Michigan trust conflict with one another. If you’re a beneficiary of a Michigan trust, it may not be clear whether you have a right to review documents related to the administration of a trust. For example, if a Michigan trust says you have the right to "full disclosure" (of trust information) but then contains another provision that says you have no right to review the trust documents, which provision would be enforced? Whichever provision is inconsistent with the terms of the Michigan Trust Code – which would provide for an immediate right to view information pertaining to the trust .
Since the Michigan Trust Code broadly provides for the rights of beneficiaries, disputes can arise when beneficiaries claim that the distribution terms of a Michigan trust are subject to interpretation. "No contest" clauses and other attempts to limit the ability of beneficiaries to challenge a trust may also give rise to trust litigation.
There are three grounds upon which the execution of a Michigan trust may be challenged: undue influence, lack of testamentary capacity and improper execution. While undue influence is difficult to prove, a lack of capacity and improper execution are frequently addressed in Michigan probate court. After all, a Michigan trust must be signed with the same requirements as a will in Michigan under the Revised Probate Court Act of 2018.
Ensuring Execution Compliance and Avoiding Missteps
Once the trust document has been executed, the new trustee has the duty to effectively administer the trust according to the terms of the trust. And that’s when most people who go about it on their own run into trouble. Having a professional administrator can take the burden off of the trustee. However, it is always helpful for the trustee to understand what has to be done, and how to do it. Starting with a solid trust agreement that is executed properly is a good way to avoid common pitfalls.
A Trust Owned as A Mechanism for Avoiding Probate If the assets that are required to be transferred to the trust are not formally transferred to the trust by the settlor during his or her lifetime (i.e., they are not retitled), it could be a disaster. If the assets are not transferrable to the trust, the settlor (and the owner of the assets) needs to make arrangements to ensure that there is a mechanism for transferring the assets after the death of the settlor. This is usually done in the trust via a pour-over will.
The Pour-Over Will The language used in the pour-over will can be problematic. The language of the pour-over will should mirror the language of the trust. The will should incorporate the trust by reference. It should refer to the trust as "that certain trust dated ____________________." The language that incorporates the trust by reference should be precise and clear. It should not be a general reference to a trust that is referenced elsewhere in the will. And it should specifically reference any amendments to the trust.
For example, the following clause creates problems: "Upon my death, my trustee shall have full power and authority to transfer all of my property of whatever kind and character which I may be entitled to at the time of my death from the residue of my estate and estate as and for a part of my residuary estate." The problem is that this clause doesn’t actually incorporate the trust by reference, and it doesn’t identify the trust as the successor beneficiary in the event of the settlor’s death.
By way of contrast, the following clause would be an acceptable pour-over clause: "I hereby give, devise and bequeath after my death and in accordance with the terms and provisions of that certain trust of which I am trustee, dated as of ____________________, to my trustee under said trust, all my estate, real and personal, wheresoever the same may be situated.
Significance of Legal Help in Trust Execution
The completion of a trust administration often requires specialized legal advice and counsel from an experienced Michigan estate planning attorney. Failure to engage a knowledgeable lawyer could result in a misinterpretation or misapplication of Michigan law. Common pitfalls include the following: Appropriate legal assistance is essential to ensure proper tax treatment of the estate, as well as creditor and beneficiary issues. In addition , only a qualified Michigan estate planning attorney is able to provide a legal opinion that is necessary to create, amend or terminate a trust in compliance with Michigan law. Believing that the potential financial implications of a poorly constructed or improperly executed trust are not worth the cost of hiring an experienced Michigan estate planning attorney is an unfortunate – and potentially deadly – mistake.