Trusts are legal documents governed by extensive state laws. The Michigan Trust Code authorizes the creation of trusts under MCL (Michigan Compiled Law) 744.7401. Of course, establishing the trust is step one in this complicated, legal process. Next, the trust must be managed and administered. For example, laws regarding trust administration are found in MCL 700.7817. This section of the Michigan Trust Code lists specific powers of trustees. Without a doubt, laws may be modified over time. As a result, an experienced estate planning attorney remains necessary if you plan to set up a trust document.
What is a Trust?
A trust is a legal document in which a person designates another person, or institution, to manage, or settle their estate at a designated time. For example, a person may establish a trust to protect their interests if they become incapacitated. Also, a trust may be set up similar to a will. In other words, it takes effect when a person passes away. The person setting up the trust is known as the grantor, or settlor. The person overseeing the trust is referred to as the trustee. Anyone receiving assets from the trust is a beneficiary. It’s important to note that a trustee may also be a beneficiary. In summary, a trust is a complex, legal document and requires sound legal advice.
Grantor’s Role
The grantor is the person who creates the trust. This individual makes several key decisions that affect the estate’s future. In Michigan, the grantor has numerous responsibilities:
- Contact an attorney to establish the trust. An experienced trust attorney will guide you during this complicated process. Most folks lack understanding regarding which assets go into a trust and which assets remain out.
- Choose beneficiaries. This is very important. In cases of blended families, some members may not receive any part of an estate without a beneficiary designation. So, be very careful to include any family member, charity, or institution in your beneficiary designation.
- Appointing trustees. Usually a trustee and a successor trustee is named in a trust document.
- Include any specific instructions. Your attorney may advise you, or you may have special requests regarding the trust document. Make sure everything is listed in the document.
Trustee’s Role
The complicated, extensive powers of trustees are listed in Michigan Law. Basically, the trustee has a fiduciary responsibility to make sure the grantor’s wishes are carried out. The trustee has a legal obligation to all beneficiaries and must carry out the terms of the trust agreement. In Michigan, some of the trustee’s roles include:
- Pay bills and taxes on grantor’s estate
- Keep records of all financial transactions
- Manage assets while the grantor is alive if this is part of the trust agreement.
- Communicate financial information to beneficiaries while settling the estate.
- Distribute assets following the trust agreement after all grantor’s debts are settled.
- Contact an experienced estate planning attorney for help when necessary.
Do I Need a Trust?
Some folks believe a will is sufficient protection. Others prefer the added security offered by a trust document. For example, trusts are useful to avoid probate. In Michigan, when you transfer your assets into a trust, these assets go directly to your beneficiaries when you pass away. In other words, the trust assets are exempt from probate. Going to Probate Court takes time and costs money. Your grieving beneficiaries may prefer to avoid this process. Also, larger estates may want to avert federal taxes by placing assets in a trust. Of course, these matters remain complicated and require an experienced attorney’s guidance.
To learn more about Michigan Probate, refer to our comprehensive article on Michigan probate laws
Michigan Trust Litigation Laws
In Michigan, when discord arises surrounding the management or distribution of trust assets, trust litigation laws become the focal point.
Michigan’s trust litigation framework encompasses:
Initiation of Litigation: Kickstarts with disputes on trust administration, trust validity, or other trust-related issues.
Representation: Involved parties procure legal representation to protect their interests.
Court Proceedings: The court scrutinizes the disputes, weighing the state’s laws and the trust document if present.
Resolution: Through judicial decisions, disputes are resolved ensuring lawful trust management and asset distribution.
This legal pathway is essential for addressing trust disputes, honoring the trustor’s intentions, and guaranteeing rightful asset distribution to beneficiaries.