Commentary-- New Michigan Trust Code gives clear guidelines

By Patricia Gormely Prince and Amber Atkins The Daily Record Newswire DETROIT, MI -- When a lawyer creates a trust for his or her client, the trust instrument is a major part of the work, but not all of the work. The client's assets still need to be transferred to the trust once the agreement is signed. Generally, lawyers instruct their clients how to accomplish this by providing the language they need to finish the task. However, that does not guarantee the entity the client is dealing with to change the account or retitle the asset will understand the process. And all too frequently, the lawyer who drafts the estate planning document gets a call from the client saying that ''the entity (bank, insurance company, etc.) wants to see my trust.'' One reason trusts are selected by clients is for the privacy they provide, and, if the entire trust is turned over, the dispositive provisions are no longer private. Additionally, many times the lawyer will get a call from the entity making the change asking where the trust powers are - after demanding the entire document! In 1991, MCL 565.432-433 were enacted. These sections deal with what needs to be in a Certificate of Trust when used for real estate. For many years, the statute also was used as a guide by estate planning lawyers when drafting Certificates of Trusts for non-real estate assets. When the client was told that the entity needed to see the trust, they could instead give the entity a Certificate of Trust which contained the information needed to transfer the assets to the trust. The Certificate of Trust also gave the entities assurance that the trust was indeed in effect and the trustee had the power to transfer, invest, or sell the assets. Some entities, such as brokerage houses, created their own ''form'' to be used. In any event, for the most part, the cobbled Certificate of Trust, based on MCL 565.432-433, worked. However, when the new Michigan Trust Code (MTC) was enacted April 1, 2010, Section MCL 700.7913 was added to give clear guidelines on what should be included in a Certificate of Trust. The requirements are fairly straightforward and include: 1. The name of the trust, the date of the trust instrument, and the date of any and all amendments. 2. The name and address of the current trustee. 3. The powers of the trustee relating to the pur?poses for which the Certificate is offered. 4. Whether the trust is revocable and who can revoke the trust. 5. Whether the trustee has the authority to sign or otherwise authenticate, and if there is more than one trustee, whether all of the trustees must exercise the powers together. (Note that under the MTC, if there are more than two trustees, the default rule is that the trustees must act by majority. Therefore, if the intent of the trust settlor is to require unanimous consent of acting trustees, the trust should state so explicitly.) 6. A statement that the trust has not been revoked, modified, or amended in any manner that would cause the representations made in the Certificate to be incorrect. If you have already drafted the trust, most of the requirements of MCL 700.7913 may be ''cut and pasted'' into your Certificate of Trust. Generally, all powers of the trustee should be included, as this saves having to do a specific Certificate of Trust for each type of asset. The Certificate of Trust can be signed by the settlor (grantor), trustee, or an attorney for either, and must be in the form of an affidavit. Notably, the Certificate of Trust need not include all of the dispositive terms of the document. This serves to preserve the privacy of the settlor. More importantly, a person who acts or relies upon the Certificate is not liable to anyone for acting and need not make inquiry into the existence of the underlying facts of the Certificate, unless of course, the entity has knowledge that the representations made in the Certificate are inaccurate. Further, a person who enters into the transaction based on the Certificate of Trust and relies on the Certificate of Trust in good faith can enforce it against the trust property even if the representations are later found to be incorrect. However, an entity may require the trustee to furnish copies of the excerpts and later amendments that designate the trustee and confer upon the trustee the power to act. This would most likely arise after the initial settlor has died and the successor trustee executes a new Certificate of Trust. MCL 565.432-433 was not repealed, and still applies to transfers involving real estate. However, MCL 700.7913 should satisfy the requirements of MCL 565.432-433 so long as the following are also included in the Certificate: 1. The legal description of the property. 2. The names and addresses of the successor trustee(s). 3. The governing law. Therefore, between MCL 565.432 and MCL 700.7913, a lawyer should be able to draft one Certificate of Trust that works for all assets! MCL 700.7913 also has some teeth to it for would be violators. If an entity demands the trust instrument in addition to the Certificate of Trust and/or excerpts, they may be liable for damages, costs, expenses, and legal fees where the court determines that the entity was not acting pursuant to a valid legal requirement in demanding the trust instrument itself. Now, when you get a call from an entity unwilling to accept the Certificate of Trust, your threat that you may take them to court for costs is credible. Note that MCL 700.7913 does not prevent one from getting a copy of the trust in judicial proceedings regarding the trust. It is simply meant for third parties, and mostly in situations dealing with the transfer, investment, and sale of assets. Patricia Gormely Prince is a principal and Amber Atkins is an associate at the Prince Law Firm in Farmington Hills. Prince's practice focuses on the area of estate planning, conservatorships and guardianships, estate administration, and related taxation, as well as probate litigation. She is a former chair of the Probate and Estate Planning Section of the State Bar of Michigan, and a frequent speaker for ICLE. Atkins is a 2009 graduate of the Thomas M. Cooley Law School, Cum Laude, and the recipient of an Honors Scholarship and the Certificate of Merit for Environmental Law. Contact them at (248) 865-8810 or pgp@probateprince.com and ana@probateprince.com. Published: Thu, Nov 4, 2010

––––––––––––––––––––
 Subscribe to the Legal News!
 https://test.legalnews.com/Home/Subscription
Full access to public notices, articles, columns, archives, statistics, calendar and more
Day Pass Only $4.95!
One-County $80/year
Three-County & Full Pass also available