March 19, 2010
/24-7PressRelease/ --
Michigan Trust Code Enacted
On April 1, 2010, the Michigan Trust Code (MTC) will take effect, updating Michigan's law regarding trusts. The new laws were created to:
-Codify a substantial portion of Michigan's common law regarding trusts;
-Fill gaps in Michigan's existing trust law; and
-Provide a comprehensive body of law that individuals and attorneys can use in estate planning and the creation of trusts.
The MTC will apply to all trusts, regardless of whether they were created before the MTC takes effect. Because the MTC is basically a set of "default" rules, a settlor has the ability to craft a trust that best reflects his or her wishes and avoid the application of much, but not all, of the MTC. For this reason, existing trusts should be reviewed to determine the effects of the MTC and which, if any, changes should or can be made. Moreover, the MTC will create some degree of uniformity with the laws of other states (as "uniformity" among states' laws is always a relative term).
The MTC is based on the Uniform Trust Code (UTC). The UTC was drafted as a model code to provide states with a guideline when drafting their own trust laws. Since many states have used or are using the UTC to draft legislation regarding trust law, more uniformity should exist among those states' laws. Therefore, individuals could create trusts that would be interpreted and enforced similarly regardless of where they reside.
While the MTC is based on the UTC, it was generally designed to keep Michigan's common law intact by incorporating long-standing Michigan provisions and procedures regarding trusts. Even so, the MTC will bring about a few major changes to Michigan law. For example, a person who settles charitable trusts will be able to enforce the particular terms of the trust. Also, the level of capacity necessary for an individual to create a trust has been changed to mirror that for a will. These rules allow Michigan residents to make a simpler choice between establishing a trust or drafting a will -- two of the most commonly used methods of transferring property after death. Equally dramatic is the formal introduction of the "trust protector" concept to Michigan law. Lastly, the MTC will make all trusts created after the effective date revocable trusts, unless the drafter of the trust specifically states otherwise.
The hope is that the MTC will change the way trusts are drafted and administered in Michigan for the better. However, because of the changes in the law, individuals with trusts or those who plan to create a trust should become familiar with the changes and understand their impact. Michigan attorneys and law firms that focus on estate planning should be consulted to analyze the effects of the MTC on existing trusts.
Article provided by Patricia Gormely Prince, P.C.
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