Trust Administration in Michigan
Administering Revocable and Irrevocable Trusts
Living trusts, often used to avoid probate and estate taxes, are considered revocable in Michigan unless the document itself establishes the trust as irrevocable.
Revocable trusts may be amended during the grantor's (person who establishes the trust) lifetime, but generally become irrevocable trusts when the grantor dies.
An irrevocable trust may only be changed or amended by court order and is managed by a trustee who holds many responsibilities, including:
- Investing trust assets in accordance with the trust's provisions and for the sole interest of the trust's beneficiaries
- Making payments to the trust's beneficiaries in accordance with provisions of the trust
- Preserving and controlling trust property in a reasonable manner
- Paying the income taxes of the trust
- Accounting and record keeping for the trust
- Notifying trust beneficiaries and heirs when the grantor dies
- Notifying creditors when the grantor dies
- Notifying the county assessor, if the trust contains real estate ownership, when there is a change of ownership of the trust
- Dealing impartially with beneficiaries
- Cooperating with a co-trustee
- Avoiding using property and assets of the trust for the trustee's benefits or profit
- Avoiding becoming the trustee of another trust with conflicting interests
Dividing Trusts When the Grantor (Originator) Dies - Taxable Estates
With a revocable living trust, when the first spouse dies, two trusts will be operating: Trust A and Trust B. Trust A remains a revocable trust in the control of the surviving spouse while Trust B contains the decedent's assets to which the surviving spouse generally becomes the sole trustee. Trust B cannot be canceled or have its provisions changed, but the surviving spouse may benefit from the income generated by Trust B and, if demonstrable need exists, withdraw principal from Trust B.
When the surviving spouse dies, both trusts become irrevocable, and assets are subject to the federal estate tax if they meet the current threshold. The assets of the trust are then either maintained and payments made to beneficiaries by the trustee (if the trust is to continue after the originator's death) or distributed to beneficiaries in accordance with the provisions of each trust.
Detailed Attention Is Required of a Trustee – Speak With One of Our Experienced Trust Administration Lawyers Today
Trustees can be held personally liable for any breach of fiduciary duty or monetary loss. Beneficiaries may find cause to sue the trustee or other beneficiaries if they suspect issues with the trust's administration or distribution.
Please call our offices in Kalamazoo, Grand Rapids or Paw Paw to schedule a free initial consultation with one of our attorneys at 888-635-3824 or email us. We look forward to speaking with you about your specific trust administration and estate administration concerns.