Trusts Blog
Three Rivers Estate Planning - Trust Law Blog

Issues with a Trustee:

Posted December 2, 2018

The trustee of a trust is generally designated in the trust instrument. The trustee accepts the trusteeship by substantially complying with a method of acceptance set forth in the terms of the trust. If the trust does not provide a method, the trustee accepts the office by accepting delivery of the trust property, exercising powers, performing duties, or otherwise indicating acceptance. A trustee who has not accepted the trusteeship may reject the office, and a trustee who does not accept the office within a reasonable time is deemed to have rejected the trusteeship. If, for whatever reason, a trustee is not designated in the trust instrument or the designated trustee declines to accept or resigns as trustee and no successor is named in the trust instrument, the probate court has jurisdiction to appoint a successor trustee.

A trustee who is appointed by court order qualifies by executing an acceptance of trust and must serve the acceptance and order on the qualified trust beneficiaries. The court does not issue letters of trusteeship.  The trustee is also a fiduciary and, as such, stands in a position of confidence and trust to the beneficiary. The fiduciary must discharge all duties, including impartiality, care and prudence in actions, and segregation of assets held in the fiduciary capacity.  The fiduciary shall conform to the Michigan prudent investor rule with respect to making investments.

The probate court has authority to remove an unsuitable trustee, including on the court’s own initiative. MCL 700.7201, .7706. A trustee may be removed for breach of fiduciary duty, a substantial change in circumstances, or for any other circumstance that renders the trustee unfit to continue as trustee. MCL 700.7201, .7706(2). A violation by a trustee of a duty the trustee owes to a trust beneficiary is a breach of trust. MCL 700.7901. Breaches can result from nonfeasance, misfeasance, or malfeasance. Examples of breach of duty include the following:

  • failing to perform the trustee’s duties
  • failing to report
  • failing to follow the trust instrument’s instructions
  • failing to make required distributions
  • failing to properly invest

Lack of fitness to continue as trustee can be established in a number of circumstances; however, absent an accompanying breach of fiduciary duty, courts are reluctant to remove the trustee designated in the trust instrument unless it can be shown that failure to remove the trustee will result in serious detriment to the administration of the trust.

MCL 700.7203(1)


Trustee's Intent

Posted November 10, 2018

Estate and Protected Individuals Code or EPIC’s express rules for the interpretation of and disposition of property by will, MCL 700.2605–.2608, which previously did not apply to trusts, are now extended to trusts under the Michigan Trust Code. MCL 700.7112. If the settlor’s intent cannot be determined from the trust instrument, parol evidence is admissible to aid in the construction.  Be aware that matters involving the construction of terms of the trust can also be resolved by a proper nonjudicial settlement agreement under MCL 700.7111.

Karam v Law Office of Kliber, 253 Mich App 410; 655 NW 2d 614, (2002)


The End of a Trust:

Posted October 21, 2018

A trust terminates without court intervention, as provided in the trust instrument, when no purpose of the trust remains to be achieved or the purposes of the trust have become impossible to achieve or are found by a court to be unlawful or contrary to public policy. A trustee or beneficiary may commence a proceeding to confirm the termination of the trust. A trust may be terminated by the court on a petition for termination by the trustee or another interested person for various reasons, including the following:

Owing to circumstances not anticipated by the settlor, termination of the trust will further the settlor’s stated purpose or, if there is no stated purpose, the settlor’s probable intention.

The value of the trust property is insufficient to justify the cost of administration.

All of the qualified trust beneficiaries and the trustee consent, and termination is consistent with the material purposes of the trust or continuance of the trust is not necessary to achieve any material purpose of the trust. However, if a trustee fails and refuses to consent or fewer than all the qualified trust beneficiaries consent, the court may terminate the trust if the following apply:

(i) if the trustee and all of the qualified trust beneficiaries had consented, the trust could have been modified under MCL 700.7411(5), and

(ii) the interests of a qualified trust beneficiary who does not consent will be adequately protected.

MCL 700.7411(1)(a).