New Probate Laws

Take-Away: In the flurry of last-minute legislation signed into law by Governor Snyder, two Bills became law that are of interest to those who deal with trusts.

• Trust Certificates [PA 492]: This new statute was put in place to deal with the use of a Trust Certificate in lieu of recording the entire trust instrument as a matter of public record. Previously there were two separate trust certificate statutes, one in the Michigan Trust Code, as a second statute restricted to real estate. The goal was to combine the two statutes into a single statute with a consistent set of matters to be identified in the Certificate.
• Trust Certificates are used primarily to preserve the confidentiality of the contents of a trust, excluding provisions that deal with who gets the wealth, how much wealth they will receive, if there any conditions imposed on the receipt of a distribution of wealth from the trust, etc. The Trust Certificate is used when title to real estate is transferred to the name of the trustee.
• In short, all of those sensitive wealth distribution provisions contained in the trust instrument can be excluded from the contents of a Trust Certificate, but enough other information about the trust is required in the Trust Certificate to enable third parties, e.g. mortgage lenders; title examiners, purchasers, to rely on the factual representations made in the Trust Certificate.

Key provisions of this statute provide [heavily paraphrased by me] that:

• an instrument that conveys, encumbers or otherwise affects real estate, executed pursuant to an express trust, may be accompanied by (b) A certificate of trust under section 7913 of the estates and protected individuals code, 1998 PA 286, MCL 700.7913 that includes the legal description of the affected real property.
• a trust certificate that accompanies a trust, and any amendments to or revocations of the trust or the trust certificate of trust under section 7913 may be recorded in the office of the register of deeds of each county where the lands that are the subject of or affected by the trust instrument are located.
• if a trust certificate accompanies a trust, the trust certificate must be recorded as a separate document.
• a purchaser of or other party relying on the information included in a recorded certificate of trust has the same protection as is provided to a subsequent purchaser in good faith under MCL 565.29; and
• a purchaser or other party described in this section is not required to further examine the trust instrument, unless an instrument amending or revoking the trust instrument is recorded in the same office in which the trust certificate was previously recorded.

Probably revocable trusts, as well as irrevocable trusts will need to have an updated Trust Certificate prepared, or ‘refreshed,’ to comport with this new statute.

• Directed Trustees: This extensive legislation will allow a trustee that is directed by a trust adviser [formerly called a trust protector]to limit the trustee’s liability for following the directions of the adviser. A summary of the import of this statute is that it relieves the trustee of an implied duty (and thus exposure to liability) to monitor the actions or decisions made by the trust adviser. This proposed legislation was summarized for you in the past, but once I obtain and digest a copy of the new statute I will provide a more detailed summary.