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George F. Bearup, J.D. Senior Legal Trust Advisor

20-Jan-20

Michigan’s Decanting Statutes

Take-Away:  Each year Nevada attorney Steve Oshins ‘ranks’ various state statutes that deal with trusts and their administration. Steve recently came out with his latest ‘rankings’ of state statutes that authorize the trustee’s decanting of an irrevocable trust’s assets to a new trust created by the trustee. When compared to Delaware’s decanting statute, Michigan’s two decanting statutes did not fare well.

Comparision:  Delaware’s decanting statute [Del. 12. s3528] was ranked 3rd out of 29 states that have adopted decanting statutes. Michigan’s two statutes [MCL 700.7820a and MCL 556.115a] were collectively ranked 25th. . A comparison of the ‘ranking’ factors between the two states indicates why Michigan was considered when it comes to the ease with which a trustee can decant trust assets and is a good indicator why Delaware is often a popular place to situs an irrevocable trust.

  • Can Decant Trust with Ascertainable Standard: Delaware – Yes, Michigan – No
  • Notice to Beneficiaries Required: Delaware – No, Michigan – Yes
  • Can Decant trust with Ascertainable Standard into Discretionary Trust: Delaware – No, Michigan -No
  • Can Remove Mandatory Income Interest: Delaware – Yes, Michigan – No
  • Allows Power of Appointment in Second Trust to Add Non-Beneficiaries of First Trust: Delaware – Yes, Michigan – Yes
  • Able to  Accelerate a Remainder Beneficiary’s Interest in the Trust: Delaware – Yes, Michigan -Uncertain (MCL 556.115a is silent)
  • State Dynasty Trust Statute ‘Ranking:’Delaware – Ranked 8th, Michigan – unranked
  • State Domestic Asset Protection Trust ‘Ranking:’   Delaware Ranked 7th, Michigan- Ranked 12th

Mr. Oshins is considered a well-known estate planning attorney who is a frequent speaker and author on asset protection and dynasty-type trusts. I have no idea though if his ‘rankings’ are fair or are even warranted. However, the comparison of Delaware and Michigan’s decanting statutes underscores why Delaware is often chosen to situs a long-term trust that the settlor may wish to have modified as the years pass.