Legal Reference Blog by Renee C. Walsh, Attorney

29/05: Laws Pertaining to Trust Administration - Michigan

ESTATES AND PROTECTED INDIVIDUALS CODE, Act 386 of 1998, Article VII TRUST ADMINISTRATION, MCL 700.7101 to MCL 700.7511.


700.7101 Registration of trusts.

(1) The trustee of a trust having its principal place of administration in this state may register the trust in the court at the place designated in the trust instrument or, if none is designated, then at the principal place of administration. The principal place of the trust's administration is the trustee's usual place of business where the records pertaining to the trust are kept or the trustee's residence if the trustee does not have such a place of business. For a corporate trustee, the usual place of business is the business location of the primary trust officer for the trust.

(2) For cotrustees, if not designated in the trust instrument, the principal place of administration is 1 of the following:

(a) If there is only 1 corporate cotrustee, the corporate trustee's usual place of business.

(b) If there is only 1 professional fiduciary who is an individual and no corporate trustee, the professional fiduciary's usual place of business or residence.

(c) If (a) or (b) does not apply, the usual place of business or residence of any of the cotrustees as agreed upon by them.


700.7102 Registration procedures.

(1) A trust is registered by the filing of a statement that states the trustee's name and address and in which the trustee acknowledges the trusteeship. The statement must indicate if the trust has been registered elsewhere. The statement must identify the trust in 1 of the following manners:

(a) For a testamentary trust, by the name of the testator and the date and place of domiciliary probate.

(b) For a written inter vivos trust, by the name of each settlor and the original trustee and the date of the trust instrument and all amendments existing on the date of registration.

(c) For an oral trust, by information identifying the settlor or other source of money and describing the trust's time and manner of creation and the trust's terms, including the subject matter, beneficiaries, and time of performance.

(2) The trust instrument and amendments are not required to be filed with the court as part of the trust registration. If a trust is registered elsewhere, registration in this state is ineffective until the earlier registration is released by order of the court where that registration occurred or by an instrument executed by the trustee and all beneficiaries. The order or instrument shall be filed with the registration in this state.


700.7103 Effect of registration.

(1) By registering a trust or accepting the trusteeship of a registered trust, the trustee submits personally to the court's jurisdiction in a proceeding under section 7201 relating to the trust that is initiated by an interested person while the trust remains registered. Notice of a proceeding must be given to the trustee in accordance with section 1401 at the trustee's address as stated in the registration or as reported to the court and to the trustee's address then known to the petitioner.

(2) To the extent of all beneficial interests in the trust and if notice is given in accordance with section 1401, each beneficiary of a trust properly registered in this state is subject to the jurisdiction of the court of registration for the purposes of a proceeding under section 7201.


700.7104 Effect of failure to register.

For purposes of a proceeding commenced by a trust beneficiary before registration, a trustee of a trust that is not registered in a proper place is subject to the personal jurisdiction of a court in which the trust could have been registered. In addition, a trustee who, within 28 days after receipt of a written demand by a trust settlor or beneficiary, fails to register a trust as required by the trust instrument is subject to removal and denial of compensation or to surcharge as the court may direct.


700.7105 Registration; qualification of foreign trustee.

A foreign corporate trustee is required to qualify as a foreign corporation doing business in this state if it maintains a trust's principal place of administration within the state. A foreign cotrustee is not required to qualify in this state solely because its cotrustee maintains the principal place of administration in this state. Unless otherwise doing business in this state, local qualification by a foreign trustee, corporate or individual, is not required for the trustee to receive distribution from a local estate, to hold, invest in, manage, or acquire property located in this state, or to maintain litigation. This section does not affect a determination of what other acts require qualification as doing business in this state.


700.7201 Court; exclusive jurisdiction of trusts.

(1) The court has exclusive jurisdiction of proceedings concerning trusts as provided in section 1302(b) and (d) and concurrent jurisdiction regarding matters affecting trusts as provided in section 1303.

(2) Neither registration of a trust nor another proceeding concerning a trust results in continuing supervisory proceedings. Subject to court jurisdiction as invoked by an interested person or as otherwise exercised as provided by law, the management and distribution of a trust estate, submission of an account or report to beneficiaries, payment of a trustee's fees and other trust obligations, acceptance and change of trusteeship, and any other aspect of trust administration shall proceed expeditiously consistent with the terms of the trust, free of judicial intervention, and without court order or approval, or other court action.


700.7202 Trust proceedings; venue.

Venue for a proceeding under section 7201 involving a registered trust is in the place of registration. Venue for a proceeding under section 7201 involving a trust not registered in this state is in any place where the trust properly could have been registered and as otherwise specified by the rules of civil procedure.


700.7203 Trust proceedings; dismissal of matters relating to foreign trusts.

(1) If a party objects, the court shall not entertain a proceeding under section 7201 involving a trust registered or having its principal place of administration in another state, unless either of the following applies:

(a) All appropriate parties could not be bound by litigation in the courts of the state where the trust is registered or has its principal place of administration.

(b) If the interests of justice would otherwise seriously be impaired.

(2) The court may condition a stay or dismissal of a proceeding under this section on the consent of a party to jurisdiction of the state in which the trust is registered or has its principal place of business, or the court may grant a continuance or enter another appropriate order.


700.7204 Court; concurrent jurisdiction of litigation involving trusts and third parties.

The court where a trust is registered has concurrent jurisdiction with other courts of this state of an action or proceeding to determine the existence or nonexistence of the trust if created other than by will, of an action or proceeding against a creditor or debtor of the trust, and of another action or proceeding involving a trustee and a third party. Venue is determined by the rules generally applicable to civil actions.


700.7205 Proceedings for review of employment of agents and review of compensation of trustee and employees of trust.

On petition of an interested person, after notice to all interested persons, the court may review the propriety of employment of a person by a trustee including an attorney, auditor, investment advisor, or other specialized agent or assistant, and the reasonableness of the compensation of a person so employed and the reasonableness of the compensation determined by the trustee for the trustee's own services. The court may order a person who receives excessive compensation from a trust to make an appropriate refund.


700.7206 Trust proceedings; initiation by notice; interested persons.

A proceeding under section 7201 is initiated by filing a petition in the court and giving notice to interested persons as provided in section 1401. The court may order notification of additional persons. A judgment or order binds each person who is given notice of the proceeding even if not all interested persons are notified.


700.7207 Approval of agreements adjusting beneficial interests.

(1) On petition of an interested person, the court may approve an interpretation, construction, modification, or other settlement that is agreed upon in writing by all presently identified and competent beneficiaries whose interests in the trust may be affected to resolve a contest, controversy, or question of construction or interpretation concerning the existence, administration, or termination of an irrevocable trust.

(2) If the present or future interest of an unborn, unascertained, missing, or disappeared person; of a trustee or a trust beneficiary described in the trust document but not yet established; or of a minor or other person without legal capacity is not represented or is not represented adequately under the provisions of section 1209 or section 1403, the court may appoint 1 or more guardians ad litem to represent the interest or interests.

(3) The court shall approve an agreement described in subsection (1) if it appears to have been reached in good faith and its effects are just and reasonable under all of the relevant facts and circumstances.

(4) The order in response to a petition under subsection (1) is binding on each party who is represented in the proceeding and on others in accordance with section 1403(b). After issuance of the order, the agreement as approved by the court shall be considered a part of the governing instrument of the trust.


700.7301 General duties not limited.

Except as specifically provided, the general duty of a trustee to administer a trust expeditiously for the benefit of the beneficiaries is not altered by this act.


700.7302 Trustee's standard of care and performance.

Except as otherwise provided by the terms of the trust, the trustee shall act as would a prudent person in dealing with the property of another, including following the standards of the Michigan prudent investor rule. If the trustee has special skills or is named trustee on the basis of representation of special skills or expertise, the trustee is under a duty to use those skills.


700.7303 Duty to inform and account to beneficiaries.

(1) Subject to subsection (2), the trustee of a revocable trust shall keep the settlor reasonably informed of the trust and its administration. Unless otherwise provided in the trust instrument, the trustee of a revocable trust does not have a duty to inform a trust beneficiary of the trust and its administration, other than the settlor or, if the settlor is an incapacitated person, the settlor's designated agent.

(2) Unless otherwise provided in the trust instrument, if the trustee reasonably believes the settlor of a revocable trust is an incapacitated person and has no designated agent, the trustee shall keep each beneficiary, who, if the settlor were then deceased, would be a current trust beneficiary, reasonably informed of the trust and its administration. Notwithstanding the provisions of the trust instrument, upon good cause shown, the court may order the trustee to keep other beneficiaries reasonably informed of the trust and its administration.

(3) For a revocable trust, within 28 days after acceptance of trust or the death of the settlor, whichever is later, and for all other trusts, within 28 days after acceptance of the trust, the trustee shall inform in writing each interested trust beneficiary of the trust's existence, of the court in which the trust is registered, if it is registered, of the trustee's name and address, and of the interested trust beneficiary's right to request and receive both a copy of the trust's terms that describe or affect the interested trust beneficiary's interest and relevant information about the trust property. In addition, all of the following apply:

(a) Upon reasonable request, the trustee shall provide a beneficiary with a copy of the trust's terms that describe or affect the beneficiary's interest and with relevant information about the trust property.

(b) Unless the settlor directs or requests in the trust instrument that the trustee provide accounts to less than all interested trust beneficiaries, all of the following apply:

(i) At least annually and on termination of the trust or a change of the trustee, the trustee shall provide a statement of account to each current trust beneficiary and shall keep each current trust beneficiary informed of the trust and its administration.

(ii) Upon reasonable request, the trustee shall provide a statement of account to each interested trust beneficiary who is not also a current trust beneficiary and shall keep each of those persons reasonably informed of the trust and its administration.

(iii) The trustee shall provide a statement of account and other information to a beneficiary as the court directs.

(iv) In the trustee's discretion, the trustee may provide a statement of account and other information to any beneficiary.

(c) If the settlor requests or directs the trustee in the trust instrument to provide accounts and information to less than all interested trust beneficiaries, the trustee shall provide statements of account and information as provided in the trust instrument. At the court's direction, the trustee shall provide statements of account and other information to persons excluded by the settlor's request or direction to the extent and in the manner the court directs.

(d) A statement of account under this section is a report by the trustee that shall, at a minimum, list the trust assets, if feasible giving their market values, the trust liabilities, receipts, and disbursements, and state the source and amount of the trustee's compensation. A particular format or formality is not required for a report or statement of account under this section unless a court specifies its content and manner of presentation.


700.7304 Duty to provide bond.

A trustee need not provide bond to secure performance of the trustee's duties unless required by the terms of the trust, reasonably requested by a beneficiary, or found by the court to be necessary to protect the interests of the beneficiaries who are not able to protect themselves and whose interests are not otherwise adequately represented. On petition of the trustee or an interested person, the court may excuse a requirement of bond, reduce the amount of the bond, release the surety, or permit the substitution of another bond with the same or different sureties. If bond is required, the bond shall be filed in the court of registration or another appropriate court in an amount and with the sureties and liabilities as provided in sections 3604 and 3606 relating to the bond of a personal representative.


700.7305 Trustee's duties; appropriate place of administration; change.

A trustee is under a continuing duty to administer the trust at a place appropriate to the purposes of the trust and to its sound, efficient management. If the principal place of administration becomes inappropriate for any reason, the court may enter an order furthering efficient administration and the interests of beneficiaries, including, if appropriate, release of registration, removal of the trustee, and appointment of a trustee in another state. A trust provision relating to the place of administration, to changes in the place of administration, or to change of trustee controls unless compliance would be contrary to efficient administration or the purposes of the trust. The view of an adult beneficiary shall be given weight in determining the suitability of the trustee and the place of administration.


700.7306 Personal liability of trustee.

(1) Unless otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee's fiduciary capacity in the course of administration of the trust estate unless the trustee fails to reveal the trustee's representative capacity and identify the trust estate in the contract.

(2) A trustee is personally liable for an obligation arising from ownership or control of the trust estate property or for a tort committed in the course of administration of the trust estate only if the trustee is personally at fault.

(3) A claim based on a contract entered into by a trustee in trustee's fiduciary capacity, on an obligation arising from ownership or control of the trust estate, or on a tort committed in the course of trust administration may be asserted against the trust estate by proceeding against the trustee in the trustee's fiduciary capacity, whether or not the trustee is personally liable for the claim.

(4) The question of liability as between the trust estate and the trustee individually may be determined in a proceeding for accounting, surcharge, or indemnification or in another appropriate proceeding.


700.7307 Limitations on proceedings against trustees.

(1) A beneficiary is barred from commencing a proceeding against a trustee for breach of trust if the proceeding is not commenced within 1 year after the date the beneficiary or a representative of the beneficiary is sent a report that adequately discloses the existence of a potential claim for breach of trust and informs the beneficiary of the time allowed for commencing a proceeding. A beneficiary may also be barred from commencing a proceeding against a trustee for breach of trust by adjudication, consent, ratification, estoppel, or other limitation.

(2) Persons barred under subsection (1) include all of the following:

(a) A beneficiary when an interested trust beneficiary possessing the same interest preceding that of the beneficiary receives the report.

(b) An object, taker in default, or another who may receive property by virtue of the exercise of or failure to exercise a presently exercisable or testamentary general or special power of appointment if the person possessing the power of appointment receives the report.

(c) A person described in section 1403(b) as bound by another if that other receives the report.

(3) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.

(4) If subsection (1) does not apply, a proceeding by a beneficiary against a trustee for breach of trust shall be commenced within 5 years of the first of the following to occur:

(a) The removal, resignation, or death of the trustee.

(b) The termination of the beneficiary's interest in the trust.

(c) The termination of the trust.


700.7308 Duties and liabilities of successor trustees.

(1) A person who succeeds to the position of trustee of a revocable trust upon the death, resignation, or incapacity of a trustee who was also the trust settlor is not liable for an act or omission of the settlor while serving as trustee.

(2) The successor trustee has no responsibility to investigate a transaction of the settlor/trustee, to review an account, act, or omission of the settlor/trustee, or to take action against the settlor/trustee for a breach of trust.

(3) A successor trustee does not have a greater responsibility to locate property in the trust, or passing to the trust, than it would have if the successor trustee were acting as personal representative of the estate of the settlor/trustee. The successor trustee may act upon information that the successor trustee believes true or a document that the successor trustee believes genuine.


700.7401 Specific powers of trustee; exceptions.

(1) A trustee has the power to perform in a reasonable and prudent manner every act that a reasonable and prudent person would perform incident to the collection, preservation, management, use, and distribution of the trust property to accomplish the desired result of administering the trust legally and in the trust beneficiaries' best interest.

(2) Subject to the standards described in subsection (1) and except as otherwise provided in the trust instrument, a trustee possesses all of the following specific powers:

(a) To take possession, custody, or control of property transferred to the trust.

(b) To retain property that the trustee receives, including property in which the trustee is personally interested, in accordance with the Michigan prudent investor rule.

(c) To receive property from a fiduciary or another source that is acceptable to the trustee.

(d) To perform, compromise, or refuse to perform a contract of the settlor that is an obligation of the trust, as the trustee may determine under the circumstances. In performing an enforceable contract by the settlor to convey or lease land, if the contract for a conveyance requires the giving of a warranty, the deed or other instrument of conveyance to be given by the trustee must contain the warranty required. The warranty is binding on the trust as though made by the settlor, but does not bind the trustee except in the trustee's fiduciary capacity. The trustee, among other possible courses of action, may do either of the following:

(i) Execute and deliver a deed of conveyance for cash payment of money remaining due or the purchaser's note for the money remaining due secured by a mortgage on the land.

(ii) Deliver a deed in escrow with directions that the proceeds, when paid in accordance with the escrow agreement, be paid to the trustee, as designated in the escrow agreement.

(e) To satisfy a settlor's written charitable pledge irrespective of whether the pledge constitutes a binding obligation of the settlor or was properly presented as a claim, if in the trustee's judgment the settlor would have wanted the pledge completed under the circumstances.

(f) To deposit trust money in a bank, including a bank operated by the trustee and to invest and reinvest trust property as would a prudent investor acting in accordance with the Michigan prudent investor rule.

(g) To acquire property, including property in this or another state or country, in any manner for cash or on credit, at public or private sale; and to manage, develop, improve, exchange, partition, or change the character of trust property.

(h) To make an ordinary or extraordinary repair or alteration in a building or another structure, to demolish an improvement, or to raze an existing or erect a new party wall or building.

(i) To subdivide, develop, or dedicate land to public use; to make or obtain the vacation of a plat or adjust a boundary; to adjust a difference in valuation on exchange or partition by giving or receiving consideration; or to dedicate an easement to public use without consideration.

(j) To enter for any purpose into a lease as lessor or lessee, with or without an option to purchase or renew, for any term.

(k) To enter into a lease or arrangement for exploration and removal of minerals or another natural resource or to enter into a pooling or unitization agreement.

(l) To abandon property if, in the trustee's opinion, the property is valueless, or is so encumbered or in such a condition that it is of no benefit to the trust.

(m) To vote a stock or other security in person, by general or limited proxy, or in another manner provided by law.

(n) To pay a call, assessment, or other amount chargeable or accruing against or on account of a security.

(o) To hold property in the name of a nominee or in another form without disclosure of the interest of the trust. However, the trustee is liable for an act of the nominee in connection with the property so held.

(p) To insure the trust property against damage, loss, or liability and to insure the trustee against liability as to a third person.

(q) To borrow money for any purpose from the trustee or others and to mortgage or pledge trust property.

(r) To effect a fair and reasonable compromise with a debtor or obligor, or extend, renew, or in any manner modify the terms of an obligation owing to the trust. If the trustee holds a mortgage, pledge, or another lien on property of another person, the trustee may, instead of foreclosure, accept a conveyance or transfer of encumbered property from the property's owner in satisfaction of the indebtedness secured by a lien.

(s) To pay a tax, an assessment, the trustee's compensation, or another expense incident to the administration of the trust.

(t) To sell or exercise a subscription or conversion right or to consent, directly or through a committee or another agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a business enterprise.

(u) To allocate an item of income or expense to either trust income or principal, as permitted or provided by law.

(v) To employ, and pay reasonable compensation for services performed by, a person, including an auditor, investment advisor, accountant, appraiser, broker, custodian, rental agent, realtor, or agent, even if the person is associated with the trustee, for the purpose of advising or assisting the trustee in the performance of an administrative duty; to act without independent investigation upon such a person's recommendation; and, instead of acting personally, to employ 1 or more agents to perform an act of administration, whether or not discretionary.

(w) To employ an attorney to perform necessary legal services or to advise or assist the trustee in the performance of the trustee's administrative duties, even if the attorney is associated with the trustee, and to act without independent investigation upon the attorney's recommendation. An attorney employed under this subdivision shall receive reasonable compensation for his or her employment.

(x) To prosecute, defend, arbitrate, settle, release, compromise, or agree to indemnify a claim or proceeding in any jurisdiction or under an alternative dispute resolution procedure. The trustee may act under this subsection for the trustee's protection in the performance of the trustee's duties.

(y) To sell, exchange, partition, or otherwise dispose of, or grant an option with respect to, trust property for any purpose upon any terms or conditions.

(z) To continue or participate in a business or venture in any manner, in any form, and for any length of time.

(aa) To change the form, in any manner, of a business or venture in which the settlor was engaged at the time of death.

(bb) To provide for exoneration of the trustee from personal liability in a contract entered into on behalf of the trust.

(cc) To respond to environmental concerns and hazards affecting trust property as provided in section 7407.

(dd) To collect, pay, contest, settle, release, agree to indemnify against, compromise, or abandon a claim of or against the trust, including a claim against the trust by the trustee.

(ee) To respond to a tax matter as provided in section 7408.

(ff) To divide trust property into 2 or more separate portions or trusts with substantially identical terms and conditions and to allocate property between them, in order to simplify administration for generation skipping transfer tax purposes, to segregate property for management purposes, or to meet another trust objective.

(gg) To make a payment of money, or other property instead of money, to or for a minor or incapacitated individual as provided in section 7409.

(hh) To make a distribution or division of trust property in cash or in kind, or both; to allot a different kind or disproportionate portion of, or an undivided interest in, trust property among beneficiaries and determine the value of allotted trust property; or to distribute an unclaimed share as described in section 3916.

(ii) To transfer the property of a trust to another jurisdiction and appoint, compensate, or remove a successor trustee, individual or corporate, for trust property in another jurisdiction, with any trust powers set out in this part that the trustee delegates to the successor trustee.

(jj) To execute and deliver an instrument that accomplishes or facilitates the exercise of a power vested in the trustee.

(3) A trust that contains substantially identical provisions as another trust established for the same beneficiary or beneficiaries may be consolidated and administered as 1 trust. If the rule against perpetuities speaks from different dates with reference to the trusts or if there are other variations in terms, consolidation may still take place, but the property of the trusts shall be maintained in separate accounts if necessary to recognize and give effect to the differences.


700.7402 Relief from restrictions; court order.

For cause shown and on the petition of the trustee or an affected beneficiary and on appropriate notice to the affected parties, the court may relieve a trustee from a restriction on the trustee's powers that would otherwise be placed on the trustee by the trust instrument or by this part.


700.7403 Conflict of interest; court authorization.

(1) If the trustee's duty and the trustee's individual interest or the trustee's interest as a trustee of another trust conflict in the exercise of a trust power, the power may be exercised if any of the following are true:

(a) The trust agreement expressly authorizes the transaction.

(b) The transaction is approved by the court after notice to interested persons.

(c) The transaction is otherwise permitted by statute.

(2) Under this section, personal profit or advantage to an affiliated or subsidiary company or association is personal profit to a corporate trustee.


700.7404 Persons dealing with trustee.

With respect to a third person dealing with a trustee or assisting a trustee in the conduct of a transaction, the existence of a trust power and its proper exercise by the trustee may be assumed without inquiry. The third person is not bound to inquire whether the trustee may act or is properly exercising the power. A third person, without actual knowledge that the trustee is exceeding a trust power or improperly exercising it, is fully protected in dealing with the trustee as if the trustee possessed and properly exercised the power the trustee purports to exercise. A third person is not bound to assure the proper application of trust property paid or delivered to the trustee.


700.7405 Powers of remaining trustees.

Unless otherwise provided in the trust instrument, if 1 of several trustees dies, resigns, or is removed, the remaining trustees have all rights, title, and powers of all previous trustees. If the trust instrument provides that a successor trustee be appointed to fill a vacancy, the remaining trustees may exercise the powers of all previous trustees until the successor is appointed.


700.7406 Powers exercisable by 1 or more trustees.

(1) If there are 2 or more trustees and the trust instrument expressly makes provision for the execution of any of the trustees' powers by both or all of them or by any 1 or more of them, the provisions of the trust instrument govern.

(2) If there is no governing provision in the trust instrument, cotrustees may provide, by written agreement signed by all of them and filed with and approved by the court where the trust would be registered, as determined in accordance with section 7101, that any 1 or more of the powers designated in section 7401 may be exercised by any designated 1 or more of the trustees.

(3) Subject to subsection (1), if 2 or more trustees own securities, their acts with respect to voting have 1 of the following effects:

(a) If only 1 trustee votes, in person or by proxy, that trustee's act binds all of the trustees.

(b) If more than 1 trustee votes, in person or by proxy, the act of the majority so voting binds all of the trustees.

(c) If more than 1 trustee votes, in person or by proxy, but the vote is evenly split on a particular matter, each faction is entitled to vote the securities proportionately.

(4) Subject to subsections (1) to (3), all other acts and duties shall be performed by both of the trustees if there are 2 or by a majority of the trustees if there are more than 2. A trustee who has not joined in exercising a power is not liable to a beneficiary or another person for the consequences of the exercise of that power. A dissenting trustee is not liable for the consequences of an act in which the dissenting trustee joins at the direction of the other trustees, if the dissenting trustee expressed dissent in writing to a cotrustee at or before the time of joinder.

(5) A trustee is not relieved of liability by entering into an agreement under this section.


700.7407 Trustee authority regarding environmental matters.

(1) In connection with an environmental concern or hazard, a trustee may do any of the following:

(a) Inspect property or the operation of a business activity on property, including property held in or operated by a sole proprietorship, partnership, corporation, or limited liability company or any other type of entity, for the purpose of determining compliance with environmental law affecting the property and to respond to an actual or threatened violation of an environmental law affecting property held or tendered to the trustee.

(b) Take action necessary to prevent, abate, or otherwise remedy an actual or threatened violation of an environmental law affecting property held by the trustee, either before or after a governmental body initiates an enforcement action.

(c) Refuse to accept property in trust if the trustee determines that the property to be transferred to the trust either is or may be contaminated by a hazardous substance or has been or is being used for an activity directly or indirectly involving a hazardous substance that could result in liability to the trust or otherwise impair the value of the trust property.

(d) Settle or compromise at any time a claim against the trust that a governmental body or private party may assert involving the alleged violation of an environmental law affecting property held in the trust.

(e) Disclaim a power granted by a document, statute, or rule of law that, in the sole discretion of the trustee, may cause the trustee to incur personal liability under an environmental law.

(f) Decline to serve or resign as a trustee if the trustee reasonably believes that there is or may be a conflict of interest between it in its fiduciary capacity and in its individual capacity because of a potential claim or liability that may be asserted against the trustee on the trust's behalf because of the type or condition of property held in trust.

(g) Appoint an independent special trustee to hold title to, and take a reasonably required action, as provided in this section, relating to environmental law in regard to, property tendered to the trust, until the time that the trustee determines no substantial risk exists if the tendered property becomes part of the trust property or abandons the tendered property.

(h) Charge the cost of an inspection, review, abatement, response, cleanup, settlement of claim, or remedial action authorized by this section against the trust property.

(2) A trustee is not personally liable to a beneficiary or other party for a decrease in value of trust property by reason of the trustee's compliance with an environmental law, specifically including a reporting requirement under that law. The trustee's acceptance of property or failure to inspect property or a business operation does not create an inference that there is or may be liability under an environmental law with respect to the property or business operation. The authority granted by this section is solely to facilitate the administration and protection of trust property and is not to impose greater responsibility or liability on the trustee than imposed by law absent this section.


700.7408 Trustee authority regarding tax matters.

(1) A trustee may do any of the following in connection with a tax matter:

(a) Make, revise, or revoke an available allocation, consent, or election affecting a tax that is appropriate in order to carry out the settlor's estate planning objectives and to reduce the overall burden of taxation, both in the present and in the future. This authority includes, but is not limited to, all of the following:

(i) Electing to take expenses as estate tax or income tax deductions.

(ii) Electing to allocate the exemption from the tax on generation skipping transfers among transfers subject to estate or gift tax.

(iii) Electing to have all or a portion of a transfer for a spouse's benefit qualify for the marital deduction.

(iv) Electing the date of death or an alternate valuation date for federal estate tax purposes.

(b) Exclude or include property from the gross estate for federal estate tax purposes.

(c) Value property for federal estate tax purposes.

(d) Join with the surviving spouse or the surviving spouse's personal representative in the execution and filing of joint income tax return and consenting to a gift tax return filed by the surviving spouse or the surviving spouse's personal representative.

(2) A trustee's decision on a matter described in subsection (1)(a) binds all beneficiaries.

(3) After making a decision described in subsection (1)(a), a trustee may make compensating adjustments between principal and income in the manner provided by the uniform principal and income act.


700.7409 Payment provisions.

(1) A trustee may act under section 7401(2)(gg) by paying money or other property to 1 or more of the following:

(a) The minor or incapacitated individual directly.

(b) A person or institution providing support, maintenance, education, or medical, surgical, hospital, or other institutional care for the minor or incapacitated individual in direct payment for those services.

(c) The legal or natural guardian of the minor or incapacitated individual.

(d) A person, whether or not appointed guardian by a court, who shall in fact have the care and custody of the minor or incapacitated individual.

(e) A custodian for the minor or incapacitated individual under a uniform gifts or transfers to minors act.

(2) If the trustee exercises due care in the selection of the person to whom a payment is made under this section, including a minor or incapacitated individual, the trustee does not have a duty to see to the payment's application. The person's receipt for the payment completely discharges the trustee.


700.7410 Improper distribution or payment.

Unless the distribution or payment can no longer be questioned because of adjudication, estoppel, or other limitation, a distributee or claimant that receives property that is improperly distributed or paid from a trust shall return the property and any income and gain from the property since distribution, if the recipient has the property. If the recipient does not have the property, the recipient shall pay the value of the property as of the date of distribution or payment and any income and gain from the property since distribution.


700.7501 Liability of trust for expenses, claims, and allowances.

(1) The property of a trust over which the settlor has the right without regard to the settlor's mental capacity, at his or her death, either alone or in conjunction with another person, to revoke the trust and revest principal in himself or herself is subject to all of the following, but only to the extent that the settlor's property subject to probate administration is insufficient to satisfy the following expenses, claims, and allowances:

(a) The administration expenses of the settlor's estate.

(b) An enforceable and timely presented claim of a creditor of the settlor, including a claim for the settlor's funeral and burial expenses.

(c) Homestead, family, and exempt property allowances.

(2) A trust established as part of, and all payments from, an employee annuity described in section 403 of the internal revenue code, an individual retirement account described in section 408 of the internal revenue code, a Keogh (HR-10 plan), or a retirement or other plan that is qualified under section 401 of the internal revenue code shall not be considered to be a trust described in subsection (1).

(3) This section does not impair a right that an individual has under a qualified domestic relations order as that term is defined in section 414(p) of the internal revenue code.

(4) For purposes of this section, property held or received by a trust to the extent that the property would not have been subject to a claim against the settlor's estate if it had been paid directly to a trust created under the settlor's will or other than to the settlor's estate, or property received from a trust other than a trust described in this section, shall not be considered trust property available for the payment of the administration expenses, a claim against the settlor's estate, or an allowance described in subsection (1).


700.7502 Trustee's duty to pay expenses and obligations of settlor's estate.

(1) A trustee of a trust described in section 7501(1) shall pay to the personal representative of the settlor's estate the amount from time to time that the personal representative certifies in writing to the trustee is required to pay the administration expenses of the settlor's estate; an enforceable and timely presented claim of a creditor of the settlor, including a claim for the settlor's funeral and burial expenses; and homestead, family, and exempt property allowances. Without liability to a trust beneficiary or another party, the trustee may rely on the certificate of the personal representative. In the event there is no personal representative appointed for the settlor's estate, the trustee shall pay directly to the creditor an enforceable and timely served claim of a creditor of the settlor, including a claim for the settlor's funeral and burial expenses. If a personal representative is not appointed for the settlor's estate within 4 months after the date of the publication of notice to creditors, a trust described in section 7501(1) is not liable for payment of homestead, family, or exempt property allowances. A payment made by a trustee is subject to this section, but the payment shall be made exclusively out of property, or the proceeds of property, that is includable in the settlor's gross estate for federal estate tax purposes, other than assets described in section 7501(2), (3), and (4).

(2) Unless a settlor provides in his or her will or, in the absence of such a provision, designates in the trust the money or property passing under a trust to be used as described in section 7501, the administration expenses of the settlor's estate; an enforceable and timely filed claim of a creditor of the settlor, including a claim for the settlor's funeral and burial expenses; or homestead, family, and exempt property allowances, to be paid in accordance with subsection (1), shall be paid from the property of the trust in the following order:

(a) Property of the trust residue remaining after all distributions that are to be satisfied by reference to a specific property or type of property, fund, money, or statutory amount.

(b) Property that is not to be distributed out of specified or identified property or a specified or identified item of property.

(c) Property that is to be distributed out of specified or identified property or a specified or identified item of property.


700.7503 Rules regarding payment of expenses and obligations.

(1) The following rules apply to section 7502(2):

(a) Upon the failure or insufficiency of money or property out of which payment should be made, to the extent of the insufficiency, a distribution of property from the trust that is to be satisfied out of specified or identified property shall be classed as a distribution to be satisfied out of the general trust property not otherwise disposed of in the trust instrument.

(b) A distribution of property from the trust given for valuable consideration shall abate with other distributions of the same class only to the extent of the excess over the amount of the value of the consideration until all others of the same class are exhausted.

(c) Except as otherwise provided in this section, distributions of property from the trust shall abate equally and ratably and without preference or priority as between real and personal property.

(d) If a specified or identified item of property that has been designated for distribution in the trust instrument or that is charged with a distribution is sold or taken by the trustee, other beneficiaries shall contribute according to their respective interests to the beneficiary whose property is sold or taken, and before distribution, the trustee shall determine the amounts of the respective contributions, which shall be paid or withheld before distribution is made.

(2) Costs and expenses of trust administration, including trustee compensation and attorney fees, shall be paid by the trustee before and in preference to the administration costs and expenses of the settlor's estate, an enforceable and timely filed claim of a creditor of the settlor, and homestead, family, and exempt property allowances. If, after paying costs and expenses of trust administration, the trust property is insufficient to pay in full all charges for which the trust is liable under section 7501(1), the trustee shall make payment in the following order of priority:

(a) Costs and expenses of administration of the decedent's estate.

(b) Reasonable funeral and burial expenses.

(c) Homestead allowance.

(d) Family allowance.

(e) Exempt property.

(f) Debts and taxes with priority under federal law.

(g) Reasonable and necessary medical and hospital expenses of the decedent's last illness, including compensation of a person attending the decedent.

(h) Debts and taxes with priority under other laws of this state.

(i) All other claims.

(3) A preference shall not be given in the payment of a charge over another charge of the same class under subsection (2), and a charge due and payable is not entitled to a preference over a charge not due.

(4) If the decedent was the settlor of more than 1 trust described in section 7501(1), the charges described in that section are payable pro rata from those trusts, based on the gross values of the respective trusts on the date of the decedent's death. Each trustee is entitled to right of contribution as necessary to effect the pro rata liability. The allocation and contribution, however, are subject to provisions in the trusts regarding the allocation and burden of the charges. If there is conflict between the governing instruments regarding the allocation and burden of the charges, the decedent's will controls.


700.7504 Trustee's duty to give notice.

If there is no personal representative of the settlor's estate to whom letters of administration have been issued so that the publication and notice requirements of section 3801 have not been discharged, then each trustee of a trust described in section 7501(1) must cause a notice to creditors to be published and served in the same manner, with the same duties, and with the same protection for the trustee and the attorney for the trustee as described in section 3801 for a personal representative. The notice must comply with an applicable court rule and contain the name of the trust's deceased settlor; the trust's name or other designation, if any; the date the trust was established; the name and address of each trustee serving at the time of or as a result of the settlor's death; and the name and address of the trustee's attorney, if any. The notice must state the date of publication.


700.7505 Presentation of claims against revocable trust.

(1) If notice to claimants is given by a trustee as provided in section 7504, a claimant shall present a claim against a trust described in section 7501(1) in either of the following ways:

(a) The claimant may mail or deliver to the trustee a written statement of the claim indicating its basis, the name and address of the claimant, and the amount claimed. The claim is considered presented on the trustee's receipt of the claim. If a claim is not yet due, the date when it will become due must be stated. If the claim is contingent or unliquidated, the nature of the uncertainty must be stated. If the claim is secured, the security must be described. Failure to describe correctly the security, the nature of any uncertainty, and the due date of a claim not yet due does not invalidate a claim's presentation.

(b) The claimant may commence a proceeding to obtain payment of a claim against the trust in a court where the trustee is subject to jurisdiction. The commencement of the proceeding must occur within the time limit for presenting the claim. Presentation of a claim is not required in regard to matters claimed in proceedings against the trust or settlor that were pending at the time of the settlor's death.

(2) If a personal representative is appointed for the settlor's estate, presentation of a claim against the settlor's estate must be made in the manner described in section 3804, and such a presentation is sufficient to assert liability against a trust described in section 7501(1) without an additional presentation of the claim against the trustee.


700.7506 Limitation of time for presentation of claims to assert liability against revocable trust.

(1) If not barred earlier by another statute of limitations, a claim against the settlor of a trust described in section 7501(1) that arose at or before the settlor's death that a person seeks to recover from the trust is barred against the trust, each trustee of the trust, and a trust beneficiary, unless presented within 1 of the following times:

(a) If notice is given in compliance either with section 3801 or section 7504, within 4 months after the date of publication of notice to creditors.

(b) For a creditor known to the personal representative at the time of publication or during the 4 months following publication, or known to the trustee at or during such a time if publication occurred under section 7504, within 28 days after the subsequent sending of notice or 4 months after the date of publication of notice to creditors, whichever is later.

(c) If the notice requirements of either section 3801 or section 7504 are not met, within 3 years after the settlor's death.

(2) This section does not affect or prevent any of the following:

(a) A proceeding to enforce a mortgage, pledge, or other lien upon property held in the trust.

(b) A proceeding to establish the settlor's or the trustee's liability for which the settlor or the trustee is protected by liability insurance to the limits of the insurance protection only.

(c) Collection of compensation for services rendered and reimbursement of expenses advanced by the trustee or by an attorney, auditor, investment adviser, or other specialized agent or assistant for the trustee.


700.7507 Allowance and disallowance of claims against revocable trust.

If there is no personal representative appointed for the settlor's estate and notice is given in accordance with section 7504, the allowance or disallowance of a claim presented in the manner described in section 7505(1) and within a time period described in section 7506 is governed by the following provisions:

(a) The trustee may deliver or mail a notice to the claimant stating that the claim has been disallowed in whole or in part. If, after allowing or disallowing a claim, the trustee changes a decision concerning the claim, the trustee shall notify the claimant. The trustee shall not change a decision disallowing a claim if the time for the claimant to commence a proceeding for allowance expires or if the time to commence a proceeding on the claim expires and the claim has been barred. A claim that is disallowed in whole or in part by the trustee is barred to the extent not allowed unless the claimant commences a proceeding against the trustee not later than 63 days after the mailing of the notice of disallowance or partial allowance if the notice warns the claimant of the impending bar. Failure by the trustee to deliver or mail to a claimant notice of action on the claim within 63 days after the time for the claim's presentation has expired constitutes a notice of allowance.

(b) After allowing or disallowing a claim, the trustee may change the allowance or disallowance as provided in this subdivision. Before payment, the trustee may change the allowance to a disallowance in whole or in part, but not after allowance by a court order or judgment, or an order directing payment of the claim. The trustee shall notify the claimant of the change to disallowance, and the disallowed claim is then subject to bar as provided in subdivision (a). The trustee may change a disallowance to an allowance, in whole or in part, until it is barred under subdivision (a). After a claim is barred, it may be allowed and paid only if the trust is solvent and all whose interests would be affected consent.

(c) Upon the trustee's or a claimant's commencement of a proceeding, the court may allow in whole or in part a claim properly presented in due time and not barred by subdivision (a).

(d) A judgment in a proceeding in another court against a trustee to enforce a claim against a decedent's estate constitutes an allowance of the claim.

(e) Unless otherwise provided in a judgment in another court entered against the trustee, an allowed claim bears interest at a rate determined under section 6013 of the revised judicature act of 1961, MCL 600.6013, for the period commencing 63 days after the time for original presentation of the claim has expired, unless based on a contract that provides for interest, in which case the claim bears interest in accordance with the contract.


700.7508 Payment of claims by trustee.

(1) Upon the expiration of 4 months after the date of the publication of the notice to creditors, the trustee shall proceed to pay the claims allowed against the trust in the order of priority prescribed in section 7503(2)(f) to (g), after making provision for costs and expenses of trust administration, for reasonable funeral and burial expenses, for each claim already presented that is not yet allowed or whose allowance is appealed, and for each unbarred claim that may yet be presented. A claimant whose claim is allowed, but not paid as provided in this section, may petition the court to secure an order directing the trustee to pay the claim to the extent that money of the trust is available for the payment.

(2) At any time, the trustee may pay a claim that is not barred, with or without formal presentation, but is individually liable to another claimant whose claim is allowed and who is injured by the payment if either of the following occurs:

(a) Payment is made before the expiration of the time limit stated in subsection (1) and the trustee fails to require the payee to give adequate security for the refund of any of the payment necessary to pay another claimant.

(b) Payment is made, due to the negligence or willful fault of the trustee, in a manner that deprives the injured claimant of priority.

(3) If a claim is allowed, but the whereabouts of the claimant is unknown at the time the trustee attempts to pay the claim, upon petition by the trustee and after notice the court considers advisable, the court may disallow the claim. If the court disallows a claim under this subsection, the claim is barred.


700.7509 Secured claims.

Payment of a secured claim shall be upon the basis of the amount allowed if the creditor surrenders the security. Otherwise payment shall be upon the basis of 1 of the following:

(a) If the creditor exhausts the security before receiving payment, upon the claim amount allowed less the fair value of the security.

(b) If the creditor does not have the right to exhaust the security or does not do so, upon the claim amount allowed less the value of the security as determined by converting it into money according to the terms of the agreement under which the security is delivered to the creditor, or as determined by the creditor and trustee by agreement, arbitration, compromise, or litigation.


700.7510 Claims not due and contingent or unliquidated claims.

A claim that will become due at a future time, a contingent claim, or an unliquidated claim is governed by the following:

(a) If a claim becomes due or certain before the distribution of the trust, and if the claim is allowed or established by a proceeding, the claim shall be paid in the same manner as presently due and absolute claims of the same class.

(b) For a claim not covered by subdivision (a), the trustee or, on petition of the trustee or the claimant in a proceeding for the purpose, the court may provide for payment as follows:

(i) If the claimant consents, the claimant may be paid the present or agreed value of the claim, taking any uncertainty into account.

(ii) Arrangement for future payment, or possible payment, on the happening of the contingency or on liquidation may be made by creating a trust, giving a mortgage, obtaining a bond or security from a distributee, or otherwise.


700.7511 Counterclaims of trustee.

In allowing a claim, the trustee may deduct a counterclaim that the trustee has against the claimant. In determining a claim against a trust, the court shall reduce the amount allowed by the amount of a counterclaim and, if the total counterclaims exceed the claim, render a judgment against the claimant in the amount of the excess. A counterclaim, liquidated or unliquidated, may arise from a transaction other than that upon which the claim is based. A counterclaim may give rise to relief exceeding in amount or different in kind from that sought in the claim.