HB-6131, As Passed Senate, December 20, 2018

SUBSTITUTE FOR

HOUSE BILL NO. 6131

     A bill to amend 1998 PA 386, entitled

"Estates and protected individuals code,"

by amending sections 7103, 7105, 7108, 7411, and 7703 (MCL

700.7103, 700.7105, 700.7108, 700.7411, and 700.7703), section 7103

as amended by 2012 PA 483, sections 7105 and 7411 as amended by

2010 PA 325, and sections 7108 and 7703 as added by 2009 PA 46; and

to repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 7103. As used in this article:

     (a) "Action", with respect to a trustee, or a trust protector,

includes an act or a failure to act.

     (b) "Ascertainable standard" means a standard relating to an

individual's health, education, support, or maintenance within the

meaning of section 2041(b)(1)(A) or 2514(c)(1) of the internal

revenue code of 1986, 26 USC 2041 and 2514.

     (c) "Charitable trust" means a trust, or portion of a trust,

created for a charitable purpose described in section 7405(1).

     (d) "Discretionary trust provision" means a provision in a

trust, regardless of whether the terms of the trust provide a

standard for the exercise of the trustee's discretion and

regardless of whether the trust contains a spendthrift provision,

that provides that the trustee has discretion, or words of similar

import, to determine 1 or more of the following:

     (i) Whether to distribute to or for the benefit of an

individual or a class of beneficiaries the income or principal or

both of the trust.

     (ii) The amount, if any, of the income or principal or both of

the trust to distribute to or for the benefit of an individual or a

class of beneficiaries.

     (iii) Who, if any, among a class of beneficiaries will receive

income or principal or both of the trust.

     (iv) Whether the distribution of trust property is from income

or principal or both of the trust.

     (v) When to pay income or principal, except that a power to

determine when to distribute income or principal within or with

respect to a calendar or taxable year of the trust is not a

discretionary trust provision if the distribution must be made.

     (e) "Interests of the trust beneficiaries" means the

beneficial interests provided in the terms of the trust.

     (f) "Power of withdrawal" means a presently exercisable

general power of appointment other than a power that is either of

the following:

     (i) Exercisable by a trustee and limited by an ascertainable

standard.

     (ii) Exercisable by another person only upon on consent of the

trustee or a person holding an adverse interest.

     (g) "Qualified trust beneficiary" means a trust beneficiary to

whom 1 or more of the following apply on the date the trust

beneficiary's qualification is determined:

     (i) The trust beneficiary is a distributee or permissible

distributee of trust income or principal.

     (ii) The trust beneficiary would be a distributee or

permissible distributee of trust income or principal if the

interests of the distributees under the trust described in

subparagraph (i) terminated on that date without causing the trust

to terminate.

     (iii) The trust beneficiary would be a distributee or

permissible distributee of trust income or principal if the trust

terminated on that date.

     (h) "Revocable", as applied to a trust, means revocable by the

settlor without the consent of the trustee or a person holding an

adverse interest. A trust's characterization as revocable is not

affected by the settlor's lack of capacity to exercise the power of

revocation, regardless of whether an agent of the settlor under a

durable power of attorney, a conservator of the settlor, or a

plenary guardian of the settlor is serving.

     (i) "Settlor" means a person, including a testator or a

trustee, who creates a trust. If more than 1 person creates a

trust, each person is a settlor of the portion of the trust

property attributable to that person's contribution. The lapse,

release, or waiver of a power of appointment shall does not cause

the holder of a power of appointment to be treated as a settlor of

the trust.

     (j) "Spendthrift provision" means a term of a trust that

restrains either the voluntary or involuntary transfer of a trust

beneficiary's interest.

     (k) "Support provision" means a provision in a trust that

provides the trustee shall distribute income or principal or both

for the health, education, support, or maintenance of a trust

beneficiary, or language of similar import. A provision in a trust

that provides a trustee has discretion whether to distribute income

or principal or both for these purposes or to select from among a

class of beneficiaries to receive distributions pursuant to under

the trust provision is not a support provision, but rather is a

discretionary trust provision.

     (l) "Trust beneficiary" means a person to whom 1 or both of

the following apply:

     (i) The person has a present or future beneficial interest in

a trust, vested or contingent.

     (ii) The person holds a power of appointment over trust

property in a capacity other than that of trustee or trust

director.

     (m) "Trust director" means that term as defined in section

7703a.

(n) (m) "Trust instrument" means a governing instrument that

contains the terms of the trust, including any amendment to a term

of the trust.

     (n) "Trust protector" means a person or committee of persons

appointed pursuant to the terms of the trust who has the power to

direct certain actions with respect to the trust. Trust protector

does not include either of the following:

     (i) The settlor of a trust.

     (ii) The holder of a power of appointment.

     Sec. 7105. (1) Except as otherwise provided in the terms of

the trust, this article governs the duties and powers of a trustee,

relations among trustees, and the rights and interests of a trust

beneficiary.

     (2) The terms of a trust prevail over any provision of this

article except the following:

     (a) The requirements under section sections 7401 and

7402(1)(e) for creating a trust.

     (b) The Except as otherwise provided in sections 7703a and

7703b, the duty of a trustee to administer a trust in accordance

with section 7801.

     (c) The requirement under section 7404 that the trust have a

purpose that is lawful, not contrary to public policy, and possible

to achieve.

     (d) The power of the court to modify or terminate a trust

under sections 7410, 7412(1) to (3), 7414(2), 7415, and 7416.

     (e) The effect of a spendthrift provision, a support

provision, and a discretionary trust provision on the rights of

certain creditors and assignees to reach a trust as provided in

part 5.

     (f) The power of the court under section 7702 to require,

dispense with, or modify or terminate a bond.

     (g) The power of the court under section 7708(2) to adjust a

trustee's compensation specified in the terms of the trust that is

unreasonably low or high.

     (h) Except as permitted under section 7809(2), the The

obligations imposed on a trust protector director in section

7809(1).7703a(4) and (5).

     (i) The duty under section 7814(2)(a) to (c) to provide

beneficiaries with the terms of the trust and information about the

trust's property, and to notify qualified trust beneficiaries of an

irrevocable trust of the existence of the trust and the identity of

the trustee.

     (j) The power of the court to order the trustee to provide

statements of account and other information pursuant to under

section 7814(4).

     (k) The effect of an exculpatory term under section 7809(8)

7703a(5)(b) or 7908.

     (l) The effect of a release of a trustee or trust director

from liability for breach of trust under section 7703a(8).

(m) (l) The rights under sections 7910 to 7913 of a person

other than a trustee or beneficiary.

(n) (m) Periods of limitation under this article for

commencing a judicial proceeding.

(o) (n) The power of the court to take action and exercise

jurisdiction.

(p) (o) The subject-matter jurisdiction of the court and venue

for commencing a proceeding as provided in sections 7203 and 7204.

(q) (p) The requirement under section 7113 that a provision in

a trust that purports to penalize an interested person for

contesting the trust or instituting another proceeding relating to

the trust shall not be given effect if probable cause exists for

instituting a proceeding contesting the trust or another proceeding

relating to the trust.

     (r) The requirement under section 7703b(2)(d) regarding the

eligibility of a trust's sole beneficiary to be a separate trustee

as that term is defined in section 7703b.

     Sec. 7108. (1) Without precluding other means for establishing

a sufficient connection with the designated jurisdiction, terms of

a trust designating the principal place of administration are valid

and controlling if either any of the following applies:apply:

     (a) A trustee's principal place of business is located in or a

trustee is a resident of the designated jurisdiction.

     (b) A trust director's principal place of business is located

in, or a trust director is a resident of, the designated

jurisdiction.

(c) (b) All or part of the administration occurs in the

designated jurisdiction.

     (2) A trustee is under a continuing duty to administer the

trust at a place appropriate to its purposes, its administration,

and the interests of the qualified trust beneficiaries.

     (3) Without precluding the right of the court to order,

approve, or disapprove a transfer, the trustee, in furtherance of

the duty prescribed by subsection (2), may transfer the trust's

principal place of administration to another state or to a

jurisdiction outside of the United States.

     (4) The trustee shall notify the qualified trust beneficiaries

in writing of a proposed transfer of a trust's principal place of

administration not less than 63 days before initiating the

transfer. The notice of proposed transfer shall must include all of

the following:

     (a) The name of the jurisdiction to which the principal place

of administration is to be transferred.

     (b) The address and telephone number at the new location at

which the trustee can be contacted.

     (c) An explanation of the reasons for the proposed transfer.

     (d) The date on which the proposed transfer is anticipated to

occur.

     (e) In a conspicuous manner, the date, not less than 63 days

after the giving of the notice, by which a qualified trust

beneficiary must notify the trustee in writing of an objection to

the proposed transfer.

     (5) The authority of a trustee under this section to transfer

a trust's principal place of administration without the approval of

the court terminates if a qualified trust beneficiary notifies the

trustee in writing of an objection to the proposed transfer on or

before the date specified in the notice.

     (6) In connection with a transfer of the trust's principal

place of administration, the trustee may transfer some or all of

the trust property to a successor trustee designated in the terms

of the trust or appointed pursuant to under section 7704.

     (7) The view of an adult beneficiary shall must be given

weight in determining the suitability of the trustee and the place

of administration.

     Sec. 7411. (1) Subject to subsection (2), a noncharitable

irrevocable trust may be modified or terminated in any of the

following ways:

     (a) By the court upon on the consent of the trustee and the

qualified trust beneficiaries, if the court concludes that the

modification or termination of the trust is consistent with the

material purposes of the trust or that continuance of the trust is

not necessary to achieve any material purpose of the trust.

     (b) Upon On the consent of the qualified trust beneficiaries

and a trust protector who is person or committee that is given the

power under the terms of the trust to grant, veto, or withhold

approval of termination or modification of the trust.

     (c) By a trustee or trust protector to whom other person or

committee that is given a power by the terms of the trust to direct

the termination or modification of the trust. has been given by the

terms of a trust.

     (2) Subsection (1) does not apply to irrevocable trusts

created before or to revocable trusts that become irrevocable

before April 1, 2010.

     (3) Notice of any proceeding to terminate or modify a trust

shall must be given to the settlor, the settlor's representative if

the petitioner has a reasonable basis to believe the settlor is an

incapacitated individual, the trust protector, director, if any, a

powerholder described in subsection (1)(b) or (c), if any, the

trustee, and any other person named in the terms of the trust to

receive notice of such a proceeding.

     (4) Upon On termination of a trust under subsection (1), the

trustee shall distribute the trust property as agreed by the

qualified trust beneficiaries.

     (5) If the trustee fails or refuses to consent, or fewer than

all of the qualified trust beneficiaries consent, to a proposed

modification or termination of the trust under subsection (1), the

modification or termination may be approved by the court if the

court is satisfied that both of the following apply:

     (a) If the trustee and all of the qualified trust

beneficiaries had consented, the trust could have been modified or

terminated under this section.

     (b) The interests of a qualified trust beneficiary who does

not consent will be adequately protected.

     (6) As used in this section, "settlor's representative" means

the settlor's agent under a durable power of attorney, if the agent

is known to the petitioner, or, if an agent has not been appointed,

the settlor's conservator, plenary guardian, or partial guardian.

     Sec. 7703. (1) Cotrustees Except as otherwise provided in this

section, cotrustees shall act by majority decision.

     (2) If a vacancy occurs in a cotrusteeship, the remaining

cotrustee or cotrustees may act for the trust.

(2) (3) A cotrustee shall participate in the performance of a

trustee's function unless the cotrustee is unavailable to perform

the function because of absence, illness, disqualification under

other law, or other temporary incapacity or the cotrustee has

properly delegated the performance of the function to another

trustee.

(3) (4) If prompt action is necessary to avoid injury to the

trust property, the remaining cotrustee or a majority of the

remaining cotrustees may act for the trust if either of the

following applies:

     (a) A cotrustee is unavailable to perform duties because of

absence, illness, disqualification under other law, or other

temporary incapacity.

     (b) A cotrustee who is available fails or refuses to

participate in the administration of the trust following notice

from the remaining cotrustee or cotrustees.

(4) (5) By agreement of the trustees, a trustee may delegate

to a cotrustee 1 or both of the following:

     (a) Any power that is permitted to be delegated pursuant to

under section 7817(v) to an agent who is not a trustee.

     (b) Any power that can only be performed by a trustee, if

notice of the delegation is provided to the qualified trust

beneficiaries within 28 days.

(5) (6) Unless a delegation under subsection (5) (4) was

irrevocable, a trustee may revoke the delegation previously made. A

revocation under this subsection shall must be in writing and shall

must be given to all of the remaining cotrustees. If notice of the

delegation was required to be provided to the qualified trust

beneficiaries, notice of the revocation shall must be given to the

qualified trust beneficiaries within 28 days after the revocation.

(6) (7) 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.

(7) (8) A trustee is not liable for the action or omission of

a cotrustee if all of the following apply:

     (a) The trustee is not unavailable to perform a trustee's

function because of absence, illness, disqualification under other

law, or other incapacity or has not properly delegated the

performance of the function to a cotrustee.

     (b) The trustee is aware of but does not join in the action or

omission of the cotrustee.

     (c) The trustee dissents in writing to each cotrustee at or

before the time of the action or omission.

(8) (9) A trustee who that is not aware of an action by a

cotrustee is not liable for that action unless the trustee should

have known that the action would be taken and, if the trustee had

known, would have had an affirmative duty to take action to prevent

the action.

(9) (10) A dissenting trustee who that joins in an action at

the direction of the majority of the trustees and who that notified

any cotrustee in writing of the dissent at or before the time of

the action is not liable for the action.

     (10) Notwithstanding any provision in this section, the terms

of a trust may relieve a cotrustee from duty and liability with

respect to another cotrustee's exercise or nonexercise of a power

of the other cotrustee to the same extent that a directed trustee

described in section 7703a may be relieved from duty and liability

with respect to a trust director's power of direction under section

7703a.

     Enacting section 1. Section 7809 of the estates and protected

individuals code, 1998 PA 386, MCL 700.7809, is repealed.

     Enacting section 2. This amendatory act does not take effect

unless all of the following bills of the 99th Legislature are

enacted into law:

     (a) House Bill No. 6129.

     (b) House Bill No. 6130.