November 7, 2018, Introduced by Reps. Elder and Lucido and referred to the Committee on Judiciary.
A bill to amend 1998 PA 386, entitled
"Estates and protected individuals code,"
by amending sections 7103, 7105, 7110, 7302, and 7402 (MCL
700.7103, 700.7105, 700.7110, 700.7302, and 700.7402), section 7103
as amended by 2012 PA 483, section 7105 as amended by 2010 PA 325,
and section 7110 as added and sections 7302 and 7402 as amended by
2009 PA 46, and by adding sections 7409 and 7409a.
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) if
the charitable purpose is a material purpose of the trust.
(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 consent of the
trustee or a person holding an adverse interest.
(g)
"Qualified trust beneficiary" means a either of the
following:
(i) A trust beneficiary as to whom a settlor's intent to
benefit is a material purpose of the trust and to whom 1 or more of
the following apply on the date the trust beneficiary's
qualification is determined:
(A) (i) The
trust beneficiary is a distributee or permissible
distributee of trust income or principal.
(B) (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) sub-subparagraph (A) terminated on that date
without causing the trust to terminate.
(C) (iii) The
trust beneficiary would be a distributee or
permissible distributee of trust income or principal if the trust
terminated on that date.
(ii) If on the date a trust beneficiary's qualification is
determined there is no trust beneficiary described in subparagraph
(i), a trust beneficiary to whom 1 or more of the following apply
on the date the trust beneficiary's qualification is determined:
(A) The trust beneficiary is a distributee or permissible
distributee of trust income or principal.
(B) 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 sub-
subparagraph (A) terminated on that date without causing the trust
to terminate.
(C) 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.
(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 7401 for creating a trust.
(b) 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 durational limits specified in section 7409 for the
care of animals and in section 7409a for other noncharitable
purpose trusts.
(e) (d)
The power of the court to modify or
terminate a trust
under sections 7410, 7412(1) to (3), 7414(2), 7415, and 7416.
(f) (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.
(g) (f)
The power of the court under
section 7702 to require,
dispense with, or modify or terminate a bond.
(h) (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.
(i) (h)
Except as permitted under section
7809(2), the
obligations imposed on a trust protector in section 7809(1).
(j) (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.
(k) (j)
The power of the court to order the
trustee to provide
statements of account and other information pursuant to section
7814(4).
(l) (k)
The effect of an exculpatory term
under section
7809(8) or 7908.
(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 must not be given effect if probable cause exists
for instituting a proceeding contesting the trust or another
proceeding relating to the trust.
Sec. 7110. (1) A charitable organization expressly named in
the terms of a trust to receive distributions under the terms of a
charitable trust has the rights of a qualified trust beneficiary
under this article if 1 or more of the following are applicable to
the charitable organization on the date the charitable
organization's qualification is being determined:
(a) The charitable organization is a distributee or
permissible distributee of trust income or principal.
(b) The charitable organization would be a distributee or
permissible distributee of trust income or principal on the
termination of the interests of other distributees or permissible
distributees then receiving or eligible to receive distributions.
(c) The charitable organization would be a distributee or
permissible distributee of trust income or principal if the trust
terminated on that date.
(2) A person appointed to enforce a trust created for the care
of
an animal under section 7409 or another noncharitable purpose as
provided
in section 2722 trust under
section 7409a has the rights
of a qualified trust beneficiary under this article.
(3) The attorney general of this state has the following
rights with respect to a charitable trust having its principal
place of administration in this state:
(a) The rights provided in the supervision of trustees for
charitable purposes act, 1961 PA 101, MCL 14.251 to 14.266.
(b) The right to notice of any judicial proceeding and any
nonjudicial settlement agreement under section 7111.
Sec.
7302. (1) The To
the extent there is no conflict of
interest between the holder of a power of appointment and the
person represented with respect to a particular question or
dispute,
the holder of a power of revocation
or amendment or a
presently
exercisable or testamentary general or special power of
appointment, including a power of appointment in the form of a
power of amendment or revocation, may represent and bind a person
whose
to the extent the person's interest, as a permissible
appointee, taker in default, or otherwise, is subject to the power.
For the purpose, however, of granting consent or approval to
modification or termination of a trust or to deviation from its
terms, including consent or approval to a settlement agreement
described in section 7111, only the holder of a presently
exercisable or testamentary general power of appointment may
represent and bind such a person.
(2) For purposes of subsection (1), both of the following
apply:
(a) There is no conflict of interest between the holder of a
nonfiduciary power of appointment and a person whose interest is
subject to the power to the extent the subject interest is liable
to be extinguished by an exercise of the power.
(b) If a power of appointment is subject to a condition
precedent other than the death of the holder of a testamentary
power, no interest is subject to the power until the condition
precedent is satisfied.
(3) As used in this section, "nonfiduciary" means, with
respect to a power of appointment, that the power is not held in a
fiduciary capacity.
Sec. 7402. (1) A trust is created only if all of the following
apply:
(a) The settlor has capacity to create a trust.
(b) The settlor indicates an intention to create the trust.
(c) The trust has a definite beneficiary or is either of the
following:
(i) A charitable trust.
(ii) A trust for a noncharitable purpose under section 7409a
or
a trust for the care of an animal ,
as provided in section
2722.under section 7409.
(d) The trustee has duties to perform.
(e) The same person is not the sole trustee and sole
beneficiary.
(2) A trust beneficiary is definite if the trust beneficiary
can be ascertained now or in the future, subject to any applicable
rule against perpetuities.
(3) A power in a trustee to select a trust beneficiary from an
indefinite class is valid only in a charitable trust.
Sec. 7409. (1) A trust may be created to provide for the care
of a designated domestic pet or animal alive during the settlor's
lifetime. A trust created under this subsection terminates on the
death of the animal or, if the trust was created to provide for the
care of more than 1 domestic or pet animal alive during the
settlor's lifetime, on the death of the last surviving animal.
(2) A trust authorized under this section may be enforced by a
person appointed in the terms of the trust or, if there is not a
person appointed in the terms of the trust, by a person appointed
by the court. A person that has an interest in the welfare of an
animal for which the trust is created may request the court to
appoint a person to enforce the trust or to remove a person
appointed in the terms of the trust.
(3) Property of a trust authorized by this section may be
applied only to its intended use, except to the extent the court
determines that the value of the trust property exceeds the amount
required for the intended use. Except as otherwise provided in the
terms of the trust, property not required for the intended use must
be distributed to the settlor, if then living, or otherwise to the
settlor's successors in interest.
Sec. 7409a. Except as otherwise provided in section 7409 or
any other law, the following rules apply:
(a) A trust may be created for a noncharitable purpose without
a definite or definitely ascertainable beneficiary or for a
noncharitable but otherwise valid purpose to be selected by the
trustee. A trust created under this section may be performed by the
trustee according to the terms of the trust for not more than 25
years whether or not the terms of the trust contemplate a longer
duration.
(b) A trust authorized by this section may be enforced by a
person appointed in the terms of the trust or, if there is not a
person appointed in the terms of the trust, by a person appointed
by the court.
(c) Property of a trust authorized by this section may be
applied only to its intended use, except to the extent the court
determines that the value of the trust property exceeds the amount
required for the intended use. Except as otherwise provided in the
terms of the trust, property not required for the intended use must
be distributed to the settlor, if then living, or otherwise to the
settlor's successors in interest.
Enacting section 1. This amendatory act does not take effect
unless Senate Bill No.____ or House Bill No. 6468 (request no.
06613'18) of the 99th Legislature is enacted into law.