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Should You Register Your Trust In Michigan?

 

A trust in Michigan may be registered with the local probate court in the county where it is primarily located.  There is no requirement under the law that a trust is registered in Michigan (except for charitable trusts which MUST be registered with the Michigan Attorney General’s Office under the Supervision of Trustees For Charitable Purposes Act of 1961).  However, there may be advantages for doing so:

 

Where Is The Trust Registered At?

The trustee of a trust that has its principal place of administration in this state may register the trust in the court at the place designated in the terms of the trust.  MCL 700.7209(1).  If no place is designated, then it should be registered at the principal place of administration, which is EITHER the trustee’s usual place of business where trust records are kept OR the trustee’s residence if there is no usual place of business.  Id.

If there are multiple co-trustees, the principal place of administration is one of the following locations:

  • If there is a corporate trustee among the co-trustees, then it should be registered where the corporate trustee’s usual place of business is located (e.g. business location of the primary trust officer of the trust). MCL 700.7209(2)(a).
  • If no corporate co-trustee and there is a professional fiduciary who is an individual (e.g. attorney), then it should be registered where the professional fiduciary’s usual place of business is located. MCL 700.7209(2)(b).
  • If neither of the above, then it should be registered where the usual place of business or residence of any of the co-trustees is located (upon agreement). MCL 700.7209(2)(c).

 

How Do You Register The Trust?

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. MCL 700.7210(1).  The statement shall indicate if the trust has been registered elsewhere. The statement shall identify the trust in one of the following manners:

  • “For a trust created by will, by the name of the testator and the date and place of domiciliary probate.” MCL 700.7210(1)(a).
  • “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.” MCL 700.7210(1)(b).
  • “For an oral trust, by information identifying the settlor or other source of property and describing the trust’s time and manner of creation and the terms of the trust, including the subject matter, beneficiaries, and time of performance.” MCL 700.7210(1)(c).

The trust instrument is not required to be filed with the court as part of the registration of a trust. MCL 700.7210(2).  “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 qualified trust beneficiaries.  Id.  The order or instrument shall be filed with the registration in this state.”  Id.

 

What Is The Effect Of Trust Registration?

“By registering a trust or accepting the trusteeship of a registered trust or a trust having its principal place of administration in this state or by moving the principal place of administration to this state, the trustee submits personally to the jurisdiction of the courts of this state regarding any matter involving the trust.”  MCL 700.7202(1).  “With respect to their interests in the trust, the beneficiaries of a trust having its principal place of administration or having been properly registered in this state are subject to the jurisdiction of the courts of this state regarding any matter involving the trust.”  MCL 700.7202(3).  “By accepting a distribution from such a trust, the recipient submits personally to the jurisdiction of the courts of this state regarding any matter involving the trust.”  Id.  Venue for a proceeding involving a trust is proper in the place of registration and takes priority over any other jurisdiction that it may be heard.  MCL 700.7204.

The mere act of registering a trust does not give the probate court any authority over the trust.  A trust many be administered without passing through the probate process, even if the grantor is dead.  However, if a dispute arises over a trust, then the probate would have subject matter jurisdiction to hear the claim.  The appropriate probate court that it will be heard in is the one that has venue.  If there is a possibility of an unhappy beneficiary or blood relative that lives in a far-off county or state, then they may attempt to file suit against the trust in the probate court in their jurisdiction.  This probate court can be a great distance away from the trustee’s location and can cause a great inconvenience in having to defend such a far-flung action.  However, if the trust is registered in the trustee’s place of administration, then the beneficiary may have no choice but to file suit where the trustee can be located.  This can be a significant advantage if the trustee expects a legal challenge.

Trustees should also be mindful that a grantor may provide in the terms of the trust that the trustee must register in Michigan.  “[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 terms of the trust is subject to removal and denial of compensation or to surcharge as the court may direct.”  MCL 700.7202(2).  While registration is not required by law, the trustee is duty-bound to carry out the terms of the trust or else face legal consequences.

 

Is My Charitable Trust Subject To Registration?

Charitable trusts MUST be registered with the Attorney General’s office, not the probate court.  It doesn’t matter if the trust is subject to litigation or not.  The statute makes it clear: “It is hereby declared to be the policy of the state that the people of the state are interested in the administration, operation and disposition of the assets of all charitable trusts in the state; and that the attorney general shall represent the people of the state in all courts of the state in respect to such charitable trusts.”  MCL 14.251. 

A “charitable trust” means the relationship where a trustee holds property for a charitable purpose.  MCL 14.252(2).  This can be a written trust or an oral trust.  “The [Supervision of Trustees For Charitable Purposes Act] does not apply to the United States, any state, territory or possession of the United States, the district of Columbia, the commonwealth of Puerto Rico, or to any of their agencies or governmental subdivisions, to an officer of a religious organization who holds property for religious purposes, or to a charitable corporation organized and operated primarily as an educational institution, including amateur theater, band and orchestra corporations, a religious organization or hospital.”  MCL 14.253(1).

“Every trustee subject to this act who has received property for charitable purposes shall register and file with the attorney general, within 2 months after receiving possession or control of such property, a copy of the instrument providing for his title, powers or duties, an inventory of the assets of the charitable trust.”  MCL 14.255.  The purpose of registration is for the attorney general to monitor charitable activities to safeguard the public against fraud and make these entities open and available for public inspection.  “The attorney general may institute appropriate proceedings to secure compliance with this act and to secure the proper accounting for the assets and administration of any charitable trust.”  MCL 14.261.  This means that, if the trustee does not comply, the attorney general can ask the circuit court or probate court to enter an order compelling the trustee to comply under contempt of court, remove the trustee or even surcharge the trustee for the value of money or property that was not properly accounted for.  A finding of contempt of court can subject the trustee to fines, costs and even incarceration.

 

Bottom Line: Should I Register My Trust?

The decision to register or not register the trust is best made in consultation with a skilled lawyer.  Registration may create advantages for the trustee in any potential litigation, but there may also be unforeseen drawbacks.  In some cases, you may be required to register your trust, so the advice of legal counsel can ensure that you are in compliance with the trust terms or applicable charity laws.  Most probate courts will charge $25.00 to have the trust registered in their county in Michigan.  If you are a trustee or a trust beneficiary and have questions or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.

 

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