November 4, 2015, Introduced by Senator SCHUITMAKER and referred to the Committee on Judiciary.
A bill relating to certain trusts; to provide for the powers
and procedures of the court that has jurisdiction of certain
trusts; to provide for the validity and effect of certain transfers
and contracts that relate to certain trusts; to provide remedies;
and to provide procedures to facilitate enforcement of certain
trusts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"qualified dispositions in trust act".
Sec. 2. As used in this act:
(a) "Advisor" means a person who is given authority by the
terms of a trust instrument to remove, appoint, or both, 1 or more
trustees or to direct, consent to, approve, or veto a trustee's
actual or proposed investment or distribution decisions. A person
is considered an advisor even if the person is denominated by
another title, such as trust protector. Any person may serve as an
advisor except that a transferor and any person who is related or
subordinate to the transferor within the meaning of section 672(c)
of the internal revenue code of 1986, 26 USC 672(c), may act as an
advisor only in connection with investment decisions.
(b) "Ascertainable standard" means that term as defined in
section 7103 of the estates and protected individuals code, 1998 PA
386, MCL 700.7103.
(c) "Claim" means a right to payment, whether or not the right
is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured.
(d) "Creditor" means, with respect to a transferor, a person
who has a claim whether directly or indirectly.
(e) "Debt" means liability on a claim.
(f) "Discretionary trust provision" means that term as defined
in section 7103 of the estates and protected individuals code, 1998
PA 386, MCL 700.7103.
(g) "Disposition" means a transfer of property that either
creates a new fiduciary relation between at least 1 trustee and a
trust beneficiary or newly subjects property to a preexisting
fiduciary relation between at least 1 trustee and a trust
beneficiary. The transfer may be by conveyance or assignment, by
exercise of a power of appointment, including a power to substitute
1 trustee for another or to add 1 or more new trustees, or a power
of revocation or amendment or, except as provided in this
subdivision, by disclaimer, release, or relinquishment. A
disposition, however, does not include a disclaimer, release, or
relinquishment of property that was previously the subject of a
qualified disposition. For purposes of this subdivision, as between
a given trustee and a given beneficiary, a new fiduciary relation
is created whenever the terms of the governing trust instrument are
materially altered including alteration by an election described in
section 5(6) with respect to the trust beneficiary in question.
(h) "Distribution decision" means a decision regarding the
distribution of trust property to or for the benefit of a trust
beneficiary. Distribution decision also includes a decision
regarding whether to make or guaranty a loan to or for the benefit
of a trust beneficiary.
(i) "Fiduciary disposition" means a disposition made by a
trustee acting in a fiduciary capacity.
(j) "Fiduciary qualified disposition" means a qualified
disposition made by a trustee acting in a fiduciary capacity.
(k) "General power of appointment" means a general power as
that term is defined in section 2 of the powers of appointment act
of 1967, 1967 PA 224, MCL 556.112. However, a power exercisable in
favor of the donee, his or her estate, his or her creditors, or the
creditors of his or her estate that is limited by an ascertainable
standard is not a general power of appointment.
(l) "Investment decision" means a decision regarding whether
or not to purchase, sell, exchange, tender, or pledge any trust
property. Investment decision also includes decisions regarding
other transactions affecting the ownership of or rights in any
trust property, other than distribution decisions. Unless otherwise
provided in the trust instrument, investment decision includes a
decision regarding whether to make or guaranty a loan to or on
behalf of an entity in which the trust owns an interest, directly
or indirectly, in the entity's debt or equity.
(m) "Organization" means that term as defined in section 1106
of the estates and protected individuals code, 1998 PA 386, MCL
700.1106.
(n) "Person" means that term as defined in section 1106 of the
estates and protected individuals code, 1998 PA 386, MCL 700.1106.
(o) "Property" means that term as defined in section 1106 of
the estates and protected individuals code, 1998 PA 386, MCL
700.1106.
(p) "Qualified disposition" means, subject to subparagraph
(iii), a disposition after which both subparagraphs (i) and (ii)
apply to the subject property:
(i) The subject property is owned by 1 or more trustees at
least 1 of whom is a qualified trustee.
(ii) The subject property is governed by a trust instrument
including, but not limited to, a trust instrument as modified by an
election described in section 5(6), under which the transferor only
has rights, powers, and interests that are permitted by section
4(2).
(iii) A disposition is not a qualified disposition to the
extent that, at the time of the disposition, the transferor is in
arrears on a child support obligation by more than 30 days.
(q) "Qualified trust beneficiary" means that term as defined
in section 7103 of the estates and protected individuals code, 1998
PA 386, MCL 700.7103.
(r) "Qualified trustee" means a person, other than the
transferor, who meets all of the following conditions:
(i) For an individual, the individual is a resident of this
state or, in all other cases, is authorized by the law of this
state to act as a trustee and whose activities are subject to
supervision by the department of insurance and financial services,
the Federal Deposit Insurance Corporation, the Comptroller of the
Currency, or the Office of Thrift Supervision.
(ii) The person maintains or arranges for custody in this
state of some or all of the property that is the subject of the
qualified disposition and administers all or part of the trust in
this state.
(iii) The person's usual place of business where some of the
records pertaining to the trust are kept is located in this state
or, if the person does not have such a place of business, the
person's residence is in this state. For a corporate trustee, the
usual place of business is the business location of the primary
trust officer.
(s) "Retirement benefit" means an interest in 1 of the
following types of assets if payable to a trust as a beneficiary or
owned by the trust: a qualified or nonqualified annuity; a benefit
under a qualified or nonqualified plan of deferred compensation;
any account in, or benefit payable under, any pension, profit-
sharing, stock bonus, or other qualified retirement plan; any
individual retirement account or trust; and all benefits under a
plan or arrangement that is established under section 401, 403,
408, 408A, or 457 or a similar provision of the internal revenue
code of 1986, 26 USC 401, 403, 408, 408A, and 457.
(t) "Settlor" means that term as defined in section 7103 of
the estates and protected individuals code, 1998 PA 386, MCL
700.7103.
(u) "Special power of appointment" means a special power as
defined in section 2 of the powers of appointment act of 1967, 1967
PA 224, MCL 556.112.
(v) "Spendthrift provision" means that term as defined in
section 7103 of the estates and protected individuals code, 1998 PA
386, MCL 700.7103.
(w) "Spouse" and "former spouse" mean only an individual to
whom the transferor was married at, or before, the time the
qualified disposition is made.
(x) "Support provision" means that term as defined in section
7103 of the estates and protected individuals code, 1998 PA 386,
MCL 700.7103.
(y) "Transferor" means any of the following, as applicable:
(i) A person and, for more than 1 owner of undivided
interests, each of several persons, who, as a beneficial owner of
certain property, or as the holder of a general power of
appointment over certain property, directly or indirectly, makes a
disposition of the property or causes a disposition to be made.
(ii) For a fiduciary disposition, the person or persons who,
as of the time of the fiduciary disposition, most recently fit the
description in subparagraph (i) with respect to the property
subject to the fiduciary disposition.
(z) "Trust beneficiary" means that term as defined in section
7103 of the estates and protected individuals code, 1998 PA 386,
MCL 700.7103.
(aa) "Trust instrument" means an instrument appointing a
qualified trustee or qualified trustees for the property that is
the subject of a disposition to which all of the following apply:
(i) The instrument expressly incorporates the law of this
state to govern the validity, construction, and administration of
the trust.
(ii) The instrument is irrevocable.
(iii) The instrument provides that the interest of the
transferor or other trust beneficiary in trust property may not be
transferred, assigned, pledged, or mortgaged, whether voluntarily
or involuntarily, before the qualified trustee or qualified
trustees actually distribute trust property to the trust
beneficiary, and that provision of the trust instrument is
considered a restriction on the transfer of the transferor's
beneficial interest in the trust that is enforceable under
applicable nonbankruptcy law within the meaning of section
541(c)(2) of the bankruptcy code 11 USC 541(c)(2).
Sec. 3. (1) The probate court has exclusive jurisdiction over
an action that addresses either of the following questions:
(a) Whether a transfer is a qualified disposition.
(b) The extent of the transferor's interest in, or the income
from, a qualified disposition.
(2) The probate court has concurrent jurisdiction over an
action brought under section 5(2).
(3) Venue for a proceeding under subsection (1) or (2) is as
follows:
(a) For a trust registered under section 7209 of the estates
and protected individuals code, 1998 PA 386, MCL 700.7209, the
place of registration.
(b) For a trust that is not registered, in any place where the
trust properly could be registered.
(4) If a trust has no qualified trustee and has not been
registered, and there is no place in this state where the trust
properly could be registered, venue for a proceeding under
subsection (1) or (2) is in the following order of priority, except
to the extent otherwise provided by court rule:
(a) In a county in this state in which the immediately
preceding qualified trustee had its usual place of business or
residence.
(b) In a county in this state in which a trust beneficiary
resides.
(c) In a county in this state in which any trust property is
located.
(d) In any county in this state.
Sec. 4. (1) A transferor has only the powers and rights that
are conferred by the trust instrument. Except as otherwise provided
in subsection (2), a transferor does not have powers or rights with
respect to the property that is the subject of a qualified
disposition or the income from the property, and any agreement or
understanding that purports to grant or permit the retention of any
greater powers or rights is void.
(2) A trust instrument may provide for 1 or more of the
following rights, powers, or interests, none of which grants or is
considered, either alone or in any combination, a power to revoke a
trust:
(a) The transferor's power to direct the investment decisions
of the trust.
(b) The transferor's power to veto a distribution from the
trust.
(c) A special power of appointment exercisable by will or
other written instrument of the transferor effective only on the
transferor's death.
(d) The transferor's potential or actual receipt of income,
including rights to the income retained in the trust instrument.
(e) The transferor's potential or actual receipt of income or
principal from a charitable remainder unitrust or charitable
remainder annuity trust as those terms are defined in section 664
of the internal revenue code of 1986, 26 USC 664; and the
transferor's right, at any time by written instrument delivered to
the trustee, to release the transferor's interest in the trust, in
whole or in part, in favor of a charitable organization that has or
charitable organizations that have a succeeding beneficial interest
in the trust.
(f) The transferor's potential or actual receipt of income or
principal from a grantor retained annuity trust or grantor retained
unitrust as those terms are described in section 2702 of the
internal revenue code of 1986, 26 USC 2702, or the transferor's
receipt each year of a percentage, not to exceed 5%, as provided in
the governing instrument of the initial value of the trust property
which value may be described either as a percentage or a fixed
amount or determined from time to time under the governing
instrument.
(g) The transferor's potential or actual receipt or use of
principal if the potential or actual receipt or use of principal
would be the result of a trustee's acting under any of the
following:
(i) A discretionary trust provision.
(ii) A support provision.
(iii) The direction of an advisor acting under a discretionary
trust provision or support provision.
(h) The transferor's right to remove a trustee or advisor and
to appoint a new trustee or advisor.
(i) The transferor's potential or actual use of real property
held under a qualified personal residence trust within the meaning
of that term as described in section 2702(c) of the internal
revenue code of 1986, 26 USC 2702(c), or the transferor's
possession and enjoyment of a qualified annuity interest within the
meaning of that term as described in 26 CFR 25.2702-5(c)(8).
(j) The transferor's potential or actual receipt of income or
principal to pay, in whole or in part, income taxes due on income
of the trust if the potential or actual receipt of income or
principal is under a provision in the trust instrument that
expressly provides for the payment of those taxes and if the
potential or actual receipt of income or principal would be the
result of a qualified trustee's or qualified trustees' acting in
any of the following ways:
(i) In the qualified trustee's or qualified trustees'
discretion or under a mandatory direction in the trust instrument.
(ii) At the direction of an advisor who is acting in the
advisor's discretion.
(k) After the transferor's death, the power of a qualified
trustee to pay the transferor's debts, the expenses of
administering the transferor's estate, or any estate or inheritance
tax imposed on or with respect to the transferor's estate, without
regard to the source of the payment.
(l) The transferor's actual or potential receipt of a minimum
required distribution as defined in 26 USC 4974(b) with respect to
a retirement benefit.
Sec. 5. (1) Notwithstanding any other provision of this act,
with respect to any qualified disposition, a creditor has only the
rights provided in this section and section 7.
(2) For an action brought by a creditor for an attachment or
other provisional remedy against property that is the subject of a
qualified disposition or for avoidance of a qualified disposition,
all of the following apply:
(a) Except for the limitation period provided under subsection
(3), the action may only be brought under sections 4 and 5 of the
uniform fraudulent transfer act, 1998 PA 434, MCL 566.34 and
566.35.
(b) For a creditor whose claim arose after a qualified
disposition, the action must involve a qualified disposition that
was made with actual intent to defraud the creditor.
(c) The allegations in the action must be proved by clear and
convincing evidence.
(3) A person shall not bring or maintain an action under
subsection (2) unless the action is commenced within either of the
following periods:
(a) If the claim arose before the qualified disposition was
made, on the later of the following:
(i) Two years after the qualified disposition was made or the
obligation was incurred.
(ii) One year after the qualified disposition or obligation
was or could reasonably have been discovered by the claimant, if
the person who is or may be liable for any claim fraudulently
concealed the existence of the claim or the identity of any person
who is liable for the claim from the knowledge of the person
entitled to sue on the claim.
(b) If the claim arose concurrent with or after the qualified
disposition, 2 years after the qualified disposition was made.
(4) If a trust beneficiary who has an interest in a qualified
disposition or in property that is subject to a qualified
disposition is a party to an action for annulment of a marriage,
divorce, or separate maintenance, all of the following apply:
(a) If the trust beneficiary is not the transferor of the
qualified disposition, the trust beneficiary's interest in the
qualified disposition or in property that is the subject of the
qualified disposition is not considered marital property, is not
considered, directly or indirectly, part of the trust beneficiary's
real or personal estate, and shall not be awarded to the trust
beneficiary's spouse in a judgment for annulment of a marriage,
divorce, or separate maintenance.
(b) If the trust beneficiary is the transferor of the
qualified disposition, the trust beneficiary's interest in the
qualified disposition or in property that is the subject of the
qualified disposition is not considered marital property, is not
considered, directly or indirectly, part of the trust beneficiary's
real or personal estate, and shall not be awarded to the trust
beneficiary's spouse in a judgment for annulment of a marriage,
divorce, or separate maintenance if either of the following apply:
(i) The trust beneficiary transferred the property that is the
subject of the qualified disposition more than 30 days before the
trust beneficiary's marriage that is the subject of the action.
(ii) The parties to the marriage agree that this subdivision
applies to the qualified disposition.
(c) If subdivisions (a) and (b) do not apply, subsections (2)
and (3) do not limit the transferor's spouse's property division
claims.
(5) Except as otherwise provided in subdivision (a), a
fiduciary qualified disposition is considered made as of the time
the property that is subject to the disposition was first
transferred to the trustee who is making the fiduciary qualified
disposition, or any predecessor of that trustee in an unbroken
succession of fiduciary ownership of the property, in a form that
meets either of the following requirements:
(a) The requirements of a qualified disposition. If the
property that is subject to the qualified disposition was first
transferred to the trustee making the disposition or the
predecessor trustee before the effective date of this act in a form
that would otherwise meet the requirements of a qualified
disposition, the qualified disposition is considered to have been
made as of the effective date of this act.
(b) Both of the following requirements:
(i) The requirements of section 2(p)(ii).
(ii) The requirements to be considered a qualified disposition
or its equivalent under the laws of another state.
(6) If a trustee of an existing trust proposes to make a
disposition that, but for the exercise of authority granted in this
subsection, would not be a qualified disposition because of a
nonconforming power of appointment of the transferor, the trustee
may modify the trust instrument by delivering to the qualified
trustee an irrevocable written election to modify the nonconforming
power of appointment to conform to the requirements of section
4(2)(c) or section 4(2)(k). An irrevocable written election
described in this section must include both of the following:
(a) A description of the modified power of appointment.
(b) The transferor's written consent to the modification.
The transferor's consent is not a disposition.
(7) With respect to a qualified disposition, a creditor does
not have a claim or cause of action against any of the following:
(a) The trustee of a trust that is the subject of a qualified
disposition.
(b) An advisor of a trust that is the subject of a qualified
disposition.
(c) A person involved in the counseling, drafting,
preparation, execution, or funding of a trust that is the subject
of a qualified disposition.
(8) If more than 1 qualified disposition is made by means of
the same trust instrument, all of the following apply:
(a) With respect to a prior qualified disposition, both of the
following apply:
(i) The making of a subsequent qualified disposition is
disregarded in determining whether a creditor's claim is
extinguished as provided in subsection (3).
(ii) The making of a subsequent qualified disposition is
disregarded in determining, as provided in subsection (4), whether
a trust beneficiary's interest in a qualified disposition or in
property that is the subject of a qualified disposition is
considered marital property, is considered part of a trust
beneficiary's real or personal estate, or may be awarded to the
trust beneficiary's spouse in a judgment for annulment of a
marriage, divorce, or separate maintenance.
(b) A distribution to a trust beneficiary is considered to
have been made from the most recent qualified disposition.
(9) In an action against a trustee that received property in a
qualified disposition, if a court takes any action declining to
apply the law of this state in determining the validity,
construction, or administration of the trust, or the effect of a
spendthrift provision in the trust instrument, the trustee shall
immediately on the court's action, and without the further order of
any court, cease in all respects to be trustee of the trust. The
former trustee does not have any power described in section 4(2)
except to convey the trust property to the successor trustee and,
at the former trustee's election, to petition the court for
appointment of a successor trustee and collect its attorney fees,
costs, and expenses. If the trust instrument does not provide for a
successor trustee and the trust would otherwise be without a
trustee, all of the following apply:
(a) The probate court, on the request of a qualified trust
beneficiary of the trust, shall appoint a successor trustee on the
terms and conditions it determines to be consistent with the
purposes of the trust and this act.
(b) A former trustee may, but has no duty to, petition the
probate court to appoint a successor trustee if a petition for
appointment of a successor trustee is not brought by a qualified
trust beneficiary within 30 days after the date on which the former
trustee ceases to be a trustee of the trust. If the former trustee
elects to petition for the appointment of a successor trustee, the
former trustee is entitled to reimbursement for all attorney fees,
costs, and expenses associated with the petition, and the amount of
the attorney fees, costs, and expenses is a lien against the
trust's property.
(10) A valid lien attaching to property before a qualified
disposition of the property survives the disposition, and the
trustee takes title to the property subject to the valid lien and
the trustee is subject to any agreements that created or perfected
the valid lien.
(11) A written agreement between a transferor and a creditor
may provide for any of the following:
(a) The transferor will have a continuing or periodic
obligation to disclose any qualified dispositions to the creditor.
(b) A qualified disposition will require the prior written
approval of the creditor.
(c) That the transferor is under those other obligations as
the creditor may require with respect to qualified dispositions.
(12) If a transfer that would otherwise be a qualified
disposition violates an agreement with a creditor described in
subsection (11), with respect to the creditor only, the transfer is
not a qualified disposition and this act does not affect the rights
of the creditor.
Sec. 6. (1) Except as provided in subsection (6), for purposes
of this section, a "qualified affidavit" means an affidavit in
which the transferor states that at the time of the transfer of the
property to the trust all of the following apply:
(a) The transferor has full right, title, and authority to
transfer the property to the trust.
(b) The transfer of the property to the trust will not render
the transferor insolvent.
(c) The transferor does not intend to defraud a creditor by
transferring the property to the trust.
(d) The transferor does not know of or have reason to know of
any pending or threatened court actions against the transferor,
except for those court actions identified by the transferor on an
attachment to the affidavit.
(e) The transferor is not involved in any administrative
proceedings, except for those administrative proceedings identified
on an attachment to the affidavit.
(f) The transferor is not currently in arrears on a child
support obligation by more than 30 days.
(g) The transferor does not contemplate filing for relief
under the bankruptcy code, 11 USC 101 to 1532.
(h) The property being transferred to the trust was not
derived from unlawful activities.
(2) The transferor shall sign a qualified affidavit before a
qualified disposition is made.
(3) A qualified affidavit is defective if it materially fails
to meet the criteria set forth in subsection (1), except that a
qualified affidavit is not defective because of any of the
following:
(a) Nonsubstantive variances from the language set forth in
subsection (1).
(b) Statements or representations in addition to those set
forth in subsection (1) if the statements or representations do not
contradict those required by subsection (1).
(c) Technical errors in administering an oath if the errors
were not the fault of the transferor and the transferor reasonably
relied on another person to prepare or administer the oath.
(4) A qualified affidavit is not required in any of the
following circumstances:
(a) From the settlor for a fiduciary qualified disposition.
(b) From a transferor who is not the settlor of the qualified
disposition, except to the extent the transferor is a beneficiary
of the qualified disposition and the property subject to the
qualified disposition was not previously subject to a qualified
disposition with respect to which the transferor signed a qualified
affidavit.
(c) In connection with dispositions that are part of, required
by, or the direct result of a prior qualified disposition supported
by a qualified affidavit that otherwise complies with the
requirements of subsection (1).
(5) If a qualified affidavit is required by this section, and
a transferor fails to timely sign a qualified affidavit or signs a
defective affidavit, the failure or defect may be considered as
evidence in an action described in section 5(2) to the extent
permitted by the Michigan rules of evidence, but the validity of
the qualified disposition is not affected in any other way because
of the failure or defect.
(6) If subsection (4)(b) applies, the required affidavit must
omit the statements described subsection (1)(a) and (c), and
include a statement that the qualified disposition is not intended
to defraud any creditor.
Sec. 7. (1) A qualified disposition may be avoided only to the
extent necessary to satisfy or provide for the present value,
taking into consideration any uncertainty of the transferor's debt
to the creditor at whose instance the disposition had been avoided.
(2) If all or any portion of a qualified disposition is
avoided as provided in subsection (1), all of the following apply:
(a) If the court is satisfied that a trustee has not acted in
bad faith in accepting or administering the property that is the
subject of the qualified disposition, both of the following apply:
(i) The trustee has a lien against the property that is the
subject of the qualified disposition in an amount equal to the
entire cost, including attorney fees, incurred by the trustee in
the defense of an action to avoid the qualified disposition. The
lien has priority over all other liens against the property,
whether or not the other liens accrued or were recorded before the
accrual of the lien created by this act.
(ii) The qualified disposition is avoided subject to the fees,
costs, preexisting rights, claims, and interests of the trustee and
of any predecessor trustee that has not acted in bad faith.
(b) If the court is satisfied that a trust beneficiary has not
acted in bad faith, the avoidance of the qualified disposition is
subject to the right of the trust beneficiary to retain any
distribution received before the creditor's commencement of an
action to avoid the qualified disposition. It is presumed that the
trust beneficiary, including a trust beneficiary who is also a
transferor of the trust, did not act in bad faith merely by
creating the trust or by accepting a distribution made under the
terms of the trust.
(c) For purposes of this subsection, it is presumed that a
trustee did not act in bad faith merely by accepting the property,
with or without a qualified affidavit, or by making any
distribution under the terms of the trust.
(3) A creditor has the burden of proving by clear and
convincing evidence that a trustee or trust beneficiary acted in
bad faith as required under subsection (2), except that, for a
trust beneficiary who is also the transferor, the burden on the
creditor is to prove that the transferor-beneficiary acted in bad
faith by a preponderance of the evidence. This subsection provides
substantive not procedural rights.
(4) With respect to a qualified disposition, a levy,
attachment, garnishment, notice of lien, sequestration, or other
legal or equitable process is permitted only in those circumstances
permitted by this act.
(5) Notwithstanding any other provision of this act or section
13 of the powers of appointment act of 1967, 1967 PA 224, MCL
556.123, a creditor does not have a right against the interest of a
trust beneficiary in a trust or portion of a trust that was a
qualified disposition solely because the trust beneficiary has the
right to authorize or direct the trustee to pay all or part of the
trust property in satisfaction of estate or inheritance taxes
imposed on or with respect to the trust beneficiary's postdeath
estate, or the debts of the trust beneficiary's postdeath estate,
or the expenses of administering the trust beneficiary's postdeath
estate, unless the trust beneficiary actually directs the payment
of the taxes, debts, or expenses, and then only to the extent of
the direction.
(6) Except as otherwise provided in the trust instrument, if a
married couple make a qualified disposition of property and,
immediately before the qualified disposition, the property, any
part of the property, or any accumulation to the property was,
under applicable law, owned by the married couple as tenants by the
entireties, then notwithstanding the qualified disposition, the
property, any part of the property, or any accumulation to the
property is, while held in trust during the lifetime of both
spouses, treated as though it were tenancy by the entireties
property. In an action concerning whether a creditor of either or
both spouses may recover the debt from the trust, on avoidance of
the qualified disposition, the sole remedy available to the
creditor with respect to trust property treated as though it were
tenancy by the entireties property is an order directing the
trustee to transfer the property to both spouses as tenants by the
entireties.
(7) Except as otherwise provided in subsection (6), on
avoidance of a qualified disposition to the extent permitted under
subsection (1), the sole remedy available to the creditor is an
order directing the trustee to transfer to the transferor the
amount necessary to satisfy the transferor's debt to the creditor
at whose instance the disposition has been avoided.
Sec. 8. (1) If a person serving as qualified trustee ceases to
meet the requirements of a qualified trustee and there remains no
trustee that meets the requirements of a qualified trustee, the
person serving as qualified trustee is considered to have resigned
as of the time of the cessation, and the successor qualified
trustee provided for in the trust instrument becomes a qualified
trustee of the trust on the successor qualified trustee's
acceptance of trusteeship, or in the absence of a successor
qualified trustee provided for in the trust instrument, the probate
court shall, on petition of a qualified trust beneficiary, appoint
a successor qualified trustee.
(2) A disposition that was a qualified disposition does not
cease to be considered a qualified disposition as a result of a
subsequent vacancy in the position of qualified trustee if a
successor qualified trustee is appointed or a proceeding for the
appointment of a successor qualified trustee is commenced within a
reasonable time after a person with authority to appoint a
qualified trustee or commence a proceeding to appoint a qualified
trustee knows of the vacancy.
Sec. 9. (1) A trust beneficiary does not have the power or
capacity to transfer any of the income from a trust or portion of a
trust that is a qualified disposition by his or her order,
voluntary or involuntary, or by an order or direction of a court.
(2) Except as otherwise provided in this act, the interest of
a beneficiary in a trust or portion of a trust that is a qualified
disposition is not subject to a process of attachment issued
against the beneficiary, and may not be taken in execution under
any form of legal process directed against the beneficiary,
trustee, trust estate, or any part of the income of the trust
estate, but the whole of the trust estate and the income of the
trust estate must go to and be applied by the trustee solely for
the benefit of the beneficiary, free, clear, and discharged of and
from all obligations of the beneficiary.
(3) The trustee of a qualified disposition shall disregard and
oppose an assignment or other act, voluntary or involuntary, that
is attempted contrary to this section. The trustee is entitled to
reimbursement for all attorney fees, costs, and expenses associated
with carrying out this duty, and the amount of the attorney fees,
costs, and expenses is a lien against the property that is the
subject of the qualified disposition. A trustee is not liable, and
a trust beneficiary or any successor trust beneficiary does not
have a claim or cause of action against a trustee, for a breach of
this duty unless the trustee's breach was in bad faith or the
result of reckless indifference to the purposes of the trust or the
interests of the trust beneficiaries.
(4) This section does not prohibit a beneficiary from
disclaiming an interest in a trust or portion of a trust that is a
qualified disposition or from exercising a power of appointment.
Sec. 10. (1) Subject to section 5(5), this act applies to
qualified dispositions made on or after the effective date of this
act.
(2) If any provision of this act conflicts with any provision
of chapter 63 of 1846 RS 63, MCL 555.1 to 555.28, or the estates
and protected individuals code, 1998 PA 386, MCL 700.1101 to
700.8206, the provision of this act prevails.
Enacting section 1. This act does not take effect unless
Senate Bill No. 598
of the 98th Legislature is enacted into law.