Michigan Living Trust

Introduction

Key Things to Know

1. 1

   Michigan's biggest and most Michigan-specific trap is not homestead, it is property tax uncapping. Under Proposal A, MCL 211.27a(7)(c) treats a deed conveying your home into your living trust as a 'transfer of ownership' that resets, or uncaps, the home's capped taxable value to current state equalized valuation, unless the settlor or the settlor's spouse, or both, conveys the property and the sole present beneficiary is the settlor or the settlor's spouse. Naming a child as a co-beneficiary alongside yourself, rather than solely as a successor beneficiary, is enough to trigger it, and a later change to that beneficiary can trigger it again.

2. 2

   Michigan never adopted the Uniform Probate Code's augmented-estate elective share. MCL 700.2202(2) and (7) calculate a surviving spouse's elective share only against the decedent's probate estate, and a funded revocable trust is not one of the narrow categories of 'property derived by the spouse' that reduce the share. Assets you move into a Michigan living trust during life generally fall outside your spouse's statutory election entirely, though the trust still cannot defeat your own creditors after death under MCL 700.7605.

3. 3

   Creating a Michigan living trust requires no notary, no witness, and no will formalities. MCL 700.7402(1) lists only five requirements: capacity, intent, a definite beneficiary, trustee duties, and no sole-trustee-sole-beneficiary merger, and MCL 700.7401(1)(b) even allows creation by a bare declaration that you hold property as trustee, with no writing required on the face of the statute. Notarization only becomes necessary later, when a deed conveying real property into the trust must be acknowledged before a notary to be recordable (MCL 565.47).

4. 4

   Michigan runs two different perpetuities clocks in the same trust. Real property held in trust follows the Uniform Statutory Rule Against Perpetuities: valid if it vests within 21 years of a life in being or within 90 years of creation (MCL 554.72). Personal property held in trust, meaning securities, cash, and business interests, which is most of what a typical revocable trust holds, is fully exempt from the rule against perpetuities under the Personal Property Trust Perpetuities Act (MCL 554.91-554.94), putting Michigan functionally alongside South Dakota, Nevada, Alaska, Delaware, and Wyoming for that property.

5. 5

   Michigan is a domestic asset protection trust state, but only for an irrevocable trust that meets the Qualified Dispositions in Trust Act's mechanics: at least one independent Michigan qualified trustee and restricted settlor powers (MCL 700.1041-700.1050). An ordinary revocable living trust gets none of that protection: MCL 700.7506(1)(a) exposes all of a revocable trust's property to the settlor's own creditors during life, without qualification.

6. 6

   A Michigan trustee can hand a bank or title company a certificate of trust instead of the full instrument, and the statute has real teeth. MCL 700.7913 lists exactly what the certificate must contain and does not require disclosing the trust's dispositive terms; a recipient who demands the full trust instrument beyond what the statute allows, and is found to have had no legal basis for the demand, is liable for the trustee's damages, costs, and attorney fees (MCL 700.7913(8)).

7. 7

   Registering a Michigan trust with the probate court is optional, not mandatory: MCL 700.7209 and MCL 700.7210 say a trustee 'may register,' and MCL 700.7201(2) confirms registration alone does not trigger continuing court supervision. Michigan also has no state estate or inheritance tax currently collected (the old pick-up tax at MCL 205.202a computes to zero for every death since 2004), and its judgment-creditor homestead exemption (MCL 600.6023(1)(g), a fixed $3,500 of home equity) is not written to address ownership through a trust one way or the other, unlike the property-tax uncapping trap above, which is the real Michigan real-property risk to plan around.

Michigan Requirements for Living Trust

• Michigan No Notary or Witness Required to Create the Trust

  MCL 700.7402(1) requires only settlor capacity, intent, a definite beneficiary, trustee duties, and no sole-trustee-sole-beneficiary merger. MCL 700.7401(1)(b) allows creation by the settlor's bare declaration. No notary, witness, or will formality applies to the trust itself, though the funding deed must be notarized to be recordable (MCL 565.47).

• Michigan Property Tax Uncapping Trap on Funding the Home

  MCL 211.27a(7)(c) treats a conveyance of the home into the trust as a taxable transfer of ownership that uncaps its capped taxable value unless the sole present beneficiary is the settlor or the settlor's spouse. Naming any other current co-beneficiary of the residence can trigger a reassessment and a higher property tax bill.

• Michigan Elective Share Reaches Only the Probate Estate

  MCL 700.2202(2) and (7) calculate a surviving spouse's elective share against the probate estate only; Michigan never adopted the augmented-estate concept. A funded revocable trust generally falls outside the elective share calculation entirely, though it does not defeat the settlor's own creditors under MCL 700.7605.

• Michigan Personal Property Trust Perpetuities Act

  Real property held in trust follows the 90-year Uniform Statutory Rule Against Perpetuities (MCL 554.72), but personal property held in trust is fully exempt from any rule against perpetuities under MCL 554.91-554.94, allowing indefinite duration for the securities, cash, and business interests a typical revocable trust holds.

• Michigan Certificate of Trust Fee-Shifting Protection

  MCL 700.7913 lets a trustee furnish a certificate of trust in place of the full instrument, without disclosing dispositive terms. A recipient who demands the full instrument without a legal basis for the demand is liable for the trustee's damages, costs, and attorney fees under MCL 700.7913(8).

• Michigan Revocable Trust Gives No Creditor Protection During Life

  MCL 700.7506(1)(a) exposes all of a revocable trust's property to the settlor's own creditors during life without qualification. Asset protection is available only through an irrevocable trust meeting the Qualified Dispositions in Trust Act's requirements, MCL 700.1041-700.1050.