Choosing a trustee is one of the most important decisions you will make when creating a trust. The person or institution you name will be responsible for managing trust assets, following your instructions, and making decisions that affect the people you want to protect.
While you may naturally think of a family member or close friend, the right trustee is not always the person you know best. A trustee needs to be organized, responsible, and able to handle financial decisions while putting the interests of the beneficiaries first.
Our trust attorneys in St. Joseph can help you evaluate your options and prepare a plan designed to protect your wishes and your loved ones. Contact us before finalizing your trust.
What Does a Trustee Do in Michigan?
A trustee manages property held in a trust and carries out the instructions included in the trust document. Their responsibilities depend on the type of trust and the assets involved, but may include paying trust expenses, overseeing investments, filing tax returns, and making distributions to beneficiaries.
Trust money must remain separate from the trustee’s personal funds, and every payment should come from the proper account. The exact tasks depend on what the trust owns and the terms it requires. Under Michigan law, trustees have a duty to administer the trust in good faith, in accordance with its terms and purposes, and in the best interests of the beneficiaries.
Because a trustee has significant responsibility, choosing the right person or institution is an important part of creating a successful estate plan.
Who Can Serve as Trustee in Michigan?
When creating a trust, you can choose an individual, an independent professional trustee (such as an experienced attorney, CPA, retired bank trust officer, or other experienced fiduciary), a bank, or a trust company to serve as trustee. The best choice depends on your family situation, the type of assets in the trust, and how long the trust may need to be managed.
Common trustee options include:
- A family member or trusted friend. Many people choose someone close to them because they understand the family’s needs and values. However, the person should also be comfortable managing finances and making difficult decisions.
- An independent professional trustee. An experienced individual who regularly serves as a trustee may provide valuable experience administering trusts, particularly when family relationships are complicated or the trust is expected to continue for many years.
- A bank or trust company. Financial institutions can provide professional trust administration, investment management, and record-keeping.
- Co-Trustees. Some people choose two or more trustees to share responsibility. This can provide additional oversight, but the trust should clearly explain how decisions will be made.
The person who knows your family best may not always be the person best prepared to manage trust property. Your trustee selection should be based on the responsibilities that person will have and the needs of the beneficiaries.
How to Choose a Trustee in Michigan
Choosing a trustee requires more than asking whether someone is trustworthy. The person you name may be responsible for managing assets, communicating with beneficiaries, and making decisions for years after you are gone.
Consider how each candidate would handle the work the trust requires and the authority entrusted to them.
Can the Trustee Handle Financial Responsibilities?
Some trusts remain active for only a short time, while others continue for many years. Ask whether your proposed trustee stays organized, follows written instructions carefully, and can keep trust business separate from personal responsibilities over time.
The trustee does not need to know every tax or investment rule before accepting the role. Instead, look for someone who recognizes when another professional should be consulted, rather than making financial decisions without enough information.
Will the Trustee Communicate With Beneficiaries?
Beneficiaries can become suspicious when they hear nothing from the trustee controlling trust property. Even a proper decision may cause conflict when no one explains why a distribution was delayed or an expense was paid.
Your proposed trustee should be prepared to answer reasonable questions and provide information required by the trust. Michigan law also requires trustees to keep qualified beneficiaries reasonably informed about trust administration.
Can the Trustee Put the Trust’s Instructions First?
A sibling may handle money well but still favor one beneficiary when old resentments enter the decision. Family relationships can change when one person is put in charge of handling the trust for everyone else. Michigan Compiled Laws § 700.7802 requires the trustee to act solely in the beneficiaries’ interests.
The right trustee is someone who remains fair, follows your wishes, and makes decisions based on the trust document rather than personal relationships.
When Does a Trustee Take Over?
Naming someone as a trustee does not mean that person immediately controls the trust. Your selected trustee must first accept the appointment. The trust may state how acceptance occurs, but a person’s actions can also show that they have agreed to serve. This allows the person you name to review the instructions before taking control of the trust property.
After accepting, the trustee must identify what the trust owns and gain access to the related accounts. Accurate account information allows the trustee to begin administering the property in accordance with the written instructions and to explain later financial decisions.
Can a Trustee Be Removed in Michigan?
A trustee may be removed under various circumstances, including for a serious breach of trust, persistent failure to administer the trust effectively, lack of cooperation among cotrustees that substantially impairs administration, a substantial change in circumstances, or in certain cases at the request of the qualified beneficiaries when permitted by Michigan law.
A disagreement with a beneficiary or a single mistake does not automatically mean a trustee should be removed. Courts typically consider the trustee’s overall conduct and whether the trust is being properly managed.
If concerns arise about a trustee’s actions, reviewing the trust document and the trustee’s decisions with an experienced Michigan trust attorney can help determine the appropriate next steps.
How Often Should You Review Your Trustee Choice?
Look at your trustee selection whenever you examine the rest of your estate plan. The name in the trust may remain appropriate, but you should confirm that your first choice and successor are both willing to serve when needed.
Ask Whether Your Trustee Is Still Willing to Serve
Speak directly with your chosen trustee rather than assuming the original answer has remained the same. A demanding job or declining health can leave someone unable to take on trust administration years after agreeing to it.
The same check applies to a bank, trust company, or independent professional trustee named in an older document. The initially-named institution or person may no longer accept that type of trust, so another trustee should be named before the trust needs someone to serve, and no named trustee is available.
Decide Whether the Trust Now Requires Different Skills
The trustee selected for a small account may not be suited to oversee a business or hold property for a beneficiary over many years. The work can grow even when the original selection has not done anything wrong.
Naming someone else usually requires a valid amendment or restatement. The new document should identify the trustee and successor who will carry out the current distribution instructions.
When an Independent Professional Trustee May Be the Better Choice.
An independent professional trustee may be appropriate when:
- the trust is expected to last many years;
- beneficiaries have special needs;
- family conflict is likely;
- significant investments or a closely held business are involved; or
- you want an experienced fiduciary to administer the trust objectively.
In Michigan, an independent professional trustee may include an attorney, CPA, retired bank trust officer, or other experienced fiduciary, while corporate trustees generally must be authorized banks or trust companies.
How Legacy Counsel PLC Helps With Trustee Selection and Trust Administration
Your trust attorney should be involved before you name a trustee and can continue advising after that person begins serving. Rather than describe an ideal trustee in general terms, we examine the trust you are preparing and what the person selected will actually have to do. Our involvement can include:
- Review the person you want to name. We examine whether your proposed trustee can handle the property and financial decisions placed under that person’s control.
- Naming a successor trustee. We prepare for the possibility that your first selection declines the appointment or is unable to continue serving.
- Writing instructions for the trustee. We state when the trustee takes over and how distributions should be handled under the trust.
- Reviewing trust funding. We identify the property to be transferred into the trust and review whether the ownership records match the trust documents.
- Explaining when the trustee can make a judgment call. We identify where the trustee may use judgment and where the written terms require a specific result.
- Answering questions during administration. We help the trustee apply the trust terms before making a payment or responding to a beneficiary.
- Reviewing conduct that causes a dispute. We examine the trustee’s actions against the document and Michigan law before recommending a response.
A carefully prepared trust gives your trustee the guidance they need to manage your assets and carry out your wishes.
Frequently Asked Questions About Michigan Trustees
Does a Trustee Get Paid in Michigan?
A trustee may receive reasonable compensation unless the trust sets a different amount or method. Michigan Compiled Laws § 700.7708 directs the trustee to follow the document first. If it says nothing about payment, compensation must be reasonable for the time spent and the work the trustee actually performs.
Can a Trustee Hire Other Professionals?
Yes. A trustee may hire qualified professionals to assist with the work required by the trust. Michigan Compiled Laws § 700.7817 recognizes authority to employ professional help for trust administration. Hiring someone else does not relieve the trustee of their duty to oversee the work and act in the beneficiaries’ interests.
What Happens if the Trustee Dies or Cannot Continue Serving?
The successor trustee named in your trust can take over after accepting the appointment. Your document should also explain how another trustee will be selected if no named successor can serve. Without those instructions, the court may have to fill the vacancy before administration can continue.
Can a Trustee Also Be a Beneficiary?
Yes. A trustee may also receive property as a beneficiary. The trustee cannot use that authority to favor their own distribution over the rights of other beneficiaries or ignore instructions that apply equally to everyone named in the document.
Can a Trustee Sell Property Owned by the Trust?
Unless the trust limits that authority, Michigan law generally gives trustees broad authority to sell trust property when appropriate to administer the trust. Before acting, the trustee must confirm that the written terms permit it and that the transaction serves the trust rather than the trustee personally. The trustee must always act consistently with the trust’s terms and fiduciary duties.
Does a Trustee Have to File a Tax Return for the Trust?
Some trusts require Form 1041, while a grantor trust may report income through the person who established it. The filing method depends on how the trust is taxed and whether the trust must report income separately. A trustee should confirm the correct treatment before submitting a return.
Talk to a Michigan Trust Attorney About Choosing a Trustee
The trustee you choose can have a lasting impact on how your trust is managed and how your beneficiaries are protected. Legacy Counsel PLC helps families throughout Michigan create trusts with clear instructions and carefully selected trustees.
Our trust attorneys in St. Joseph can help you evaluate your options, name a successor trustee, and create a plan designed around your goals. Contact Legacy Counsel PLC to discuss your trustee selection and trust administration needs.
