Help for Trustees under a Revocable Living/Grantor Trust in Michigan

 


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Why read this guide?

Like many people, you may never have been a trustee under a revocable living trust or revocable grantor trust before. That’s why we created Managing someone else’s money: Help for trustees under a revocable living/grantor trust in Michigan This guide will help you understand what you can and cannot do in your role as a trustee. In that role, you are a fiduciary.

For this guide, a fiduciary is a legal term. It is anyone named to manage money or property for someone else according to the law. The law has many rules saying what the fiduciary can do, may do, or absolutely cannot do with the money or property. The legal rules come from statutes, court decisions and agency rules and regulations.

Because the rules about fiduciaries are very complicated, this guide has only brief tips to help you avoid problems, and to give you resources for finding more information. This guide does not provide legal advice.

This guide is for family and friends serving as a trustee, not for professionals or organizations. This guide does not teach you how to become a trustee.

You should talk to a lawyer if you have questions about the legal rules and your role as a fiduciary.

Let’s start with a scenario about how you might have become a trustee:

Your family member or friend is worried that she will get sick and will not be able to pay her bills or make other decisions about her savings and her house. For this guide, we will call her ‘Rose’. Rose has signed a legal document called a living or grantor trust. In it, she names you as her trustee.

When she set up the trust, she should have transferred ownership of some or all her money and property from her name to the name of the trust. As her trustee, you now have the power to make decisions for Rose’s benefit about the money and property in the trust.

The law gives you a lot of responsibility. You are now a fiduciary with fiduciary duties.

What is a fiduciary?

Since you have been named to manage money or property for someone else, you are a fiduciary. The law requires you to manage Rose’s money for HER benefit, not yours. It does not matter if you are managing a lot of her money or a little. It does not matter if you are a family member or not.

The role of the fiduciary is a serious one with strict rules. Judges or agencies or even the police can make sure you follow the rules. Breaking the rules could mean you are removed from your role, have to repay money, and/or even go to jail.

When you act as a fiduciary for Rose, the rules fall into four basic types:

  1. Rules about making you act only in Rose’s best interest.
  2. Rules about carefully managing Rose’s money and property.
  3. Rules about keeping Rose’s money and property separate from your money and property.
  4. Rules about keeping good records.

REMEMBER: IT’S NOT YOUR MONEY!

Different types of fiduciaries exist

In your role as trustee, you may act as or deal with other types of fiduciaries. These may include:

Agents under a power of attorney—someone names an agent to manage their money and property in case they are not able to do it.

Representative payees or, for veterans, VA (Veterans Affairs) fiduciaries—a government agency names them to manage government money that is paid to someone.

Conservators —a court names them to manage money and property for someone who needs help.

Other guides explaining the duties of these fiduciaries are at: www.consumerfinance.gov/managing-someone-elses-money

Revocable living trust Q & A

What is a revocable living trust or grantor trust?

A revocable living trust or grantor trust are the same thing, a legal document. Rose made a revocable living trust to give you legal authority to make decisions about her money or property in the trust if she cannot make decisions herself because she is sick or injured. She also made the revocable living trust to say who will get her money or property after she dies. In some states, the term “living trust” is used to mean a different type of trust than a “revocable living trust.” But in the rest of this guide we use “living trust”, “grantor trust” or “trust” as shorthand for “revocable living trust.”

There are three roles under a revocable living trust.

  1. The person who makes the trust may be called the settlor, grantor, or trustor.
  2. The person who makes decisions about the money or property in the revocable living/grantor trust is called the trustee. A trustee can be an individual or a financial institution. If there is more than one, they are co-trustees. A successor trustee may also be named and acts only if a trustee can no longer fulfill that role. Rose can name herself as trustee and you as co-trustee immediately, or you may be a successor trustee who can act when she can no longer make decisions.
  3. A person who receives money or property from the revocable living/grantor trust is called a beneficiary. Rose may be the only beneficiary while she is alive, or she may name co-beneficiaries who receive some money or property from the revocable living/grantor trust before she dies. The people who receive money or benefits from the revocable living/grantor trust after Rose dies are called residuary beneficiaries.

Can a revocable living trust be changed or revoked?

As long as Rose still can make her own decisions and the terms of the trust allow her to do so, she can change or end (revoke) the revocable living trust.

When do your responsibilities end?

If Rose names a new trustee or ends the trust, your authority and responsibilities end.

What if you think a change in the trust was a result of fraud or abuse?

If you think Rose does not understand the decision to take away your authority or end the trust, then talk to a lawyer, contact adult protective services, or call the police or sheriff.

Aren’t there other types of trusts?

Yes. Other types of trusts exist and people have different reasons for making trusts. This guide only covers living trusts.

Living trusts most likely have family or a friend as a trustee. Other types of trust often have professional trustees, such as a lawyer or bank trust officer.

Don’t expect others to know what a trustee is or does.

They may not understand that you have been named as a trustee. They may think that you have more authority or less authority than you really have. You may need to educate them. You could show them this guide.

Four basic types of rules for a fiduciary

When you act as a fiduciary for Rose, the rules fall into four basic types:

  1. Rules about making you act only in Rose’s best interest.
  2. Rules about carefully managing Rose’s money and property.
  3. Rules about keeping Rose’s money and property separate from your money and property.
  4. Rules about keeping good records.

1 | Rules about making you act only in Rose’s best interest.

Because you are dealing with the trust’s money and property, your duty is to make decisions that are best for Rose and any co-beneficiaries. This means you must ignore your own interests and needs, or the interests and needs of other people.

To help you follow the rules that make you act in Rose’s best interest, use these guidelines:

  • Read the living trust document and do what it says. Your authority is limited to what the document and Michigan law, if it applies, allow. There may be duties required by Michigan law or other state laws even if they are not in the living trust document. Talk to a lawyer if there is anything you don’t understand. Follow Rose’s directions in the trust document even if you have the best intentions in wanting to do something different.
  • Understand when your duty as trustee becomes effective. The living trust may say that you become a trustee or a co-trustee right away or only when Rose can no longer make her own decisions. Check to see if the document says how you will know when Rose can no longer make her own decisions. If you are still unsure, get legal advice.
  • Avoid conflicts of interest. A conflict of interest happens if you make a decision about Rose’s money or property in the trust that may benefit someone else at Rose’s expense. As a fiduciary, you have a strict duty to avoid conflicts of interest—or even the appearance of a conflict of interest.
  • Don’t borrow, loan, or give the trust’s money to yourself or others. Even if Michigan law, another state law, or the trust document allows gifts or loans, consider whether the trust can afford the gifts or loans, and whether they are in line with what Rose would have wanted. A lawyer can advise you on any effects on Rose’s taxes or on her plans to give away her property when she dies.
  • Avoid changing Rose’s plans for giving away her money or property when she dies. There may be rare situations in which changing Rose’s plans would be in her best interest. But you should get legal advice to make sure that the trust document, Michigan law, or another state law allows that.
  • Don’t pay yourself for the time you spend acting as Rose’s trustee, unless the living trust, Michigan law, or another state law allows it. If you are allowed to pay yourself, you need to show that your fee is reasonable. Carefully document how much time you spend and what you do.

Avoid possible conflicts of interest

Sometimes people have good intentions, but do things they shouldn’t. Because you are now a fiduciary, you should avoid any conflicts of interest. Here are a few examples of possible conflicts of interest:

Should you sell trust assets to yourself?

Selling trust assets to yourself is usually seen as a conflict of interest (called self-dealing). Talk to a lawyer before doing this.

Should you do business with family?

Like most people, Rose needs homeowners’ insurance. Because your spouse sells insurance, you decide to buy Rose’s insurance from him without shopping around for better coverage or prices from other insurance agents. This may be a conflict of interest.

2 | Rules about carefully managing Rose’s money and property.

As Rose’s trustee, you might pay bills, oversee bank accounts, and pay for things she needs. You might also make investments, pay taxes, collect rent or unpaid debts, get insurance if needed, and do other things written in the living trust or required by Michigan law, or even another state law.

You have a duty to manage the money and property in the trust very carefully. Use good judgment and common sense. As a fiduciary, you must be even more careful with the trust’s money than you might be with your own!

To stay within the rules about carefully managing Rose’s property and money, follow these guidelines:

  • List the trust’s money, property, and debts. You need to know what Rose’s trust owns and owes to make careful decisions. Your list might include:
    • Checking and savings accounts;
    • Cash;
    • Pension, retirement, annuity, rental, public benefit, or other income;
    • Real estate;
    • Cars and other vehicles;
    • Insurance policies;
    • Stocks and bonds;
    • Jewelry, furniture, and any other items of value;
    • Unpaid credit card bills and other outstanding loans.

The living/grantor trust or state law may require you to share the list with a beneficiary or with someone else.  Michigan law does require sharing information with certain people.  You should consult a lawyer to make sure you share information with the right people.

  • Protect the trust’s property. Keep the trust’s money and property safe. You may need to put valuable items in safe deposit boxes, change locks on property, and make sure her home or other property is insured. Make sure bank accounts earn interest if possible and have low or no fees. Review bank and other financial statements promptly. If the trust has real estate, keep it in good condition.
  • Invest carefully. Talk to a financial professional or lawyer about safe and legal ways to invest the trust’s assets. The Securities and Exchange Commission (SEC) provides tips on choosing a financial professional at www.sec.gov/investor/alerts/ib_top_tips.pdf. Discuss choices and goals for investing based on Rose’s needs and values.
  • Pay bills and taxes on time.
  • Cancel any insurance policies that Rose does not need.
  • Collect debts. Find out if anyone owes the trust money, and try to collect it.

Can Rose get any benefits?

Find out if Rose is eligible for any financial or health care benefits from an employer or a government. These benefits might include pensions, disability, Social Security, Medicare, Medicaid, Veterans benefits, housing assistance, or food stamps (now known as Supplemental Nutrition Assistance Program or SNAP). Use the National Council on Aging benefits check-up at www.BenefitsCheckUp.org.

Help her apply for those benefits. The Area Agency on Aging where Rose lives can help you find information. Find the local Area Agency on Aging through the Eldercare Locator in Michigan at www.eldercare.gov.

Medicaid is complicated

Get legal advice and be very careful about decisions that may affect Martina’s eligibility for Medicaid. The Medicaid program provides medical assistance and long-term care to low-income people. It may have another name in your state. To find your state Medicaid agency, visit: www.benefits.gov/benefits/browse-by-category/category/MED. For additional information about Medicaid and/or Medicare eligibility in Michigan, visit the Department of Health & Human Services website at www.michigan.gov/mdhhs/ or by calling 1-517-373-3740.

Medicaid/Medical Assistance: For information about Medicaid eligibility and how to apply, contact Michigan Medicare/Medicaid Assistance Program (MMAP, Inc.). MMAP, Inc. is a free health-benefit counseling service provided to Michigan residents. Call 1-800-803-7174 or visit www.mmapinc.org.

3 | Rules about keeping Rose’s money and property separate from your money and property.

Never mix money or property in Rose’s trust with your own or someone else’s. Mixing money or property makes it unclear who owns what. Confused records can get you in trouble with Rose’s family and also with government agencies such as adult protective services and the police or sheriff.

To avoid breaking the rules about keeping Rose’s money and property separate from your money and property, think about these guidelines:

  • Separate means separate. Never deposit the trust’s money into your own or someone else’s bank account or investment account.
  • Never hold title to the trust’s money and property in your own name. Every document should show the owner of the assets as either the Rose Roe Living Trust or your name as trustee of the Rose Roe Living Trust. This is so other people can see right away that the money and property belongs to the trust and not to you.
  • Know how to sign as trustee. Sign all checks and other documents relating to the trust’s money or property to show that you are Rose’s trustee. For example, you might sign “John Doe, as trustee for the Rose Roe Living Trust.” Never just sign “Rose Roe.”
  • Pay Rose’s expenses from the trust funds, not yours. Spending your money and then paying yourself back makes it hard to keep good records. If you really need to use your money, keep receipts for the expense and maintain a good record of why, what, and when you paid yourself back.

4 | Rules about keeping good records.

You must keep true and complete records of the money and property in Rose’s living trust. The living/grantor trust document or state law may say that you must share your records with someone else who can check up on you. Michigan law does require sharing information with certain people. You should consult a lawyer to make sure you share information with the right people.

Practice good recordkeeping habits:

  • Keep a detailed list of everything the trust receives and spends. Records should include amount of checks written or deposited, dates, reasons, names of people or companies involved, and other important information.
  • Keep receipts and notes, even for small expenses. For example, write “$50, groceries, ABC Grocery Store, May 2” in your records, soon after you spend the money.
  • Avoid paying in cash. Try not to pay Rose’s expenses with cash. Also, try not to use an ATM card to withdraw cash or write checks to “Cash.” If you need to use cash, be sure to keep receipts and notes.
  • Getting paid? The living trust document, Michigan law, or even another state law may say that you can be paid for acting as trustee. If you will be paid, be sure you are charging a reasonable fee. Keep detailed records, as you go along, of what work you did, how much time it took, when you did it, and why you did it. You should ask a lawyer if you are unsure about what amount is reasonable. Your compensation should be reasonable. Look for information about what other people charge to do the tasks that you are doing for Martina.

More things you should know

What if there are other fiduciaries?

Co-trustees

Rose may have named herself as co-trustee with you. Or she may have named someone else to act as co-trustee with you. The living trust document, Michigan law, or possibly another state law should say whether you and any co-trustees can make decisions alone or must agree on decisions, either unanimously or by majority rule. Michigan law says that you must follow majority rule if the trust does not have instructions.  However, if you are unsure, contact a lawyer.

Either way, you must coordinate with any co-trustee and share information about decisions. Even if you and a co-trustee don’t agree on all decisions, you cannot let a co-trustee do something that harms Rose. You are still responsible for her and must act in her best interest.

Successor trustees

Rose may have named a successor trustee to act for her if you are not able to be the trustee. A successor trustee has no authority if you are still willing and able to act as trustee.

Other types of fiduciary

Other fiduciaries may have authority to make decisions for Rose. For example, she may have conservator, a representative payee who handles Social Security benefits, or a VA fiduciary who handles veterans benefits. It is important to work with these other fiduciaries, and keep them informed.

Government benefits require special fiduciaries

As trustee, you cannot manage Rose’s government benefits such as Social Security or Veterans benefits, unless:

  • Her benefits are paid directly into her trust, or
  • You have been appointed by the government agency as, for example, a representative payee or VA Fiduciary to handle these benefits. For more information, contact the government agency.

More than one beneficiary?

If Rose named more than one beneficiary of her living trust, then you have fiduciary duties to each beneficiary. The living trust document and Michigan law, if it applies will say what your duties are to the beneficiaries.

You must always be impartial when you carry out your duties as Rose’s trustee. You cannot show any bias toward any one beneficiary. Because each beneficiary’s needs are different, you do not have to treat everyone the same. But you must act in each beneficiary’s best interest in an unbiased way.

Talk to a lawyer about what your duties are if Rose’s trust has named more than one beneficiary.

How can you avoid problems with family or friends?

Family or friends may not agree with your decisions about Rose’s money and property. To help reduce any friction, follow the rules described above and the guidelines we’ve given you.

Sharing information may help or be required in limited circumstances. BE CAREFUL.

It is not always best to share the personal information unless specifically required by Michigan law or judicial order. Check to see what the power of attorney directs you to do about sharing your records.

Some family or friends may be so difficult that it is better not to share information with them but avoid the disclosure of confidential information. Use your best judgment.

If family or friends disagree with your decisions, try to get someone to help sort it out—for example, a family counselor or mediator.

What should you know about working with professionals?

In managing the trust’s affairs, you may need help from professionals such as lawyers, brokers, financial advisors, accountants, real estate agents, appraisers, psychologists, social workers, doctors, nurses, or care managers. You can pay them with money from the trust.

If you need help from any professionals, remember these tips:

  • Check on the professional’s qualifications. Many professionals must be licensed or registered by a government agency. Check credentials with the government agency. Make sure the license or registration is current and the professional is in good standing. Check the person’s complaint history.
  • Interview the professional thoroughly and ask questions.
  • Review contracts carefully before signing. Before hiring any professionals, get their proposed plan of work and expected fee.
  • Make your own decisions based on facts and advice. Listen to their advice, but remember you are the decision-maker.

Watch out for financial exploitation

Family, friends, neighbors, caregivers, fiduciaries, business people, and others may try to take advantage of Rose. They may take her money without permission, neglect to repay money they owe, charge her too much for services, or just not do things she has paid them to do. If any of these happen, it may be examples of financial exploitation or financial abuse. As Rose’s trustee, you should help protect her and know the signs of financial exploitation for five important reasons:

  • Rose may still control some of her funds and could be exploited;
  • Even if Rose does not control any of her funds, she still may be exploited;
  • Rose may have been exploited already, and you may still be able to do something about that;
  • People may try to take advantage of you as Rose’s trustee; and
  • Knowing what to look for will help you avoid doing things you should not do, protecting you from claims that you have exploited Rose.

Look for these common signs of financial exploitation

  • You think some money or property is missing.
  • Rose says that some money or property is missing.
  • You notice sudden changes in Rose’s spending or savings. For example, she:
    • Takes out lots of money from the bank without explanation;
    • Tries to wire large amounts of money;
    • Uses the ATM a lot;
    • Is not able to pay bills that are usually paid;
    • Buys things or services that don’t seem necessary;
    • Puts names on bank or other accounts that you do not recognize or that she is unwilling or unable to explain;
    • Does not get bank statements or bills;
    • Makes new or unusual gifts to family or others, such as a “new best friend”;
    • Changes beneficiaries of a will, life insurance, or retirement funds; or
    • Has a caregiver, friend, or relative who suddenly begins handling her money.
  • Rose says she is afraid or seems afraid of a relative, caregiver, or friend.
  • A relative, caregiver, friend, or someone else keeps Rose from having visitors or phone calls, does not let her speak for herself, or seems to be controlling her decisions.

What can you do if Rose has been exploited?

  • Call the emergency 911 number if Roberto is in immediate danger.
  • Call Adult Protective Services (APS) at 1-855-444-3911. You could also call the police or sheriff. You may be required by law to report abuse and should check the Michigan Department of Health and Human Services website to make sure.
  • Alert Rose’s bank or credit card company.
  • Call the office of the local prosecutor or Michigan Attorney General.
  • Call the Michigan Long-Term Care Ombudsman Program or the state Medicaid fraud control unit if Rose is in a nursing home or assisted living.
  • Consider talking to a lawyer about protecting Rose from more exploitation or getting back money or property taken from him.

Each agency or professional has a different role, so you may need to call more than one.

Be on guard for consumer scams

As Rose’s trustee, you should be alert to protect her money from consumer scams as well as financial exploitation. Criminals and con artists have many scams and change them all the time. They often seek unsuspecting people who have access to money. Learn to spot consumer scams against Rose—and against you as her trustee.

How can you protect Rose from scams?

Consumer scams happen on the phone; through the mail, e-mail, or the Internet; and they occur in person, at home, or at a business. Here are some tips:

  • Help Rose put her number on the National Do Not Call Registry. Go to www.donotcall.gov or call 1-888-382-1222.
  • Don’t share numbers or passwords for Rose’s accounts, credit cards, or Social Security, unless you know whom you’re dealing with and why they need the information.
  • After hearing a sales pitch, take time to compare prices. Ask for information in writing and read it carefully.
  • Too good to be true? Ask yourself why someone is trying so hard to give you a “great deal.” If it sounds too good to be true, it probably is.
  • Watch out for deals that are only “good today” and that pressure you to act quickly. Be suspicious if you are not given enough time to read a contract or get legal advice before signing. Also watch out if you are told that you need to pay the seller quickly, for example by wiring the money or sending it by courier.
  • Never pay up front for a promised prize. Suspect a scam if you are required to pay fees or taxes to receive a prize or other financial windfall.
  • Watch for signs Rose already has been scammed. For example, does she receive a lot of mail or e-mail for sweepstakes? Has she paid people you don’t know, especially in other states or countries? Has she taken a lot of money out of the bank while she was with someone she recently met? Does she have a hard time explaining how she spent that money? Is she suddenly unable to pay for food, medicine, or utilities?

What can you do if Rose has been scammed?

If you suspect a scam, get help. Contact a local, state, or federal agency, depending on the type of scam. You may also need to talk to a lawyer.

Local agencies to call are Adult Protective Services (APS), the Michigan Long-Term Care Ombudsman Program, the police or sheriff, and the local Better Business Bureau.

State agencies to call are the office of the attorney general or another agency that deals with consumer protection.

Call a federal agency if scammers are in other states or countries. Federal agencies are the Consumer Financial Protection Bureau, the FBI, the Federal Trade Commission, or the U.S. Postal Inspection Service.

Each of these agencies and professionals has a different role so you may need to call more than one.

 

 

Acknowledgments

This guide was adapted from the Consumer Financial Protection Bureau’s (CFPB) Managing Someone Else’s Money guides. Sixty Plus, Inc., Elderlaw Clinic, Western Michigan University Cooley Law School prepared this guide with the support from Lansing Area Community Trust and Capital Region Community Foundation to include information about Michigan state law resources. The CFPB has not reviewed or approved the content in this guide and the CFPB does not endorse the final product. 

Michigan professionals who worked on this guide are Professor Kimberly O’Leary, Esq.,   L. Patricia Mock, Esq., Gregory Przybylo, Esq., Michelle Goetz J.D., Luis Vasquez J.D. and Dr. Janet S. Hahn (Center for Gerontology for the Western Michigan University Cooley Law School). 

 

©October 2017

These guides were adapted from the Consumer Financial Protection Bureau’s (CFPB) Managing
Someone Else’s Money guides. The CFPB has not reviewed or approved the content in this guide and the CFPB does not endorse the final product.

Sixty-Plus, Inc. prepared this guide with financial assistance from Western Michigan University-Thomas M. Cooley Law School, Lansing Area Community Trust, and Capital Region Community Foundation to include information about Michigan state law and resources.

Managing Someone Else’s Money in Michigan is supported by the Prevent Elder and Vulnerable Adult Abuse, Exploitation, Neglect Today (PREVNT) Initiative state fund grant awarded to Sixty Plus, Inc. Elderlaw Clinic from the Aging and Adult Services Agency/Michigan Department of Health and Human Services (AASA/MDHHS).

The information or content are those of the authors and should not be construed as the official position or policy of, nor should any official endorsement be inferred by the AASA/MDHHS.