734-359-7018
Now Accepting New Clients!
Blog

WILLS AND TRUST 8: A SUCCESSOR TRUSTEE WAS ABLE TO MAKE DISTRIBUTIONS TO HIMSELF UNDER BOTH A POWER OF ATTORNEY AND UNDER THE TERMS OF A TRUST

PERTINENT FACTS

In 2010, the decedents created the Trust and dual durable powers of attorney in which each spouse nominated the other to serve as primary attorney-in-fact with respondent to serve as the first alternate. The Trust designated the decedents to be primary trustees and beneficiaries, with respondent to serve as successor trustee upon the decedents’ incapacitation or death. Respondent, his children, and petitioners were other named beneficiaries. After one of the Settlors died and the other one was declared incapacitated, Respondent accordingly assumed his role as both successor trustee and the holder of the power of attorney. After the Settlor was declared incapacitated, respondent made substantial distributions from the Trust and  estate amounting to approximately $147,000 to pay his children’s educational expenses and $56,000 to himself.   Petitioners brought this action alleging that respondent violated his fiduciary duties and the Trust’s terms by improperly self-dealing and exhausting the Trust’s assets to their detriment as beneficiaries. Respondent defended his actions under the Trust’s and power of attorney’s terms, maintaining that he was given unbridled discretion to distribute the Trust’s assets. The probate court held that respondent was authorized under the power of attorney and the Trust to make distributions to himself and his children, but his authority to do so was limited to gifts “that will qualify for exclusion under the Internal Revenue Code.”

STANDARDS OF REVIEW

This Court reviews de novo both the probate court’s interpretation of a trust and its interpretation of a contract.

POWER TO MAKE GIFTS

We reject petitioners’ argument that respondent was prohibited from making gifts to himself or his children under the power of attorney or the Trust. First addressing respondent’s authority under the power of attorney, it is well established that a power of attorney provides the agent with all the rights and responsibilities of the principal as outlined in the agreement.  The power of attorney in the present case explicitly empowered respondent to self-deal in the gift-giving provision. This provision must be strictly construed and cannot be expanded or limited. Turning to the Trust, we conclude that the terms of the Trust also gave respondent the authority to make disbursements and limited gifts to himself and his children.

DISCRETIONARY TRUST

Turning to respondent’s appeal, we agree that the probate court erred by determining that his power to make distributions under Article Four, Section D was limited by his ability to make gifts under Article Four, Section G. However, we do not agree that respondent’s discretion was unfettered—Michigan law places limitations and safeguards on a trustee-beneficiary’s handling of a trust. Michigan law clearly places restrictions upon a trustee exercising his or her judgment under a discretionary trust, especially in circumstances in which the trustee is also a beneficiary.

CONCLUSION

The probate court correctly concluded that both the power of attorney and the Trust gave respondent power to make limited gifts to himself and to third parties. The probate court erred, however, by determining that respondent’s power to make distributions was limited by the gift-giving provision of the Trust; in addition to authorizing respondent to make gifts, the Trust gave respondent discretion to distribute the Trust’s assets for the benefit of the beneficiaries. Yet, contrary to respondent’s argument, this discretion was not unlimited, and there remain factual questions about whether the distributions and gifts he made under the terms of the Trust violated Michigan law.

ASSISTANCE WITH WILLS AND TRUST ISSUES

If you have lost a loved one, the last thing you should have to deal with at this time is the confusing and often frustrating process of probate.

Aldrich Legal Services offers comprehensive guidance throughout the probate process. We offer probate services for clients whose loved ones died with or without a will and trust.

Contact Aldrich Legal Services

Speak to a Pro: (734) 404-3000

FAMILY LAW 53: The trial court erred by treating the parties’ GAL as an LGAL and denying the parties the right to question her at a hearing; however, the trial court did not err in requiring the parties to compensate the GAL for her services.

Plaintiff and Defendant were never married, but share a young son who was born in 2016. The parties have battled over custody, child support, and other parenting issues ever since. In the spring of 2019, the parties filed competing motions to modify...

The Difference Between Theft, Robbery, and Burglary

Original Post: 1/11/2019 Often, burglary, robbery, and theft are used interchangeably even though there are distinct differences between all of them. Though, what all three do have in common is they may involve the unlawful taking of...

REAL ESTATE 59: Concluding that the one-year period contained in the parties’ home purchase agreement was not a statute of limitations, but rather akin to a statute of repose, and that it was plain and unambiguous, the court held that it barred plai

BACKGROUND On March 12, 2016, the parties entered into an agreement for the purchase of defendants’ home. The purchase agreement contained the following clause: TIME FOR LEGAL ACTION: Buyer and Seller agree that any legal action against...

CRIMINAL LAW 16: The trial court did not err in refusing to order a Daubert hearing as to the reliability of the DataMaster breathalyzer device as MCL 257.625a(6)(a) shows the Legislature has determined that the device’s results are valid and reliabl

UNDERLYING FACTS In the early afternoon of November 4, 2016, defendant was pulled over after an officer was dispatched for a possible drunk driver. The officer had defendant exit his vehicle and perform several field sobriety tests. Those tests...

FAMILY LAW 52: Defendant-mother was not entitled to relief on her claim the trial court did not comply with the requirements for a de novo hear, the trial court did not err in using the preponderance of the evidence standard, and its best interest f

PERTINENT FACTS In July 2017, plaintiff and defendant divorced by consent judgment. Under the judgment of divorce, the parties shared joint legal and physical custody of their three minor children. On September 24, 2018, plaintiff filed a motion...

Are you required to provide ID as a passenger?

Original Post: 05/14/2017 The preceding is for informational purposes only. Being stopped by the police is not usually a pleasant experience. Even with the most benign of infractions, the encounter can be adversarial. The idea of...

DIVORCE 45: Federal law preempts state law such that the parties’ consent judgment is unenforceable to the extent that it required defendant to reimburse plaintiff for the reduction in the amount payable to her due to his election to receive CRSC

BACKGROUND This case involves a dispute between former spouses who entered into a consent judgment of divorce (the consent judgment), which provided that defendant would pay plaintiff 50% of his military retirement benefits. Beyond that, the...

How to Choose a Criminal Defense Lawyer for a DUI

No one wants to be arrested, and if you are, especially for the first time, you can be very confused. Being arrested for Drunk Driving, Driving Under the Influence (DUI) or Operating While Intoxicated (OWI) - formerly Driving While Intoxicated (DWI)...

What does Client and Attorney Privilege Mean?

How much should you tell your lawyer? The fifth amendment protects U.S. citizens from incriminating themselves, but how does that work with your attorney. We get this question all the time. Many people have heard about attorney confidentiality,...

Don't let a bad decision, unfair contract, or a messy divorce get in the way of a promising future!
Contact the experienced team at Aldrich Legal Services today to schedule your free initial
consultation
and secure reliable and trustworthy representation today!
Get the Help You Need From a Team You Can Truly Count On: (734) 404-3000
734-237-6482
734-366-4405