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WILLS/TRUSTS 18: Probate court erred in concluding that a statute of limitations barred plaintiffs’ claims challenging the Trust.

In this case, Plaintiffs contend that the probate court erred in concluding that a statute of limitations contained in the Michigan Trust Code (MTC), MCL 700.7604, barred plaintiffs’ claims challenging the validity of the Trust.

Plaintiffs are the daughters and defendant is the son of the settlor. Following the death of her husband, in 1995, the settlor settled the Trust. The assets contained in the Trust primarily consisted of real property and a closely held business. The Trust generally provided that the assets would be equally distributed to her children upon her death.

During her lifetime, Settlor was to be the sole trustee of the Trust, and reserved in herself a number of rights and powers as the settlor, including the right to amend, modify, or revoke the Trust, and to designate different trustees or co-trustees at any time to act on Settlor’s behalf. The Trust also provided that, if Settlor was ever incapacitated and her incapacity certified by two doctors, any further actions taken by Settlor with respect to the Trust would be void.

In 2007, a doctor performed a geriatric assessment of Settlor, and in a letter dated April 18, 2007, informed Settlor’s primary care physician that Settlor was experiencing memory loss and needed help with her finances and medications.

One year after the doctor performed his geriatric assessment, on May 6, 2008, he noted on a prescription pad that Settlor was not capable of participating in business affairs.

In 2012, Settlor executed the fifth and final amendment to the Trust. The amendment revoked all previous amendments and reaffirmed that son would receive the voting shares of the business.

Settlor died on May 14, 2014, and her personal representative sent a letter to plaintiffs indicating that Settlor appointed him trustee of the Trust Established on May 12, 2014. Notably, enclosed with the letter were copies of Settlor’s will and the Irrevocable Trust established in 2012, but not a copy of the original trust or any of its amendments.

Plaintiffs requested a declaration that all amendments to the Trust executed after April 2007 were void because Settlor did not have capacity to execute them, and because Settlor was unduly influenced by her son.

The son moved for partial summary disposition pursuant to MCR 2.116(C)(7) and (C)(8), contending that (1) plaintiffs were barred by the statute of limitations, MCL 700.7604, from challenging the validity of the Trust, and (2) plaintiffs lacked standing to bring a conversion claim on behalf of the Trust.

The probate court agreed with the son that plaintiffs’ claim for declaratory relief against the Trust was barred by the statute of limitations, holding that the statute applied to the trust because it was revocable within the meaning of MCL 700.7103(h).

Plaintiffs first contend that their claims against the Trust did not exceed the statutory limitation period because the statute of limitations applies only if a trust is revocable at the time of the settlor’s death, and in this case, the Trust became irrevocable when Esther was incapacitated in 2008.

The statute of limitations at issue, MCL 700.7604, provides as follows:

(1) A person may commence a judicial proceeding to contest the validity of a trust that was revocable at the settlor’s death within the earlier of the following:

(a) Two years after the settlor’s death.

(b) Six months after the trustee sent the person a notice informing the person of the following:

(i) The trust’s existence.

(ii) The date of the trust instrument.

(iii) The date of any amendments known to the trustee.

(iv) A copy of relevant portions of the terms of the trust that describe or affect the person’s interest in the trust, if any.

(v) The settlor’s name.

(vi) The trustee’s name and address.

(vii) The time allowed for commencing a proceeding.

Because the language of the Trust prevails over the statutory definition of revocable, a certified inability on the part of Settlor to manage her own affairs would have rendered the Trust irrevocable. The probate court therefore erred in applying MCL 700.7604 to bar plaintiffs’ challenges to the Trust.

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We draft and review wills, trusts and other estate planning documents to help our clients with their estate objectives. Located in Plymouth, Michigan, we assist clients throughout southeast Michigan.

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