Changes in the law for 2019 and why you still need a lawyer!
As of December 27th, 2018, MCL 700.7913 and MCL 565.431 have been amended to update the rules associated with Certificates of Trust and Certificates of Trust Existence and Authority. It is important for anyone who utilizes a Trust as part of their estate planning, or are buying or selling real estate owned by a Trust, to understand the law, how it is used, and why you should still contact a lawyer for drafting a Certificate of Trust.
When the Michigan Trust Code (MTC) was enacted in early 2010, it provided guidelines as to what information should be included in a Certificate of Trust. However, some felt that a weakness in the 2010 legislation was that it preserved a separate statutory provision regarding Certificates of Trust used in real estate transactions (called Certificates of Trust Existence and Authority). Though the information to be included in the two certificates is similar, the documents differ in that prior to the change in the law, a Trustee could not sign a Certificate of Trust Existence and Authority in a real estate transaction although the trustee could sign a certificate in any other transaction involving trust assets. Some believe that merging the two systems would mitigate confusion and cut costs as a lawyer would no longer be required to draft and execute a Certificate of Trust for real estate purposes.  In reality, this may open the door to even more fraud in real estate transactions (see Legislative comments against the proposed Bills- Complete to 11-26-18).
WHAT IS A CERTIFICATE OF TRUST?
A Certificate of Trust provides third parties such as banking institutions, brokerage/investment firms, and now those with an interest in real estate, the necessary information regarding the Trust to help either fund your Trust or allow real property to be transferred with clear title. The Trust Certificate provides the pertinent information needed to satisfy title companies or banks.
WHAT ARE THE CHANGES IN THE LAW?
House Bills No. 5362 and No. 5398 became effective December 27th and amended portions of the existing law (found here http://www.legislature.mi.gov/documents/2017-2018/billconcurred/House/pdf/2017-HCB-5362.pdf). The legislative notes indicate that the amendment would make numerous revisions of an editorial, rather than substantive, nature, for clarity or to update the language in the Michigan Trust Code. The real purpose of these combined Bills is to combine the Certificate of Trust Existence and Authority and the Certificate of Trust statutes to provide a more uniform mechanism.
Aside from eliminating a separate Certificate of Trust Existence and Authority for real estate transactions, the amendment provides that a proper Trust Certificate will provide the date of each operative trust instrument, replacing the prior language which simply asked for “any amendments”. This arguably creates the need to not only state if there was an amendment, but to provide a date for said amendment, which may prove difficult in some situations as the records related to a Trust’s history are incomplete and the dates of previous amendments may be uncertain.
Another detailed focused element contained in the amended statute is the requirement to provide the name and address of each current trustee. The prior statute required only the name and address of each “currently acting trustee”. This subtle change may lead to more confusion, as it is unclear if the elimination of the word “acting” now means that even successor trustee address information must be provided. The amendment replaces the word “shall” with “must” in multiple locations, slightly emphasizing what was already the best practices for the seasoned practitioner. Subsection (4) continues to make clear that dispositive Trust terms need not be disclosed. Subsections (5), (6), (7), and (8) all speak to the third parties receiving certificates of trust, as it did prior to the amendment. Subsection (8) in particular outlines that a person making a demand for the entire Trust or experts from the Trust Instrument are liable for damages, costs, expenses, and legal fees if a court determines that the demand was not made pursuant to a legal requirement to demand the trust instrument. While this is intended a shield, it may be a useful sword for those who
A properly drafted Certificate of Trust will now be useful not only for banking and investment purposes, but also for real estate transactions. While the requirement that these unified Certificates of Trust be signed by an attorney are eliminated, it is still the best practice to consult with a licensed and trained real estate and estate planning attorney before attempting to draft such a document on your own. The statute is very specific on what must be included, and failure to do so will render a certificate ineffective. If you or someone you know needs a Certificate of Trust for their real estate or estate planning needs, contact Andrew Babnik at Babnik Law, PLLC today!