A last will and testament and a living trust are two of the most common estate planning methods. A living trust is attractive for many because it provides for an efficient and effective disposition of assets to loved ones, and unlike a will a living trust avoids probate court.
Once a trust is established it must be funded. Funding a trust is the process of transferring ownership of assets from the individual(s) who established the trust to the trustee of the trust, which involves titling assets in the name of the trustee. In almost all cases, the person who establishes and funds the trust also names himself or herself the trustee who has the right to manage all of the money, property, and assets that are placed inside of the living trust.
One asset that many people put in their trusts is real estate, be it a primary residence, vacant land, or otherwise. In Michigan, to the extent that a trustee decides to sell real estate that is part of a living trust, a certificate of trust will be required at or before the real estate closing.
What is a Certificate of Trust in Michigan?
Up until a few years ago, there were two different types of certificates of trust used in Michigan. One type was used for real estate transactions and the other was used mainly for financial transactions involving a trust.
Each type was governed by a different set of laws with quite different requirements. While each set of laws used the term “certificate of trust existence and authority,” one set was found in the statutes relating to Conveyances of Real Property and the other set was in the Michigan Trust Code. In 2018, as discussed below, Michigan law changed to harmonize the two statutes, simplifying our laws, reducing costs, errors, and confusion.
New legislation was signed into law in 2018 that, in essence, consolidated the two types of certificates of trust into one. Pursuant to the current law, a certificate of trust must include:
- The name of the trust, the date of the trust, and the date of each operative trust instrument.
- The name and address of each current trustee.
- The powers of the trustee relating to the purposes for which the certificate of trust is offered.
- The revocability or irrevocability of the trust and the identity of any person holding the power to revoke the trust.
- The authority of co-trustees to sign on behalf of the trust or otherwise authenticate on behalf of the trust and whether all or less than all co-trustees are required to exercise the trustee powers.
- A statement that the trust has not been revoked, modified or amended in any manner that would cause the representations included in the certificate of trust to be incorrect.
The certificate of trust may be signed or otherwise authenticated by the settlor, any trustee (including a successor trustee), or an attorney for the settlor or the trustee.
Do You Need a Certificate of Trust?
If you have a living trust, a certificate of trust will help the trustee open new financial accounts without needing to provide the entire trust. To the extent that real estate is in your trust, and you desire to sell it, the title company will require you to have a certificate of trust. Often, trustees are unaware of the need for a certificate of trust as part of the sale and are left scrambling in final days prior to the closing. If you are about to sell real estate titled in your name as trustee, you should obtain a certificate of trust early in the process to eliminate the stress and possible delays caused by not having the proper paperwork.
Even if you have a certificate of trust, it may need updating depending on when it was created. Because of the requirements imposed by the new statute, many certificates of trust that were created prior to 2018 are invalid. Additionally, since trustees and their addresses change from time to time, older certificates of trust are often out of date.
If you require assistance, the experienced trusts and estates and real estate lawyers at Fraser Trebilcock can provide the guidance you need. Please contact us.
Chair of Fraser Trebilcock’s Trusts and Estates Department, attorney Marlaine C. Teahan is a Fellow of the American College of Trust and Estate Counsel, and is the past Chair of the Probate and Estate Planning Section of the State Bar of Michigan. For help getting necessary legal authority for your loved one’s COVID-19 vaccine consent form, contact Marlaine at 517.290.0057 (cell) or mteahan@fraserlawfirm.com.