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What is a certificate of trust? Well there have been two different distinct certificates of trust up until a recent change in Michigan Law that combined them into one. For those of you that have had a trust prepared for them, you would normally also have a document called a certificate of trust, and that certificate of trust summarized some of the important information from your trust such as the date it was created, who the trustees are, who the successor trustees are, the name of the trust et cetera? And, the purpose of that certificate of trust was to be used for funding your trust. So when you went to the bank and you said hey I want to put the Trust on as a beneficiary on my account, the bank would require a certificate of trust, which was a summary of the trust information, and that was done in lieu of providing the bank with an actual copy of your trust document.
So that was one type of certificate of trust. It’s a certificate of trust that generally speaking we recommended everybody that had a trust prepared for them had a corresponding certificate of trust.
The other certificate of trust was actually called a certificate of trust existence and that was a document that a title company would require to be prepared and recorded at the time a trust was selling real estate. So if you had transferred your home into your trust, and you were then going to sell your home one day or the trust was going to sell your home, the title company would require a certificate of trust existence. And there was a specific Michigan Statute that said here’s what that certificate of trust existence has to contain.
Stepping back, that certificate of trust that you had just as part of your estate plan, there was no statute that said what that had to contain. The certificate of trust existence, though, that had been required by title companies to be recorded when a trust wanted to sell real estate, had very specific requirements under the statute.
So they were two separate documents and serve two different purposes. You would generally find that a title company when it came time to sell real estate would require that new certificate of trust existence.
Well, Michigan decided to simplify matters and to, by way of legislation, develop one certificate of trust that now is used for both purposes. One certificate of trust that you can use when you are funding your trust, and the same certificate of trust that a title company will now require when it comes time to sell real estate. So, the new statute combines them both into one and calls that one document a certificate of trust.
The statute sets out a number of requirements that a certificate of trust now has to contain. Those include:
- the name and date of the trust
- the date of each what is called operative Trust instrument, which is any amendment that would have been made to the trust
- not just the name, but the address of the current trustees.
- the power of the trustee as it relates to the purpose for which the certificate of trust is being offered. So for example, if you were going to use this new certificate of trust at a bank, the certificate of trust would have contained the powers of the trustee relative to banking. If the certificate of trust is going to be used sed by Title Company when it comes time to sell real estate, it will have to include the powers of the trustee relative to selling real estate. What we’ve opted to do is to include all of the powers that a trustee has under Michigan law so you can use one certificate of trust for all purposes that a trustee has authority to perform under Michigan law.
- whether or not it is revocable, and if revocable, indicate the name of the person who can revoke it.
- if you have co-trustees, then the certificate of trust has to indicate whether or not anyone of the co-trustees can operate and make decisions as a trustee without the other co-trustees.
- And finally, if it is going to concern real estate, then it has to contain a legal description of the real estate to which it applies.
Now why is it then that perhaps you might need a new certificate of trust?
Well here’s what is happening. What we have found from discussing with clients and contact with different Financial establishments, and this is this is kind of the way that the world of banking and the world of credit unions works. When a change in the law occurs there will be a law firm that is Corporate counsel for the bank or the credit union. And part of the job of that law firm is to keep the bank current, keep the credit union current, about changes in the law relative to them and their customers. So what happens in a situation like this is that law firm will normally put together some sort of a document sending it off to the bank or the credit union, and in this case advising them of the change in the law requiring certificates of trust. What normally then happens is not do they just advise them about the change, but they will often times create a checklist if you will, and the checklist probably says something like look in order for you the bank or the credit union to accept a certificate of trust from your customer regarding a trust that they have that is somehow now going to be related to their bank account, these are the things that have to be in that certificate of trust. That’s to make it uniform throughout the bank and the credit union, and to make it easy on the tellers. They don’t have to know the statute. They don’t have to know what changes. They just have pull out a form that says, okay, here’s what a certificate of trust requires. And what they normally do then is they go through that checklist and if everything on that checklist is there then they’ll accept the certificate of trust. If something on that checklist isn’t there, then in all probability, they will say no we cannot accept that certificate of trust, which means you cannot then make the trust the beneficiary on your bank account or credit union account or put the account in the name of the trust until you come back with an appropriate certificate of trust.
So when that happens, and we had that happen with a client recently, we were not provided with a copy of the checklist, but it was pretty clear what was going on when they went through the checklist. They looked and said hey the certificate of trust that had been prepared in that case years ago years ago when the trust was first created, and years ago when it was first used for funding at that bank, when the client went back to the bank to do something else related to the account the teller and the manager looked at that new checklist and said, hey, we need a new updated certificate of trust that is in compliance with Michigan law.
So, it didn’t void out the certificate of trust that was prepared years ago on behalf of the client. They simply refuse to do what the client asked them to do relative to the bank account without an updated certificate of trust. That is why you might well need a new certificate of trust. It’s not because your old one is no good anymore. It’s because of the financial institutions and what they are now doing relative to this change in Michigan law.
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The foregoing is an excerpt from the June 25, 2019 Tuesday with Tom episode “Why You Might Need a New Certificate of Trust”