Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, September 16, 2013

Article on Decanting in Michigan


James P. Spica (Dickinson Wright PLLC) recently published an article entitled, Spilt to Last: Longevity Planning for Tax Advantaged Trusts Under a New Statutory Decanting Regime in Michigan, 48 Real Prop., Trust & Est. L.J. 35 (Spring 2013).  Provided below is the synopsis of his article:

States considering decanting legislation may wish to note some special features of a tripartite decanting regime lately enacted in Michigan, under which a trustee can sometimes decant so as to extend the period for vesting of future interests in trust assets indefinitely.  Where a tax-advantaged perpetuity is prohibited by federal tax law, i.e., for trusts “grandfathered” under the Treasury’s generation-skipping transfer tax effective-date regulations, the Michigan regime is protective.  However, the regime also codifies common law principles regarding fiduciary special powers of appointment that may allow a trustee to extend the period for vesting of future interests in a grandfathered trust’s assets without threatening grandfathered status.  And where perpetuity is in point (because “grandfathered” status is not), the regime bolsters the anti-Delaware-tax-trap provision of Michigan’s perpetuities reform in light of the possibility that a trust may be created by the exercise of a nonfiduciary special power of appointment, thereby creating a decanting power in the appointive trustee that might be viewed as a “second power” for purposes of the “trap.”


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