Latest EPIC Q & A

By Phillip E. Harter posted 04-25-2017 11:26

  
Can a settlor’s incapacity cause a revocable trust to become irrevocable?

Question:

What effect will MCL 700.7604 have if a trust becomes irrevocable based on a determination that the settlor lacks capacity? In this case, brother A argues that his mother was coerced into changing the terms of a joint trust after his father died. The trust allows surviving settlor to amend, and mother did amend, reducing disgruntled brother A’s share at a time when she clearly did have capacity. Later, after mother was declared incapacitated, brother B took over as successor trustee. He gave the notice required under MCL 700.7814 and added in language that would trigger MCL 700.7604(1)(b) if the trust becomes irrevocable at mother’s death. What impact does mother’s incapacity and the rendering of the trust as irrevocable during her lifetime have? Does brother B, the trustee, get the benefit of the six-month statute of limitations from the date of notice to brother A? Would the six-month statute of limitations run from mother’s future date of death? Or does the six-month statute of limitations just not apply?

Answer:

The facts are a little confusing here, but we have assumed that mom is still alive, the terms of the trust allow the surviving settlor to amend the trust, and mom lacks capacity. Any attempt to invoke MCL 700.7604(1)(b) is premature if that is the case. The trust is still a revocable trust. The fact that mom lacks legal capacity to exercise her power to amend or revoke does not make the trust irrevocable as a legal matter. See MCL 700.7103(h), which provides the following:

“Revocable”, as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest. A trust’s characterization as revocable is not affected by the settlor’s lack of capacity to exercise the power of revocation, regardless of whether an agent of the settlor under a durable power of attorney, a conservator of the settlor, or a plenary guardian of the settlor is serving.

(Emphasis added.)

The Probate Section has a resource called the EPIC Q & A. Attorneys ask questions about EPIC (and the MTC) and a panel of judges, registers and attorneys give them an answer. Here is the latest question and answer. If you belong to the Probate Section and want to see the other 700 questions and answers, go to ICLE’s Probate Resource Section Area. If you aren’t a section member, think about signing up through the State Bar.

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