If trust provides settlor can not amend or revoke trust if not mentally competent, does such a provision defeat creditor rights against trust estate? (ref. section 7501) 0314

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Question

I have a question regarding MCL 700.7501, regarding claims against a decedent's revocable trust.

This section says, in pertinent part:  "The property of a trust over which the settlor has the right without regard to the settlor's mental capacity, at his or her death, either alone or in conjunction with another person, to revoke the trust and reinvest principal in himself or herself is subject to all of the following . . ."

Our revocable trusts provide that a settlor cannot amend or revoke if he/she is not mentally competent.  Does this provision take our trusts out of the requirements of  MCL 700.7501 so that creditors' rights are potentially defeated?

Answer

When interpreting the language of  MCL 700.7501(1),  you disregard the competency tests imposed by the document.  That is what ""settlor has the right without regard to the settlor's  mental capacity" seems to mean. Therefore if the trust was revocable at his death but for the issue of his competence, the assets are subject to claims and expenses to the extent that the probate estate is insufficient to pay the same.

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Last Updated:  11-1-01

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