Trust Administration in Michigan: Duties of a Trustee and Common Pitfalls
When a loved one passes away in Michigan, their estate often needs to be managed and distributed according to their trust. This process is called Trust Administration in Michigan, and it is one of the most important responsibilities in estate planning.
If you have been named as a trustee, you may feel overwhelmed by the legal, financial, and emotional obligations that come with this role. Unlike probate, which often involves court supervision, trust administration is handled outside of the courtroom, but that does not mean it is simple. Trustees are legally bound by Michigan law and can be held personally liable if they make mistakes.
In this article, we’ll walk you through:
- The duties of a trustee in Michigan
- Common pitfalls that can lead to disputes or liability
- Why working with a West Michigan estate planning and probate attorney can make the process smoother and less stressful
What Is Trust Administration?
Trust administration is the process of carrying out the terms of a trust after the grantor (the person who created the trust) passes away or becomes incapacitated. Unlike probate, which is public and court-supervised, trust administration is private. However, it requires careful attention to Michigan’s estate laws and strict adherence to the trust document.
Many families in Grand Rapids, Holland, Kalamazoo, Allegan, and across West Michigan rely on trusts to protect assets, avoid probate, and ensure a smoother transfer of property. But the person named as trustee often underestimates how much responsibility comes with the role.
At Legacy Legal & Business Services PLC, we regularly guide trustees and families through these challenges so they can administer the trust efficiently and avoid unnecessary conflict.
Duties of a Trustee in Michigan
Being a trustee is more than a title, it is a serious legal role. Under Michigan law, a trustee owes fiduciary duties to the beneficiaries, meaning they must act with loyalty, honesty, and care (see Michigan Trust Code).
Below are the key responsibilities every trustee must fulfill:
1. Fiduciary Duty
A trustee must act in the best interests of the beneficiaries at all times. This includes avoiding conflicts of interest, not favoring one beneficiary over another, and acting with complete transparency.
2. Following the Trust Document
The trust is the legal “roadmap.” A trustee cannot decide to change its terms simply because it seems easier or fairer. If the trust specifies that assets are to be distributed in a certain way, those instructions must be followed exactly.
3. Managing Trust Assets
Trustees are responsible for safeguarding all trust property. This often includes:
- Collecting and securing real estate owned by the trust
- Managing bank accounts, investments, or retirement funds
- Overseeing business interests or rental properties
- Paying outstanding debts, bills, and final expenses
Failure to manage these assets properly could result in losses that the trustee may be personally liable for.
4. Accounting and Record-Keeping
Michigan law requires trustees to keep accurate financial records of all trust activity. Beneficiaries are entitled to see an accounting that details income, expenses, and distributions. Sloppy record-keeping can create distrust and even lawsuits.
5. Communication with Beneficiaries
Trustees must keep beneficiaries reasonably informed. That doesn’t mean updating them daily, but regular communication prevents suspicion and conflict. A trustee who is silent may unintentionally cause disputes among beneficiaries.
6. Tax Responsibilities
Trustees must file federal and state fiduciary tax returns for the trust, and they may also need to file final income tax returns for the decedent. Failing to file on time, or filing incorrectly, can result in fines and penalties.
Common Pitfalls Trustees Face
Even well-intentioned trustees often stumble into errors. Here are the most common mistakes we see in Michigan trust administration:
1. Failing to Keep Records
Without clear financial records, beneficiaries may challenge a trustee’s decisions. Proper accounting protects the trustee from liability.
2. Mixing Assets
One of the most damaging mistakes is combining trust assets with personal funds. Even unintentional mixing can look like theft or mismanagement.
3. Delays in Administration
Beneficiaries are often eager for distributions, and long delays can create frustration. While some waiting is unavoidable, avoidable procrastination can lead to conflict or even legal action.
4. Misunderstanding Michigan Law
Michigan trust law requires certain notices, deadlines, and accountings. Trustees who fail to comply may face court involvement and penalties.
5. Overlooking Taxes
Tax filings are easy to overlook, but the IRS and State of Michigan do not take mistakes lightly. Failure to address taxes promptly can expose trustees to personal liability.
6. Poor Communication
Most disputes stem from lack of communication. Beneficiaries who feel left out or uninformed are more likely to challenge the trustee.
How Trustees Can Avoid These Pitfalls
The best way to avoid mistakes is to seek professional guidance. At Legacy Legal & Business Services PLC, we help trustees by:
- Reviewing the trust document in detail
- Explaining Michigan trust law requirements
- Making sure trustees are aware of their tax responsibilities and connecting them with the right professionals to ensure compliance
- Maintaining accurate financial records
- Facilitating communication with beneficiaries
- Advising on asset management and distributions
By working with an experienced West Michigan trust attorney, trustees reduce stress, avoid liability, and ensure they are honoring the grantor’s wishes.
Trust Administration vs. Probate in Michigan
Many people confuse trust administration with probate. Here’s the difference:
- Probate: Court-supervised process of administering an estate, typically required if the decedent only had a will or no estate plan. Probate is often public, slower, and more expensive.
- Trust Administration: Private process carried out by the trustee, without court involvement. While faster and more private, it still carries strict legal obligations.
If you’re unsure which applies to your family, check out our detailed guide on the Michigan Probate Process.
Why Work with a West Michigan Probate & Trust Attorney
Trust administration isn’t just paperwork, it’s about protecting your loved one’s legacy. A trustee who misunderstands their role could accidentally harm beneficiaries, trigger lawsuits, or even become personally liable.
At Legacy Legal & Business Services PLC, we serve families across Grand Rapids, Holland, Allegan, Kalamazoo, Kent, Ottawa, and Barry Counties. We can:
- Provide clear guidance on fiduciary duties
- Prevent costly mistakes
- Protect trustees from personal liability
- Offer peace of mind for families during a difficult time
Being named a trustee is both an honor and a responsibility. From asset management and tax filings to communication with beneficiaries, trustees in Michigan must carry out their duties with care. Unfortunately, many trustees fall into common pitfalls that create disputes, delays, and even personal liability.
Working with a knowledgeable West Michigan trust administration attorney ensures that the process goes smoothly, the beneficiaries are treated fairly, and your loved one’s wishes are respected.
Call Legacy Legal & Business Services today at (616) 681-0100 or visit us at www.legacylegalbusiness.com to schedule a free confidential consultation about trust administration in Michigan.