Trustees in Michigan can seek release for wrongdoing or just to prevent allegation of wrongdoing. See MCL 700.7909, which is part of the Michigan Trust Code; it says so. The problem is, without explicit instruction in a trust I don’t know for sure the circumstances under which a beneficiary’s release is valid. Here’s what I do know:
MCL 700.7821(3)(a) and (b) give two examples of when a release given to a trustee will not be valid. First, if its improperly induced by the trustee. Second, if the beneficiary didn’t know a material fact relating to a trustee’s breach of duty.
A 2014 unpublished opinion of the Court of Appeals provides a third example of an invalid release; In re Robert Stout Revocable Trust where the trustee told beneficiaries they’d get money coming to them, but only if they’d sign a release first. The trial court didn’t find this a problem, but the Court of Appeals reasoned MCL 700.7821 (referenced earlier) already required the trustee to expeditiously distribute trust property. Therefore, conditioning payment on release was a breach of fiduciary duty itself.
What if there was an allegation of error related to the proposed distribution? Would this justify a mandatory release? What if the trustee offered a release for payment but, if not, then the trustee would seek instruction from the court (which could tie up funds for years and come at great expense to the trust and its beneficiaries)? These questions don’t appear to be answered, yet. Going forward, trustees would be well advised to seek experienced counsel before seeking a release.
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