2023 House Bill 4864

House Fiscal Agency Analysis

The bills would make technical changes to ensure that Michigan-based trusts can use a tool commonly known as the Delaware tax trap to limit a trust’s exposure to the federal generation-skipping transfer tax. As described in committee, the bills would add language to the Powers of Appointment Act and the Uniform Statutory Rule Against Perpetuities to make explicit how certain provisions function in relation to other provisions of those acts, the Personal Property Trust Perpetuities Act, and the common law. The bills would not change the meaning of the amended acts as determined under the judicial rules for interpreting laws passed by the legislature. However, not all professionals who must deal with the acts are trained in those rules, so it has been suggested that the acts be amended to provide clearer guideposts as to what they mean, and how they should be applied, in coordination with one another and the other law described above. Supporters argued that the bills will ensure that Michigan-based lending institutions and trust advisors remain attractive options for Michiganders who want to establish trusts, noting that, in the absence of these technical fixes, they may either wind up engaged in costly litigation to resolve trust issues in the courts or feel the need to seek options for establishing a trust in another state.