March 06, 2017 Category: Will Contests, Trust Disputes & Probate Administration
“Release Me” was a popular song written by Eddie Miller and Robert Yount in 1949 and made into an international hit by Englebert Humperdinck in 1967. The opening line of the song “[Please release me, let me go,” is also a constant refrain of trustees who (understandably) want to be released from liability in exchange for distributions of trust assets to the beneficiaries. This is especially true when beneficiaries have expressed concerns or complaints about a trustee’s work as trustee. And why not? Contractors are asked to provide releases of lien in exchange for payment. Others in the context of fulfilling contractual obligations frequently seek a release in exchange for full performance. Should trustees be treated any differently? Under Michigan law, they are; probably.
Under Section 7821(2) of the Estate and Protected Individuals Code (“EPIC”), which governs trust administration in Michigan, a trustee is obligated to expeditiously distribute trust property to the persons entitled to it. Therefore, the argument is that a trustee should not be able to further condition a distribution, which he is compelled by statute to complete, upon a release by the beneficiary. Had the legislature desired to give trustees the right to condition distribution upon a release, the legislature could easily have said so. The only provision of EPIC that addresses the issue is Section 7909 which refers to a release of a trustee by a beneficiary but seems to imply, without stating so directly, that a release is appropriate only when a beneficiary is aware of a breach of trust by the trustee.
The only Michigan case to address this issue is In re Robert Stout Revocable Trust, unpublished decision of the MI Court of Appeals No. 313063, decided January 23, 2014. The court in Stout first looked to the trust instrument to see if it provided for releases. Absent specific language in the document, the court held that the trustee could not condition mandatory distributions upon a release of his liability. Finally, the court said that forcing the beneficiaries to sign a release in exchange for a distribution was a breach of trust all by itself. Would it have been appropriate to demand a release from the beneficiaries if there was a prior allegation of wrongdoing by the trustee? If it’s a mandatory distribution, given the Stout decision, that specific question appears to be unanswered. Certainly, a trustee who has been accused of wrongdoing would sensibly seek a release from the trust beneficiaries. We will just have to wait for Michigan courts to provide further guidance, with or without the help of Englebert Humperdink.