Article on Decanting in Michigan

James P. Spica (Dickinson Wright PLLC) recently published anarticle entitled, Spilt to Last:Longevity Planning for Tax Advantaged Trusts Under a New Statutory DecantingRegime in Michigan, 48 Real Prop., Trust & Est. L.J. 35 (Spring2013).  Provided below is the synopsis ofhis article:

States considering decanting legislation may wish to notesome special features of a tripartite decanting regime lately enacted inMichigan, under which a trustee can sometimes decant so as to extend the periodfor vesting of future interests in trust assets indefinitely.  Where a tax-advantaged perpetuity isprohibited by federal tax law, i.e., for trusts “grandfathered” under theTreasury’s generation-skipping transfer tax effective-date regulations, theMichigan regime is protective.  However,the regime also codifies common law principles regarding fiduciary specialpowers of appointment that may allow a trustee to extend the period for vestingof future interests in a grandfathered trust’s assets without threateninggrandfathered status.  And whereperpetuity is in point (because “grandfathered” status is not), the regimebolsters the anti-Delaware-tax-trap provision of Michigan’s perpetuities reformin light of the possibility that a trust may be created by the exercise of anonfiduciary special power of appointment, thereby creating a decanting powerin the appointive trustee that might be viewed as a “second power” for purposesof the “trap.”