Legislative Analysis
Phone: (517) 373-8080
UNITRUST ACT
http://www.house.mi.gov/hfa
House Bill 5110 as reported from committee Analysis available at
Sponsor: Rep. Douglas C. Wozniak http://www.legislature.mi.gov
Committee: Judiciary
Complete to 6-12-24
SUMMARY:
House Bill 5110 would create a new act, the Unitrust Act, to allow certain fiduciaries to convert
income trusts to unitrusts, convert express unitrusts to income trusts, and change the percentage
or method used to calculate unitrust amounts. The bill is based on Article 3 of the Uniform
Fiduciary Income and Principal Act, a model act drafted by the National Conference of
Commissioners on Uniform State Laws, also known as the Uniform Law Commission (ULC).1
Authorized actions
The new act would allow a trustee 2 that complies with the requirements described below to do
any of the following:
• Convert an income trust (a trust that is not a unitrust) to a unitrust if the trustee adopts
in a record a unitrust policy for the trust providing both of the following:
o That in administering the trust, the net income of the trust will be a unitrust
amount rather than net income determined without regard to the new act.
o The percentage and method used to calculate the unitrust amount.
• Change the percentage or method used to calculate a unitrust amount for a unitrust if
the trustee adopts in a record a unitrust policy or an amendment or replacement of a
unitrust policy providing those changes.
• Convert a unitrust to an income trust if the trustee adopts in a record a determination
that, in administering the trust, the net income of the trust will be net income
determined without regard to the new act rather than a unitrust amount.
Unitrust would mean a trust for which net income is a unitrust amount, and would
include an express unitrust.
Record would mean information that is inscribed on a tangible medium or that is stored
in an electronic or other medium and is retrievable in perceivable form.
Express unitrust would mean a trust for which, under the terms of the trust without
regard to the provisions of the bill, income or net income must or may be calculated as
a unitrust amount.
Terms of a trust would mean the manifestation of the intent of a settlor or decedent
with respect to the trust, expressed in a manner that admits of its proof in a judicial
proceeding, whether by written or spoken words or by conduct.
1
https://www.uniformlaws.org/committees/community-home?CommunityKey=1105f9bb-eb93-4d4d-a1ab-
a535ef73de0c
2
Including an original, additional, or successor trustee, regardless of whether appointed or confirmed by a court.
House Fiscal Agency Page 1 of 11
 Income would mean, as defined in the Uniform Principal and Income Act, 3 money or
property that a fiduciary receives as current return from a principal asset. It would
include a portion of receipts from a sale, exchange, or liquidation of a principal asset,
to the extent provided in Article 4 of the Uniform Principal and Income Act. 4
Net income would mean, as defined in the Uniform Principal and Income Act, the total
receipts allocated to income during an accounting period minus the disbursements
made from income during the period, plus or minus transfers under the Uniform
Principal and Income Act to or from income during the period.
Unitrust amount would mean an amount computed by multiplying a determined value
of a trust by a determined percentage. For a unitrust administered under a unitrust
policy, the unitrust amount would mean the applicable value, multiplied by the
unitrust rate.
Applicable value would mean the measure of the net fair market value of a trust taken
into account as described below.
Net fair market value of a trust would mean the fair market value of the assets of the
trust less the noncontingent liabilities those assets are subject to in the hands of the
trustee.
Unitrust rate would mean the rate used to compute the unitrust amount for a unitrust
administered under a unitrust policy.
Action requirements
The trustee could take an action described above if all of the following are met:
• The trustee sends a notice in a record in the manner described below that describes the
proposed action.
• At least one member of each class of the qualified trust beneficiaries receiving the
notice is one of the following:
o A legally competent individual.
o An existing entity (a person other than an individual).
o Represented as provided in Part 3 of Article VII of the Estates and Protected
Individuals Code (EPIC). 5
• The trustee does not receive, by the specified date, an objection in a record to the
proposed action from a person the notice is sent to.
3
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-Act-159-of-2004
4
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-159-2004-4
5
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-386-1998-VII-3
House Fiscal Agency HB 5110 as reported Page 2 of 11
 Qualified trust beneficiary would mean, as defined in EPIC, either of the following:
• A trust beneficiary 6 whom the settlor intends to benefit as a material purpose
of the trust and to whom one or more of the following apply on the date the
trust beneficiary’s qualification is determined:
o The trust beneficiary is a distributee or permissible distributee of trust
income or principal.
o The trust beneficiary would be a distributee or permissible distributee
of trust income or principal if the interests of the distributees under the
trust described above terminated on that date without causing the trust
to terminate.
o The trust beneficiary would be a distributee or permissible distributee
of trust income or principal if the trust terminated on that date.
• If on the date a trust beneficiary’s qualification is determined there is no trust
beneficiary as described above, a trust beneficiary to whom one or more of the
following apply on the date the trust beneficiary’s qualification is determined:
o The trust beneficiary is a distributee or permissible distributee of trust
income or principal.
o The trust beneficiary would be a distributee or permissible distributee
of trust income or principal if the interests of the distributees under the
trust described above terminated on that date without causing the trust
to terminate.
o The trust beneficiary would be a distributee or permissible distributee
of trust income or principal if the trust terminated on that date.
Settlor would mean, as defined in EPIC, a person, including a testator or a trustee, who
creates a trust. If more than one person creates a trust, each person would be a settlor
of the portion of the trust property attributable to that person's contribution. The lapse,
release, or waiver of a power of appointment would not cause the holder of a power of
appointment to be treated as a settlor of the trust.
Person would mean an individual or corporation, including a fiduciary of an estate or
trust, a business trust, partnership, limited liability company, association, joint venture,
public corporation, government, governmental subdivision, agency, or instrumentality,
or any other legal or commercial entity.
If, after sending a notice, the trustee decides not to take the action proposed in the notice, the
trustee would have to notify in a record each person described above of the decision not to take
the action and the reasons for that decision.
In deciding how to take an action authorized as described above, the trustee would have to
consider all factors relevant to the purposes of the trust and the interests of the beneficiaries.
A trustee could release or delegate the power to take an action authorized as described above
for reasons analogous to the reasons for releasing a power to adjust between principal and
income described in section 104(6) of the Uniform Principal and Income Act. 7 The release
6
A person who has a present or future beneficial interest in a trust, vested or contingent, or who holds a power of
appointment over trust property in a capacity other than that of trustee or trust director, or both.
7
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-555-504
House Fiscal Agency HB 5110 as reported Page 3 of 11
 could be permanent or for a specified period, including a period measured by the life of an
individual.
Principal would mean property held in trust for distribution to a remainder beneficiary
when the trust terminates.
Although the new act would allow a trustee that is not an independent person to exercise
certain discretionary powers, if a trust does not have a trustee that is an independent person,
the trustee of that trust could appoint, without court approval, one or more special trustees that
are independent persons to exercise discretionary powers under the act as long as the
appointment complies with any limits imposed by the terms of the trust on who is eligible to
serve as a cotrustee or successor trustee. Each such special trustee would serve as trustee for
the purpose or purposes, according to the conditions and limitations, and for the duration
specified by the appointing trustee.
Independent person would mean a person that is not any of the following:
• With respect to a trust, a qualified trust beneficiary, a nonfiduciary settlor of
the trust, or an individual whose legal obligation to support a beneficiary may
be satisfied by a distribution from the trust.
• A spouse, parent, brother, sister, or descendant of an individual described in
the above paragraph.
• A corporation, partnership, limited liability company, or other entity in which
persons described in the above two paragraphs, in the aggregate, have voting
control.
• An employee of a person described in the above three paragraphs.
Notice requirements
A notice required as described above would have to be sent in a manner authorized under
section 7109 of EPIC 8 to all of the following:
• The qualified trust beneficiaries.
• Each person acting as a trust director as that term is defined in section 7703a of EPIC. 9
• Each person that is not then a trustee or a person acting as a trust director but that has
a then-exercisable power under the terms of the trust to appoint or remove a trustee or
person acting as a trust director.
A notice required as described above would have to include all of the following:
• A description of the proposed action.
• For a conversion of an income trust to a unitrust, a copy of the unitrust policy.
• For a change in the percentage or method used to calculate the unitrust amount, a copy
of the unitrust policy or amendment or replacement of the unitrust policy.
• A statement that the person the notice is sent to may object to the proposed action by
stating in a record the basis for the objection and sending or delivering the record to
the trustee.
• The date by which an objection described above must be received by the trustee. This
date would have to be at least 30 days after the date the notice is sent.
8
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-700-7109
9
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-700-7703a
House Fiscal Agency HB 5110 as reported Page 4 of 11
 • The date the action is proposed to be taken and the date it is proposed to take effect.
• The name and contact information of the trustee.
The representation provisions of Part 3 of Article VII of EPIC would apply with regard to
notice and consent under these provisions.
A person could consent in a record at any time to a proposed action described above. A notice
required as described above would not have to be sent to a person that consents in a record.
Unitrust policy
In administering a unitrust under the new act, the trustee would have to follow a unitrust policy
adopted, amended, or replaced, as applicable, as described above. A unitrust policy would have
to provide all of the following:
• The unitrust rate or the method for determining the unitrust rate as described below.
• The method for determining the applicable value as described below.
• The rules described below that apply in the administration of the unitrust, including
both rules that are mandatory and optional rules that the trustee has elected to adopt.
Unitrust rate
Except as otherwise described below (“Special tax benefit”), a unitrust rate could be either of
the following:
• A fixed unitrust rate.
• A unitrust rate that is determined for each period using either of the following:
o A market index or other published data.
o A mathematical blend of market indices or other published data over a stated
number of preceding periods.
Except as otherwise described below (“Special tax benefit”), a unitrust policy could provide
one or more of the following regarding a unitrust rate that is determined for each period as
described above:
• A limit on how high the rate may rise.
• A limit on how low the rate may fall.
• A limit on how much the rate may increase over the unitrust rate for the preceding
period or a mathematical blend of unitrust rates over a stated number of preceding
periods.
• A limit on how much the rate may decrease below the unitrust rate for the preceding
period or a mathematical blend of unitrust rates over a stated number of preceding
periods.
• A mathematical blend of any of the unitrust rates determined as described above.
Determination of value
A unitrust policy would have to provide the method for determining the fair market value of
an asset for the purpose of determining the unitrust amount, including both of the following:
• The frequency of valuing the asset, which would not need to require a valuation in
every period.
• The date for valuing the asset in each period in which the asset is to be valued.
House Fiscal Agency HB 5110 as reported Page 5 of 11
 Except as otherwise described below (“Special tax benefit”), a unitrust policy could provide
methods for determining the amount of the net fair market value of the trust to take into account
in determining the applicable value, including one or more of the following:
• Obtaining an appraisal of an asset for which fair market value is not readily available.
• Exclusion of specific assets or groups or types of assets.
• Other exceptions or modifications of the treatment of specific assets or groups or types
of assets.
• Identification and treatment of cash or property held for distribution.
• Use of either of the following:
o An average of fair market values over a stated number of preceding periods.
o Another mathematical blend of fair market values over a stated number of
preceding periods.
• A limit on how much the applicable value of all assets, groups of assets, or individual
assets may increase over either of the following:
o The corresponding applicable value for the preceding period.
o A mathematical blend of applicable values over a stated number of preceding
periods.
• A limit on how much the applicable value of all assets, groups of assets, or individual
assets may dec