A Michigan trust can hold retirement accounts, a business interest, a portfolio, and pretty much anything else of value. For many families the house is still the largest asset in it, and if it is not handled correctly it can create more trouble for the successor trustee than everything else in the trust combined.
You face three decisions: sell it or distribute it, keep it safe while it sits, and get the transfer right so the tax bill does not permanently jump.
A trustee’s power to sell is broad. Unless the trust says otherwise, you may sell trust real estate without the beneficiaries’ permission, MCL 700.7817(y), and may distribute real estate from the trust in undivided shares instead. MCL 700.7817(gg). What you do not have is permission to choose carelessly.
Step One: Confirm the House Is Actually in the Trust
This starts at the register of deeds, not the trust binder. Assessor and GIS records are not title records. If the last recorded deed conveys the property to the trustee of the trust, title passed to you at death and what the outside world needs is a certificate of trust, not the trust itself. MCL 700.7913. If it still shows the settlor as an individual owner, the house was never funded and title has to move through probate first, which is a different problem than this one. Either way, a Property Transfer Affidavit goes to the assessor within 45 days, and the statute puts that duty on the transferee. MCL 211.27a(10).
When the Trustee Needs a Real Appraisal, Not a Market Analysis
Two separate jobs require a value, and a broker’s opinion does not do either one.
The first is tax basis. Property acquired from a decedent takes a new income tax basis equal to its value at death, IRC 1014, so the figure you establish now decides the beneficiaries’ capital gains when they eventually sell. Set it too low and they get a tax bill years later that nobody connects back to this decision.
The second is defense. You hold this property under a prudent-person standard, MCL 700.7803, and you will be asked whether the price was reasonable. A written appraisal by a licensed appraiser, valued as of the date of death, answers both questions at once, and the fee is an expense of administration the trust pays. MCL 700.7817(v). A comparative market analysis is free, which is exactly the problem: it is a marketing document prepared to win a listing, and it is not evidence of prudence.
Selling a House in a Michigan Trust Without the Beneficiaries’ Consent
Usually you can, but read the trust first. If it gives the property to a named beneficiary, your job is to convey it, not market it, and a sale is a breach no matter how good the price.
Absent a specific disposition, the discretion is real. MCL 700.7816(1)(b) gives a trustee the powers an unmarried competent owner has over his own property, and MCL 700.7817(gg) authorizes distribution in kind, including an undivided interest. That matters when a property will not sell: deeding each beneficiary a fractional share moves the asset out of the trust and ends your exposure to it. What you cannot do is hold the house indefinitely because nobody will decide, since a property producing no income while consuming taxes and maintenance is a wasting asset.
When the Beneficiaries Cannot Agree on Whether to Sell
One wants cash, another wants to keep the cottage, and you are in the middle holding both the decision and the personal exposure. Michigan offers two ways out, and neither is litigation.
The interested persons can sign a binding nonjudicial settlement agreement, which can direct the trustee to act or refrain from acting and approve the accounting. MCL 700.7111(3). A buyout fits there: one beneficiary takes the house, the others take cash. It cannot violate a material purpose of the trust and cannot be used to modify or terminate it. MCL 700.7111(2). Where consent is not available, ask the probate court for instructions, which a trust proceeding expressly covers. MCL 700.7201(3).
Watch one thing on a buyout: a sale to your own spouse, descendant, sibling, or parent is presumed to be affected by a conflict, MCL 700.7802(3), and a transaction affected by a substantial conflict is voidable by an affected beneficiary unless the trust authorized it, the court approved it after notice, or the beneficiary consented. MCL 700.7802(2). Get it authorized or approved before it closes.
How the Wrong Transfer Permanently Raises the Property Tax Bill
Property tax uncapping is the expensive part of this decision. Since Proposal A passed in 1994, the taxable value of Michigan real property cannot rise in a year by more than the lesser of inflation or 5 percent, so long as the property does not change hands. MCL 211.27a(2). A home held since the 1990s can carry a taxable value far below half its worth. A transfer of ownership ends that: the next year resets to the state equalized value, 50 percent of true cash value. MCL 211.27a(1), (3). Uncapping can add thousands a year, and it does not come back down.
Two exceptions matter here. A distribution to the sole present beneficiary, or that beneficiary’s spouse, is not a transfer of ownership. MCL 211.27a(6)(d)(i). And a distribution of residential real property to the settlor’s spouse, parent, child, grandchild, sibling, or their spouses is excluded, so long as it is not used for a commercial purpose afterward. MCL 211.27a(6)(d)(ii), (7)(v).
The details are where families lose money. That relative list is exhaustive: a niece, a nephew, a cousin, an unadopted stepchild, and an LLC the children form to hold the cottage are not on it. Renting residential property for fewer than 15 days in a calendar year is expressly carved out of what counts as a commercial purpose, MCL 211.27a(11)(c), so a week of summer rental does not cost the cap but a cottage rented all season does. And the exception must be provable: Treasury or the assessor can demand proof within 30 days, with a $200 fine for not responding.
Whether the family keeps the tax cap is decided by whose name goes on the deed. Once it is recorded, that answer does not change.
Frequently Asked Questions About Michigan Trust Real Estate
Generally yes. Unless the trust requires the property to go to a particular beneficiary or conditions a sale on consent, a Michigan trustee may sell trust real estate without the beneficiaries’ agreement. MCL 700.7817(y). The trustee still owes prudence and impartiality, and should document why the sale serves the trust.
Not always. MCL 211.27a excludes a distribution to the sole present beneficiary or that beneficiary’s spouse, and a distribution of residential property to a defined list of the settlor’s close relatives not used commercially afterward. Sales to unrelated buyers, and distributions outside those exceptions, uncap it. Because the answer turns on who receives the property, decide before the deed is signed.
Speak With a Michigan Trust Administration Attorney
A deed recorded to the wrong person, an appraisal never obtained, a distribution made without checking the uncapping consequences: each costs the beneficiaries money, each exposes the trustee personally, and each is avoidable with advice before the transfer, which the trust ordinarily pays for as an expense of administration.
If you are a successor trustee holding a house, a cottage, or farmland, call before the deed is prepared. Our probate and trust administration attorneys advise trustees across Macomb, Oakland, and Wayne Counties and throughout Southeast, Central, and Mid-Michigan. To schedule a consultation, call Boroja, Bernier & Associates at (586) 991-7611.
About the Author
Daniel Boroja, Esq. is a founding partner of Boroja, Bernier & Associates PLLC, where he leads the firm’s estate planning, probate and trust administration, and elder law practice. He has practiced Michigan estate and trust law since 2013 (Bar No. P77079).
