You said yes to serving as trustee because someone you loved asked you to. Nobody mentioned the personal exposure. Now you are holding the checkbook, the beneficiaries are asking questions, and you are wondering whether your own house and savings are on the line.
The direct answer: yes, a Michigan trustee can be sued personally. The better news: almost every surcharge we see traces back to a step that was skipped in the first few months, and the Michigan Trust Code gives a trustee who gets advice at the start several ways to build a shield before a claim ever arrives. The time to hire a trust administration attorney is when you accept the job, not when a petition lands.
Yes, a Trustee Can Be Sued Personally
Under MCL 700.7901(1), any violation of a duty a trustee owes to a beneficiary is a breach of trust. Good intentions are not a defense. If a duty was owed and not met, the beneficiary has a claim.
When a court finds a breach, it can compel the trustee to act, order an accounting, suspend or remove the trustee, deny compensation, undo a transaction, and order the trustee to redress the breach “by paying money, restoring property, or other means.” That last remedy is a surcharge: a judgment against the trustee personally.
The measure of that surcharge is set by MCL 700.7902. A trustee who breaches the trust owes the beneficiaries the larger of two amounts: what it takes to restore the trust and its distributions to where they would have been without the breach, or any profit the trustee made because of it.
What you are not liable for. Michigan does not turn a trustee into an insurer of the market. Under MCL 700.7903(2), a trustee who has not breached the trust is not liable because trust property lost value, failed to produce income, or did not earn a profit. Liability follows a broken duty, not a bad year.
In our experience, the trustees who get surcharged are rarely the ones who set out to take something. They are the ones who treated the trust like a family checkbook and skipped the paperwork.
The Five Duties That Generate Most Claims
Loyalty. MCL 700.7802(1) requires a trustee to administer the trust solely in the interests of the beneficiaries. A sale, loan, or investment for the trustee’s own account, or one affected by a substantial conflict between personal and fiduciary interests, is voidable by an affected beneficiary. The statute presumes a conflict when the other side of the deal is the trustee’s spouse, child, parent, sibling, in-law, agent, attorney, or a business the trustee has an interest in. Buying the trust’s lake cottage at a “fair” price without court approval is the classic example.
Prudence, at your skill level. MCL 700.7803 holds a trustee to the standard of a prudent person dealing with someone else’s property, and it adds a rule that matters to business owners and professionals: if you have special skills, or were named trustee because of them, you have a duty to use them. Investments are measured against the Michigan prudent investor rule, which calls for reasonable care, skill, and caution.
Information. MCL 700.7814 requires a trustee to keep the qualified beneficiaries reasonably informed, to answer reasonable requests for information promptly, to send required notices within 63 days after accepting the trusteeship or learning that the trust has become irrevocable, and to send at least an annual report of the trust’s property, liabilities, receipts, disbursements, and the trustee’s compensation. Silence is the fastest way to turn a curious beneficiary into a petitioner. Our Trust Accounting 101 post covers what that report must contain.
Records and separate accounts. MCL 700.7811 requires adequate records and requires trust property to be kept separate from the trustee’s own. Commingling, even briefly, is a breach on its face and makes every later question harder to answer.
Distributions. Pay the wrong person or the wrong amount and you are exposed. And no matter how broad the trust’s grant of discretion, MCL 700.7815(1) says a trustee abuses that discretion by acting dishonestly, acting with an improper motive, or failing to exercise judgment in line with the trust’s terms and purposes. Our guide to making trust distributions without getting sued covers the documentation that protects you.
Four Ways to Build a Liability Shield
1. Written consents and releases. Under MCL 700.7909, a trustee is not liable for a breach that the beneficiary consented to, released, or ratified. The catch is in the exceptions: the release is worthless if it was induced by the trustee’s improper conduct or if the beneficiary did not know the material facts. Translation: a release signed on full disclosure is a shield; a release slipped in with the distribution check is not.
2. Court approval before you act. Michigan trusts run without court supervision by default, but a trustee can invoke the court on purpose. MCL 700.7201(3)(f) lets a trustee petition for instructions on a question of duty or power, and MCL 700.7802(2)(b) makes a conflicted transaction safe if the court approves it after notice to the interested persons. A trustee can also ask the court to allow an account, which binds the beneficiaries who were parties. For a sale to a family member or a distribution the beneficiaries dispute, an order entered before the fact is far cheaper than a surcharge hearing after it.
3. Reports that start the clock. MCL 700.7905(1)(a) bars a beneficiary from suing for breach of trust more than one year after being sent a report that adequately disclosed the potential claim and stated the time allowed to bring it. Without such a report, the window stays open for five years after the trustee leaves office, the beneficiary’s interest ends, or the trust terminates. A complete, candid annual report is not just a duty. It is the trustee’s statute of limitations.
4. A proposal for distribution. When the trust is winding up, MCL 700.7821(1) lets the trustee send the beneficiaries a written proposal for distribution. A beneficiary who does not object within 28 days loses the right to object, provided the proposal told them about that right and the deadline.
What the trust document can and cannot do. Many trusts contain an exculpation clause forgiving ordinary mistakes. MCL 700.7908 enforces those clauses with two limits: no protection for bad faith or reckless indifference to the trust’s purposes, and none if the trustee abused a confidential relationship with the settlor to get the clause inserted. A fiduciary who acts in reasonable reliance on the governing instrument is not liable for doing so. Read the instrument. Then follow it.
Hire the Lawyer at the Beginning, Not at the Petition
Every shield above is built in the first months of an administration: the 63-day notices, the separate account, the record that explains each decision, the annual report that starts the clock, the consent obtained before a conflicted sale. None of them can be built after a beneficiary has filed. That is why the trustees who never get surcharged are usually the ones who brought in counsel the week they accepted the job, and the cost of doing so belongs to the trust, not to you.
Legal fees for administering a trust are an administrative expense of the trust: MCL 700.7817(w) expressly lets a trustee employ an attorney to advise and assist with the trustee’s administrative duties and to act on that advice, and MCL 700.7709(1) entitles the trustee to reimbursement from trust property for expenses properly incurred in the administration. When the administration goes well, every dollar of legal work is paid by the trust as part of its administrative expenses, the same as the accountant and the appraiser.
The exception is the point of this post. A trustee found to have breached the trust can be ordered to pay fees personally: in a court proceeding, MCL 700.7904(2) reimburses a trustee who participated in good faith, but subsection (3) lets the court reduce or deny a trustee’s fees and expenses with respect to a breach of trust. So if a beneficiary does petition to surcharge or remove you, your interests and the trust’s have separated and you need counsel defending you individually. A trust administration attorney at the beginning is how you make sure that day never comes.
Frequently Asked Questions
Yes. A trustee who violates a duty owed to a beneficiary commits a breach of trust, and the probate court can order the trustee personally to restore what the trust lost or disgorge any profit made. Absent a breach, a trustee is not liable because investments declined.
Not by law, but a trustee is held to a prudent person’s standard and is personally liable for a broken duty. An attorney retained at the start handles the statutory notices, the records and reports, the distribution documentation, and any court approval, and those fees are an administrative expense paid by the trust, not by you personally, unless you are found to have done something wrong. Most breach of trust claims arise from steps a trustee did not know existed.
Speak With a Michigan Trust Administration Attorney
The best defense to a breach of trust claim is an administration that never gives one a foothold: prompt notices, clean records, documented decisions, and court approval when a step is contested or conflicted. That is what we do for trustees from the first week, and when the administration goes well the trust pays for it as an administrative expense, not you. If you have just been named successor trustee, call before you send the first notice or write the first check. If a petition has already been filed, call today.
Our probate and trust administration attorneys guide and defend 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., a partner at Boroja, Bernier & Associates PLLC, admitted to the State Bar of Michigan in 2013 (Bar No. P77079). Daniel focuses his practice on estate planning, probate and trust administration, and elder law and Medicaid planning for Michigan families.
