A revocable trust’s liability for claims against the decedent’s insolvent estate; MCL 700.7506(1)(b); MCL 700.7605(1); Effect of the trust being rendered irrevocable by the decedent’s death; Whether trust assets in the form of 401(k) & life insurance proceeds are exempt under MCL 700.7605(2) or (4); MCL 500.2207(2); “Executors or administrators”

The court held that while the trust at issue was rendered irrevocable upon the decedent’s (Jennifer) death, because it was revocable by her up to her death, all the property held or proceeds received by the trust were “subject to creditor claims that cannot be satisfied by her estate subject to the exceptions stated in MCL 700.7605(2) through (4).” But it also held that the trust assets at issue, 401(k) and life insurance proceeds, were exempt from creditor reach under MCL 700.7605(2) and (4), respectively. The probate court ruled that the life insurance proceeds were subject to creditor claims but that the 401(k) proceeds were exempt. The Court of Appeals, in a published opinion, affirmed as to the life insurance proceeds but reversed as to the 401(k) proceeds. On appeal, the court first considered how it “should categorize a trust and its property—including assets that are payable to the trust upon the death of the settlor—where the trust was revocable by the settlor but can no longer be revoked following the settlor’s death.” It concluded that the text of the relevant “statutes relies on the trust’s status as a ‘revocable trust’ at the time of the decedent’s death rather than at any other point in time. To hold otherwise would require [it] to read additional words into each statute, which” it cannot do. Turning to the exemption issue, the court found that because “MCL 700.7605(2)’s exemption from Subsection (1) declares that ‘all payments from’ a 401(k) plan ‘shall not be considered to be a trust described in subsection (1),’ the Legislature exempted such payments from the claims of creditors of a deceased settlor. The disbursement from Jennifer’s 401(k) plan to her revocable trust is necessarily one of those payments exempt from creditor claims.” As to the life insurance proceeds, the court disagreed “with the probate court and the Court of Appeals in concluding that a trustee is ‘akin to an executor or administrator.’ A trustee, therefore, is not excluded as a protected beneficiary under MCL 500.2207(2).” It held that this statute “places life insurance proceeds outside the reach of the insured-decedent’s creditors unless the proceeds are paid to their estate (i.e., to ‘the insured’ or their ‘executors or administrators’). This falls within MCL 700.7605(4)’s exemption for trust proceeds that would be outside the reach of creditors if ‘paid . . . other than to the settlor’s estate.’”