The Michigan Court of Appeals recently issued a decision that considered the scope of the probate court’s ability to appoint a special fiduciary. In re Trueman Harrison and Modesta Harrison Trust, No 368031, 2025 WL 272281 (Mich Ct App Jan 22, 2025) (unpublished).
By way of background, Michigan law recognizes the power of the probate court to appoint a special fiduciary to administer an estate or trust. The court’s power to appoint a special fiduciary is extremely broad and not limited to any particular circumstance. Clearly, this power is intended to be exercised in circumstances where the court has concerns about the administration of an estate or trust by the general fiduciary. However, the governing statute merely requires that the court must act “[u]pon reliable information received from an interested person, county or state official, or other informed source, including the court's files ...” MCL 700.1309(a).
In making the appointment, the probate court should specify the duties and powers of the special fiduciary. Id; MCR 5.204(B). The appointment of a special fiduciary automatically suspends the powers of the general fiduciary, unless the court directs otherwise. MCR 5.204(B). The court has discretion as to what notice to provide, if any, before it appoints a special fiduciary. MCR 5.204(A). The appointment may be for a specified or unlimited time period. MCR 5.204(B). So long as the special fiduciary remains in place, it is “an interested person for all purposes in the proceeding,” MCR 5.204(B), and therefore entitled to be served with papers filed by other parties.
In the Harrison Trust case, there was litigation between the trustee and the estate of a deceased beneficiary over whether the estate was entitled to share in the final trust distribution. The probate court ruled that the estate was entitled to 1/6th of the trust and ordered the trustee to make an interim distribution to all beneficiaries and amend her distribution schedule. When the trustee failed to obey, the court repeatedly sought to enforce compliance. Eventually, the court learned that the trustee was unable to make distributions because she had given the trust funds to her attorney for safekeeping, and the attorney had apparently embezzled the funds.
The personal representative of the estate of the deceased beneficiary asked the probate court to appoint a special fiduciary and suspend the trustee, and the probate court agreed. However, the court “noted that there was no county public administrator available for that purpose, and there might not be money available to pay a special fiduciary.” 2025 WL 272281 at *3. Therefore, the court appointed as special fiduciary the person serving as personal representative of the deceased beneficiary’s estate.
The suspended trustee appealed, arguing that her constitutional right to due process had been violated. The Michigan Court of Appeals disagreed: “Considering the extreme nature of the facts of this case, where the former trustee hired an attorney who appears to have embezzled all of the trust proceeds, who appears to have attempted to hide the embezzlement by repeatedly asking for adjournment of hearings that could have brought that issue to light, and who failed to distribute trust proceeds to beneficiaries despite multiple court orders directing her to make those distributions, we cannot say that the probate court abused its discretion by appointing a special fiduciary and suspending the powers of the trustee.” Id at *4. The former trustee also argued that the probate court should have appointed the person designated as successor trustee in the trust agreement as special fiduciary. Again, the appellate court disagreed, noting that there is no legal limitation on who the probate court may appoint as special fiduciary. Id at *6.
While the facts of this case were extreme, it is not uncommon for probate courts to appoint special fiduciaries in less extreme cases. Those acting as general fiduciaries for an estate and/or trust should be aware of the probate court’s ability to suspend and replace them whenever concerns arise as to the quality of its administration. Estate and/or trust beneficiaries should be aware of this remedy in situations where the general fiduciary’s administration is objectionable.
