Michigan Construction Trust Funds: Segregation and Control
Michigan law does not require a separate bank account for every construction project, but contractors must protect project funds and be able to show where the money went.
This article provides general information, not legal advice. Michigan trust- fund obligations depend on the project, contracts, payments, and parties involved. Consult qualified Michigan counsel about your circumstances.
Michigan's Building Contract Fund Act—commonly called the Michigan Builders' Trust Fund Act—treats money paid to a contractor or subcontractor for building construction as a trust fund. The contractor or subcontractor receiving the money becomes its trustee.
The trust benefits the person making the payment as well as contractors, laborers, subcontractors, and material suppliers. Michigan courts describe the Act's civil remedy as an additional protection for participants in private construction projects, separate from construction-lien rights.
The practical rule for a general contractor is straightforward: project funds cannot be appropriated to another purpose before laborers, subcontractors, and material suppliers engaged for that improvement are paid. Under MCL 570.153, using the money before amounts due or to become due are paid is evidence of intent to defraud. Violations can support civil claims, and the Act also provides criminal penalties.
Does Michigan require a separate bank account?
No. The three-section Act does not prescribe a special form of accounting or expressly require a separate trust account for each project. As Simon PLC explains, commingling construction receipts in one bank account is not automatically a violation.
That does not make commingling low risk. The obligation remains tied to the specific improvement even when the cash shares an account with money from other jobs. Michigan courts have explained that the Act was designed to stop contractors from paying obligations on older projects with funds received for new ones.
If a laborer, subcontractor, or supplier remains unpaid, the contractor may need to prove how the project's receipts were used. A pooled operating account can expose transactions from across the business to scrutiny and make that proof much harder. Separate accounts are not the statutory test, but they create a cleaner record of compliance.
How Buildplus supports segregation
Buildplus gives a general contractor a dedicated account for each project plus a separate company operating account. The project accounts are opened in the contractor's business name, so the GC keeps control of routine payments without placing an outside fund-control company between the project and its trades.
That structure supports Michigan trust-fund discipline in three practical ways:
- Project receipts stay identifiable. Owner payments and construction draws land in the account assigned to the improvement that generated them.
- Payments stay connected to the work. Transactions can be tied to the project's budget, expenses, invoices, payments, and subcontracts.
- Company cash stays distinct. A separate operating account helps prevent project funds from quietly covering another job or an unrelated business expense.
Michigan may not mandate this banking structure, but dedicated project accounts reduce the tracing problem created by commingling. They make it easier to answer the question that matters when a payment dispute arises: what happened to the money received for this project?
What is Buildplus?
Buildplus is the payments, expenses and invoicing platform built for contractors running cost-plus jobs. Every payment, swipe and reimbursable expense stays tied to the project it belongs to.
Buildplus supports compliance; the contractor owns it
Buildplus does not determine whether a receipt is covered by the Act, whether a claimant is a protected beneficiary, or whether a particular payment is legally permitted. It also does not decide when a contractor's fee or profit may be transferred out of a project account. Those questions depend on the statute, the contract, the project's obligations, and the facts.
The contractor remains the trustee and must classify transactions correctly, preserve supporting records, and pay protected project participants as required. Buildplus supplies the financial structure: separate project accounts, project-linked records, and an auditable transaction history. For a Michigan GC, that makes responsible fund handling easier to operate and easier to show.