Michigan: At What Net Worth Do I Need A Trust?

estate planning trusts Mar 29, 2024
revocable living trust

This article by estate planning and elder law attorney Nicole Wipp at the Family & Aging Law Center PLLC about estate taxes, high net worth individuals, and the estate planning process for all Michigan families is not intended to be legal advice. It is for general informational purposes only. For advice on your legal situation in Michigan, contact us today at (248)278-1511.

If you've started thinking about your assets and how you want to distribute them among your loved ones, you might wonder what kind of estate planning you need. Inevitably, one of the questions is: should you have a trust?

You may have heard that trusts are only for high-net-worth families, but that's untrue. In Michigan, trusts can benefit anyone, regardless of their net worth.

Estate planning can initially seem intimidating, especially if you're unsure where to start. With so many options available, it's natural to wonder if you need a trust, especially if you don't consider yourself a high net worth individual.

The truth is, there's no one-size-fits-all answer to this question, and it largely depends on your personal financial situation and goals. In this blog post, we'll explore some common questions you may have about trusts and estate planning in Michigan.

Are Trusts Only For High Net-Worth Families?

Trusts are not only for high-net-worth persons. Anyone can benefit from a trust, regardless of their total assets. Trusts can help you bypass probate, minimize taxes, and ensure your assets are distributed according to your wishes. You may also want to consider a trust if you have a blended family, minor children, a family member with special needs, a business, or if you want to protect assets from nursing home poverty.

When many people think of trusts, they picture ultra-wealthy families passing down generational wealth or heirs with millions of dollars in assets. While it's true that trusts can benefit high-net-worth individuals, they're certainly not exclusive to them.

Most Americans Can Benefit From Having A Trust

Trusts can be a valuable tool for many people, including those who want to pass down specific assets to beneficiaries, protect their legacy and beneficiaries' interests, and reduce taxes and fees related to estate settlement.

Ultimately, trust creation is a deeply personal decision that should be made in consultation with a qualified legal professional. Your attorney can help you determine whether a trust is right based on your goals, assets, and financial situation.

minimizing estate taxes

Bottom Line: Trusts Are Useful For Anyone With ANY Assets

Trusts are not just for the wealthy. Anyone can set up a trust, and it can be useful for anyone looking to protect their assets. Trusts are just one of many estate planning tools that you can use to protect your assets and ensure they're distributed according to your wishes.

Whether you're looking to provide for your family after you're gone, want to ensure that your assets are used for a specific purpose, such as charity, or you just want to avoid probate, a trust can help. It may be that you need a revocable living trust, but you may need an asset protection trust, a Medicaid trust, or an irrevocable trust. The best way to find out? Contact us today! (248)278-1511

What Is Considered A High Net Worth Estate?

Generally, a high-net-worth estate exceeds the current federal estate tax exemption amount, which varies yearly. Effective January 1, 2024, the federal estate and gift tax exemption amount increased from $12.92 million to $13.61 million per individual (a combined $27.22 million for a married couple), representing an increase of $690,000. Any individual estate less than this amount would not be subject to federal estate tax.

Most Americans do not need to worry about federal estate taxes if their estate is below this threshold.

What Is The Estate Tax Limit In Michigan?

There is no estate tax in Michigan. This means you won't have to worry about paying additional taxes if your estate is worth more than the federal estate tax limit. However, you may be subject to other taxes, such as gift taxes, and of course, most people have income taxes from accounts with qualified funds, such as 401k or IRA accounts.

If your estate is large enough to trigger estate tax, you may also want to consider gift tax planning. Michigan does not have a separate tax for gifting, but gifts made within three years of death may be subject to estate tax. Certain trusts can help you make lifetime gifts without triggering a tax or impacting the estate tax exemption.

Trusts Are About More Than Estate Taxes

Even though many people think trusts are all about avoiding estate taxes, that couldn't be farther from the truth. The reality for most Americans is that estate planning strategies are about avoiding the probate process. However, there are additional considerations: ensuring that assets are organized and centrally located, avoiding family conflict, providing for loved ones, especially those that may be vulnerable, and much more.

tax planning

What About Asset Protection From Nursing Home Poverty?

"Regular people" - people who do not have a lot of money and especially who do not have a high net worth estate, are at more risk than high net worth individuals when it comes to the high cost of long term care, particularly nursing home care.

As an elder law firm, this is where we can be especially helpful to you, because it may be that a special type of asset protection trust is right for you. How do you know? The only way is to have us look at your situation and give you specific advice!

As An Experienced Estate Planning Attorney, I Can Help

As you can see, whether or not you need a trust largely depends on your financial situation and goals. While trusts may benefit high-net-worth individuals, they're not exclusive to them and can be valuable tools for a wide range of people.

Working with a qualified legal professional to create a comprehensive plan that protects your assets, legacy, and beneficiaries' interests is most important for many families. This may include strategies to reduce taxes and fees, but you should also consider your long-term financial and personal goals. I have been doing this work for over a decade; my staff is highly competent, friendly, and helpful. We know what to do: all you need to do is contact us today!

Call Us Today At (248)278-1511

If you're interested in exploring whether a trust is right for you, it's important to work with a qualified legal professional because bad advice is everywhere. That's where my firm comes in! We can help you determine the best strategy based on your estate's value, goals, and other factors, and ensure that your estate plan protects your legacy and beneficiaries' interests.