Do You Need A Michigan Living Trust?Jun 16, 2023
This article about Securing Your Michigan Assets with a Living Trust by experienced estate planning attorney and elder law attorney Nicole Wipp at the Family & Aging Law Center PLLC is not, and should not be construed as, legal advice. For living trust advice specific to your situation, contact us today.
living trust in Michigan
Estate planning is a critical part of life that can provide peace of mind and financial security. One aspect of planning that may benefit many individuals is the creation of a living trust. That being said, planning can feel overwhelming, especially with all the legal mumbo-jumbo commonly surrounding it.
One of the most common, yet misunderstood, terms in estate planning is “living trust.”
You may be wondering, "What is a living trust, and what does it offer to someone that a will does not?"
This article will explore the answer to that question and many more, such as providing clarity on a Michigan living trust, its potential advantages and disadvantages, and how smart planning can help you get the maximum benefits from it.
What Is A Living Trust In Michigan Used For?
In Michigan, a living trust can be a great addition to your estate plan. Living trusts are commonly used to avoid probate, reduce estate taxes, and protect assets from creditors.
Creating a living trust can provide peace of mind and financial security for individuals and their families. The key is first to understand the basics of Michigan living trusts, and then to speak to an experienced attorney that can help you make informed decisions about your estate planning.
What Are The Five Major Types Of Trusts?
There are many choices when it comes to trusts, and it would be impossible for this article to cover them all. However, the five most commonly discussed types of trusts include revocable living trusts, irrevocable living trusts, special needs trusts, charitable trusts, and testamentary trusts.
Revocable Living Trusts
A revocable trust is created and managed during your lifetime, allowing you to retain control of your assets.
Irrevocable trusts are not modifiable, but they can protect your assets from creditors or help you qualify for Medicaid if you expect long-term nursing home care or assistance to become necessary. An irrevocable living trust gives control of the assets to the trustee, which may provide tax benefits and protection from creditors. Finally, asset protection trusts can help protect your assets from legal judgments, creditors, and other financial risks.
Special Needs Trusts
Special needs trusts, meanwhile, allow you to provide assets to a family member without impacting their eligibility for government benefits.
Charitable trusts allow you to support charity causes you to believe in and may come with tax benefits.
Testamentary trusts are created in your will and go into effect after your death. Special needs trusts are created to provide financial support for individuals with disabilities. A testamentary trust is NOT a "living trust," in that it does not exist while you are alive. Rather, it springs into being after death, as it is created in the last will, and requires probate.
For this reason, having a testamentary trust in Michigan is unusual and would require very specific circumstances for it to be an appropriate planning instrument.
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What is the primary purpose of a revocable living trust?
A revocable living trust is a trust that is created while the person is still alive and can be modified in any way, or terminated at any time during the person or beneficiary's lifetime. Its primary purpose is to ensure that your assets are managed and distributed according to your wishes after your death, without the need for probate. This means that your assets will be distributed to your beneficiaries more efficiently and privately, without navigating the complex and often time-consuming probate process.
It is a legal document that allows you to transfer your assets to a trust during your lifetime so that you can manage and distribute your assets while you are still alive, and choose who manages them after your death. The trust is known as "revocable" because the creator or successor trustee can modify or revoke the trust at any time. A living trust may also help avoid probate, reduce estate taxes, and provide privacy for estate distribution.
What are the major disadvantages of revocable living trusts?
While living trusts offer multiple advantages, it's important to acknowledge the few potential disadvantages too:
Revocable living trusts offer no asset protection from creditors or the nursing home
A revocable trust is a part of your estate, which may not reduce estate taxes or protect your assets from recovery
A living trust may also cost more to set up initially and will require ongoing management fees in a few cases.
The bottom line: besides these disadvantages - most of which can be overcome by smart planning - having the right type of trust outweighs having a will, or not having any estate planning at all.
Does Having A Living Trust Help Avoid Probate in Michigan?
Yes, a living trust can avoid probate in Michigan.
The trust becomes the owner of your assets, and with many trusts, you can continue to manage your assets as yourself while you’re alive.
With a revocable living trust, during your lifetime, you may still buy, sell, or remove assets from the trust as per your needs.
When you pass away, your family will not have to go to probate court to distribute your assets. Your heirs will easily receive assets according to the rules and plans set out in the living trust document.
However, it is essential to ensure that all the trust assets are transferred to the trust during your lifetime, or it may be subject to probate. This process is known as trust "funding," and it is a crucial step in good planning.
Our office helps ensure that your accounts and other belongings are properly held by your trust in the funding process. Contact us today if you need assistance with trust funding!
It is also important to note that certain assets, such as retirement accounts, require special considerations when transferring to a living trust.
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A Living Trust In Michigan Is A Crucial Part Of Smart Planning
Good estate planning isn't just filling in the blanks but thinking through what is right for YOU and YOUR family. This is smart planning!
Your Michigan estate plan goes beyond living trusts. An estate plan is an important tool to minimize taxes and legal fees, to ensure your assets are distributed according to your wishes in the future, and to make various end-of-life decisions.
Overall, estate planning is the process of managing and distributing assets during your lifetime and after your death. It involves creating legal documents such as wills, trusts, and powers of attorney. A smart plan can provide peace of mind and financial security for individuals and their families by ensuring that what they have is distributed according to their wishes, reducing taxes, bypassing probate, and providing asset protection.
By understanding the Michigan Living Trust process, you can effectively plan and prepare for your family's future. Speaking with a lawyer knowledgeable about Michigan law will give you the best advice to help you create a living trust and achieve your goals.
Contact Us: We Can Help
If you are considering a living trust, working with an experienced law firm like ours can help you create a customized estate plan that meets your needs.
Our process helps you take the time that you need to discuss your options, ask questions, and make informed decisions to achieve your goals. Our office will work with you to understand your goals and how living trusts can assist with your overall success. Picking an experienced and trusted estate planning attorney ensures you create the right legal strategy to give you and your family the peace of mind you need.
We can help: contact us today!