Attorneys prepare trusts to accomplish a wide array of goals in Michigan. Many people are familiar with the revocable living trusts established to avoid probate, but other types of trusts can serve many different purposes with an overarching goal of protecting assets from unnecessary waste. Despite their reputation as a tool used only by the very wealthy, trusts can benefit people in a variety of economic situations.

It is important to ensure that your trust coordinates with other aspects of your estate plans. If you own a business, your trust should also align with your plans for business succession.

At Inhulsen Law, we prepare custom trusts designed with your specific goals in mind. Because of our extensive experience with commercial law, we can provide our clients with a unique level of understanding when it comes to management of trust assets and other aspects of trust administration.

Understanding Trusts in Michigan

A trust is an artificial entity set up to hold property for the benefit of one or more people known as beneficiaries. Putting property in trust protects it in certain ways. Some trusts are more flexible than others which makes them easy to use and change, but these trusts offer less protection.

Trusts start out empty until someone, usually the person who created the trust, transfers property into the trust. From that point on, the property is managed by the trustee. Because the property is held in the trust for the beneficiary, the trustee has a duty to manage trust property in a way that is advantageous to the beneficiary rather than in a way the benefits the trustee personally. This is a fiduciary duty, and it is sacred under the law. If a trustee acts in a way that serves their own interests instead of the beneficiary’s interests, the beneficiary can sue the trustee for breach of duty.

Revocable Living Trusts

When a trust is set up as revocable, the person who created it can easily change the terms or cancel the trust entirely. They can remove property from the trust at any time, so this type of trust is very flexible.

The most common reason that people establish revocable living trusts is so that they can enable their property to pass to loved ones without the need to go through the Michigan probate process. With this type of trust, the creator of the trust usually also serves as the primary trustee and enjoys the use of the property as the primary beneficiary. This allows them to use the property in the trust just as they did before the trust existed.

Where the trust proves valuable is in situations when the trust creator passes away or becomes incapacitated. At that point, an alternate trustee can step in to manage all assets in the trust. This eliminates the need for probate. It also allows trust property to pass directly to alternate beneficiaries after the death of the primary beneficiary.

If the assets were not in a trust or set up to pass directly in some other way, they would become part of an estate and the probate court would need to oversee the distribution of the assets, which is a lengthy and expensive process. People set up revocable living trusts to prevent their loved ones from having to deal with the legal hassles and costs of probate.

Irrevocable Trusts

When a trust is irrevocable, it is difficult if not impossible to change the terms. Once someone transfers property into the trust, they lose control over it and they cannot remove that property again. The trustee will use the trust property to fulfill the purposes of the trust.

Why would people give up control and ownership of their property? Because moving assets into a trust provides a means to protect those assets from a variety of risks. To understand how that works, it is helpful to consider some examples of different types of irrevocable trusts.

• Special needs trusts hold assets for individuals who receive means-tested benefits such as Medicaid. If these individuals owned the assets outright, they would lose Medicaid, SSI, and other benefits.

• Medicaid planning trusts enable individuals to qualify for Medicaid long-term care benefits without spending all assets on care needs.

• Education trusts provide support for the academic goals of a loved one.Spendthrift trusts protect assets for beneficiaries who are still learning money management skills. Their creditors cannot reach assets held in the trust.

• Charitable lead and charitable remainder trusts reduce estate tax liability while providing benefits to loved ones and favored charitable causes.

• Asset protection trusts protect assets from predatory creditors, lawsuits, and other potential losses.

To know whether an irrevocable trust could benefit your family or business, it is helpful to schedule an appointment to review the big picture of your situation and your goals for the future.

Talk to Us About Creating or Administering a Trust in Michigan

If you’d like to learn more about setting up a trust or if you need assistance administering a trust in Michigan, the team at Inhulsen Law is ready to assist. Whether you are gathering information and asking questions or you are ready to get started, we invite you to contact us to learn more about the ways we can help.