A living trust in Michigan can be a valuable estate planning tool that gives you control over your assets and which offers privacy. Also called an inter vivos trust, a revocable living trust allows you to use your assets while they are in trust during your lifetime.
Living Trusts in Michigan
The grantor is the person who creates a Michigan living trust. When you set up a trust you transfer ownership of your assets into the trust and they are then managed by the trustee. Anyone can be your trustee, but it is most common to name yourself. It’s then necessary to choose a successor trustee to step in after your death. After you die, the trustee continues to manage assets and distributes them to the beneficiaries in accordance with the terms of the trust. Revocable living trusts can be changed at any time you wish, in contrast to irrevocable living trusts which become permanent.
For a will to become effective, it must be probated, or approved by a court. This procedure takes months and involves the expense of an executor, attorney, and court fees. The heirs do not receive their inheritance until after probate is concluded. With a trust however, there is no probate needed. There is no court process at all and assets in a trust can be distributed more quickly. Michigan has enacted the Uniform Probate Code, which makes its probate process more efficient than some, but still requires months to be finalized. If you have an estate worth less than $15,000, you are eligible for a small probate procedure which takes only 18 days. In this situation, this is more cost effective than a trust.
Do I Need a Living Trust in Michigan?
When deciding if a living trust is right for you, you should weigh all the benefits and limitations. A Michigan living trust provides privacy in a way a will cannot. A will is probated and made part of the public record. A trust remains private and does not need court approval and is not made public. Trusts are also much more difficult to contest than wills, providing added security that your wishes will be carried out.
Another benefit of creating a living trust in Michigan is the control it offers. During your lifetime, you have absolute control of the assets in the trust. You live in your house and can spend, invest, give away, or do what you wish with your assets. After your death, the trustee will continue to manage the assets and disburses them only as you have specified. You can choose to slowly distribute your assets over time or at chosen dates such as the beneficiaries’ milestone birthdays. A will distributes assets once probate is over and does not allow you to manage your assets in the future.
A revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary for you to have your financial life managed for your benefit.
Living Trusts and Estate Taxes in Michigan
Living trusts have many benefits, but avoiding estate taxes is not one of them. There is no estate tax in Michigan, but federal estate tax applies to estates valued at over $5 million. It is possible to avoid estate tax with a carefully constructed QTIP trust (also known as an AB or marital trust) which passes assets from a spouse to the surviving spouse. Living trusts also do not shield assets from Medicaid spend down or from creditors.
How to Create a Living Trust in Michigan
To create a living trust in Michigan, you prepare the trust document then sign it in the presence of a notary. The final step is to transfer assets into the trust, funding it. Living trusts are a popular estate planning tool. A living trust can provide many benefits and may be a wise choice for you.
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