Experienced Michigan Lawyers Focused On Trusts

A living trust is a trust that is created and takes effect during the grantor’s lifetime, holding assets and then distributing them to beneficiaries after the grantor’s death.

Also known as an inter vivos trust, a living trust is a popular way to avoid the probate process because assets become governed by a trust document while the grantor is still living.

Living trusts may be either revocable or irrevocable.

A revocable living trust takes effect during the grantor’s lifetime and then distributes assets after the grantor’s death. However, a revocable trust affords the grantor flexibility, allowing him or her to amend, alter or terminate the trust during his or her lifetime.

Because the grantor of a revocable living trust can still maintain control of the assets, the grantor is still considered the owner for tax purposes. Assets in a revocable living trust are also reachable by creditors or someone who successfully sues the grantor.

An irrevocable living trust takes effect during the grantor’s lifetime and then distributes the assets after the grantor’s death. An irrevocable trust cannot be amended, altered or terminated once it is created.

Unlike a revocable living trust, the grantor signs away his or her assets and is no longer considered the owner for tax purposes. While the permanent nature of the irrevocable trust doesn’t offer the flexibility of a revocable trust, it protects assets from the grantor’s creditors or someone who successfully sues him or her.

An asset protection trust is designed specifically to protect assets from the grantor’s creditors.

An asset protection trust has strict requirements that must be carefully complied with. While Michigan does not allow asset protection trusts, Michigan residents may be able to set up asset protection trusts in other states that allow them such as Alaska, Delaware, Nevada, Rhode Island and South Dakota.

A charitable remainder trust consists of assets that are designated for a charitable purpose and paid over to the trust after the expiration of a life estate.

A charitable remainder trust affords the grantor/donor tax benefits during his or her lifetime. Charitable remainder trusts are irrevocable.

A generation-skipping trust is established to transfer assets to a “skip” person, or a person who is more than one generation removed from the grantor.

A generation-skipping trust, also known as a dynasty trust, is used when the grantor wants to “skip” a generation when transferring assets. An example is when a grandparent wants to provide assets for his or her grandchildren.

There are a variety of unique situations where someone might consider a generation-skipping trust, which is designed to avoid certain taxes.

A life insurance trust consists of one or more life insurance policies payable to the trust when the insured person dies.

Irrevocable life insurance trusts can be useful in specific situations, such as when the beneficiary is disabled and has special needs or has serious problems with creditors.

A simple trust requires the trustee to distribute all of the assets to the beneficiaries upon the death of the grantor.

The purpose of a simple trust is to avoid the Michigan probate process.

In a complex trust, the grantor gives the trustee near-complete or limited discretion to decide when and how much in income or assets is distributed to a beneficiary.

Also known as a discretionary trust, the complex trust is a popular tool in estate planning because it allows the grantor to distribute his or her assets in a particular manner after he or she dies.

There are thousands of examples of a complex trust, but one is where the grantor does not want a beneficiary to receive assets until he or she reaches a certain age and is presumably more financially responsible. Perhaps the grantor wants the beneficiary to receive increasingly more money throughout his or her life? A complex trust can achieve this.

Discretionary trusts are also often used to help pay certain expenses for a beneficiary’s education or lifestyle.