Trusts

What is a Trust?

A trust is a document that tells a Trustee how to distribute your assets. That’s it. That’s the whole ballgame. There are particulars and requirements, but pretty much it’s simply this.

A trust is a contract. You give your property to the Trustee, the Trustee complies with the terms of the trust contract (the “Trust”). The Trust will tell the Trustee how to hold onto assets, how to distribute assets, who to distribute them to, and when.

Should my Trust be Revocable or Irrevocable?

Most people get a revocable trust. A revocable trust is one that you can “edit” by adding property to it, taking property out of it, or by changing the terms of the trust contract. When you die, your revocable trust becomes irrevocable. An irrevocable trust can receive property, but you can’t take property out of it without the involvement of the Trustee, and you can’t really change the terms of the trust contract.

A Revocable Trust (or a “living trust”) is a great tool to avoid probate court. So long as you title your assets to the trust (called “funding” your trust), your assets will be distributed according to the terms of the trust contract. This avoids your family going to Probate Court because you only had a Will, or because you didn’t have an Estate Plan at all. Lack of an Estate Plan results in Probate Court, where the Court follows the rules of Intestate Succession.

An Irrevocable Trust is a great tool to avoid probate court and to intentionally make you look less wealthy on paper. Looking less wealthy on paper is valuable for people who have a large amount of wealth (over $15 million) to avoid Gift Taxes. It is also valuable for people who may receive means-tested benefits from government programs: however, these programs often have particular rules that make drafting a trust a very particular and important project. These trusts can be useful in Medicaid Planning and in Special Needs Planning. Finally, it is valuable for people who want to protect themselves from certain creditors with a Michigan Domestic Asset Protection Trust.

How do I Fund my Trust?

I’m so glad you asked that Question! Trust funding is one of the most important steps in the process, and it is often overlooked. This is because an attorney cannot do everything that needs to be done to fund your trust fully. While we support you and answer questions and draft deeds to fund your trust, you will have to take the lead on changing beneficiaries to your financial accounts. An estate plan can fail when the assets aren’t titled to the trust properly, sending financial accounts through Probate Court and defeating the purpose of the estate plan in the first place.

Trust assets are only those assets which are titled to the Trust. Read that again. Trust assets are only those assets which are titled to the Trust. This means that you need to take the appropriate steps to put your assets into the name of the trust by either retitling those assets to the trust, or making the trust a “pay on death” beneficiary of your trust. For most people, putting their spouse as the primary beneficiary of their financial accounts, then their trust as a contingent beneficiary, is the way to go. For homes, deeding the home to the trust - either immediately or by using a ladybird deed upon your death - is the way to go.

An experienced attorney can help you figure out the right trust for you, and help you navigate making sure it is funded. Reach out today