Trusts can be very useful, but they are not for everyone. Here, commonly asked questions are answered. If you are thinking about making a trust, already have a trust and have questions, or are simply unsure of what to do about an estate plan, contact our lawyer for trusts in Troy, Michigan to schedule a consultation and get answers to your specific questions.
What is a Trust?
A trust is a fiduciary relationship wherein one person or entity, known as the trustee, has custody and control over certain assets. The custody and control of the assets are given to the trustee by the settlor (creator) of the trust. The trustee has the responsibility of managing the assets according to the terms of the trust and for the benefit of the person, persons, or entity the trust was created for. The person, persons, or entity benefiting from the trust is known as the beneficiary. In many cases, the settlor, trustee, and initial beneficiary will be you, the creator of the trust.
There are different types of trusts designed for various situations, like:
- Revocable trusts
- Medicaid Asset Protection Trust to plan for the costs of long-term care in a nursing home
- Irrevocable trusts
- Charitable trusts
- Special Needs Trusts
- Spendthrift trusts
- Testamentary trusts
Trusts can be very specific, or they can be broad. People opt for different ones to satisfy different purposes.
When Do I Need a Trust in Michigan?
Trusts can be used at any age and for a variety of reasons. Some of the most common reasons people will benefit from the use of a trust include:
Inheritance
If you have inherited a large number of assets, it is a good idea to look at a trust to manage them and keep them safe. It is also beneficial to place your own assets in a trust to protect your children's inheritance.
Special Needs Family Member
If you have a child or other member of your family who has special needs, a trust is a common way to protect any assets they may have access to. The trustee will ensure the proceeds of the trust are used for the special needs family member and not for some other purpose.
Privacy Matters
The terms of trusts, unlike Wills, are not made public. Trusts are a good choice if you do not want the details of your financial matters made public.
What are the Benefits of a Trust in Troy, Michigan?
Benefits of a trust vary, but can include:
- settlement of your estate outside of the probate court process after death in an efficient manner with a faster distribution of the trust assets to your heirs
- Keeping certain assets judgment-proof
- Providing income to a special needs family member without having that income render them unable to receive Medicaid or Supplemental Security Income
- Tax benefits
- Ability to avoid a probate court conservatorship in the event of your incapacity
There may be other benefits available to you depending on the circumstances of your situation.
What are the Disadvantages of a Trust in Troy, Michigan?
Some trusts are irrevocable, meaning that once created, the settlor is unable to change the terms of or revoke the trust in its entirety. This loss of control is a disadvantage to some. That said, the trust may still be terminated in some circumstances.
Fortunately, it is possible to create revocable trusts (trusts that can be changed), but these types of trusts vary in the purpose that may not reflect the reason you created an irrevocable trust.
Another disadvantage is the amount of paperwork involved in setting up a trust and the costs associated with creating and managing it.
How Do I Terminate or Modify a Trust in Michigan?
The ability and process to terminate or modify a trust may depend upon the terms of the trust itself. Some, like a revocable living trust (which most people choose to use) make the process easy, and the settlor may retain the ability to terminate or amend the trust up until the moment of their death. Others are formed in such a way that once they are formed, termination or amendments require a complex process and, in the end, may not be eligible for termination or modification. However, long-term care Medicaid Asset Protection Trusts can be drafted so the Settlor can change who the trustee is, who the ultimate beneficiaries are, and how the assets in the trust are invested. These are the parts of the trust that some people want to change after creating the trust.
If I Make a Trust in Michigan, Do I Still Need a Will?
A Will is always a good idea. It may seem confusing to need a Will and a trust, but reasons exist to have both, even though the Will may never be used. Here are two important reasons:
- Guardian for minor children. You cannot name a guardian for minor children in a trust. So if you have children under the age of 18 years, you should designate a guardian in a Will.
- Property not transferred to the trust. Trusts are created all the time, but Settlors sometimes forget to transfer assets they obtain after creating the trust to the trust. If this property is not in the trust, it will not be disbursed by the trust but through probate. A Will helps ensure everything goes where it's intended and is not challenged in probate court.
How Much will Setting Up a Trust Cost?
The costs to set up the trust vary and depends on the legal services you need and the extent of those services. The more complex the trust, the likelier the costs will increase. Plus, some estate planning lawyers charge by the hour while other charge a fixed rate. Knowing what's included and excluded in those rates will also inform what the total costs of the trust are. Attorney Andrew Byers always quotes a firm flat fee at the initial consultation so that you know the cost before you decide to proceed.
Do I Need a Trusts Attorney in Michigan?
Setting up a trust is a sound strategy whether doing it for financial reasons or ensuring your beneficiaries have all the resources they will need after you are gone. While there are federal income and estate tax laws that apply to estate planning, trusts and other estate planning is controlled by the laws of each state and is therefore state specific. That is one of the problems with the do-it-yourself online services, which claim to provide software that works in all 50 states. Usually in small print at the bottom of the website, all of those services state they do not provide legal advice, are not a substitute for an attorney, and are not guaranteed to work, which is all you need to know about those programs. One of the challenges with an estate plan is that problems are not discovered until after the settlor passes away, which is when it is too late to fix them.
Legal provisions and procedures have been developed over decades in Michigan that apply to trusts and an experienced estate planning attorney will know how to apply those provisions and procedures to your situation so that you do not end up with an estate plan this is inadequate, too complex, or that does not work. The attorney is legally responsible for drafting a trust that meets your needs, just as a doctor is responsible for correctly diagnosing a health problem. To make sure your trust works and cannot be challenged in court, it is always a good idea to have an estate planning attorney draft the trust and conduct the signing meeting to make sure it is executed and witnessed properly.
The multiple estate planning options can get confusing. Plus, anytime you deal with finances, it's always good to have someone with experience follow up. Also, we can help you:
- Choose an appropriate trustee
- Update documents as needed and when appropriate
- Avoid probate
- Protect assets
- Achieve estate planning goals
Contact a Trust Lawyer in Troy, Michigan Today
At the law office of Andrew Byers, our trusts attorney in Michigan will help identify what trust works best in your unique circumstances. There are many types of trusts that can be created to suit your needs, and each has their benefits and disadvantages. We can help you weigh the pros and cons against what your specific needs are. Contact us at (248) 469-4261 to schedule a consultation and learn what type of trust can complement your estate plan today.