A trust is a versatile tool designed to protect your loved ones, business and hard-earned legacy. If you are planning to set up one soon, you should understand the different types available. With this knowledge, you can choose the right trust that fits your family’s needs.
Revocable living trust
A revocable living trust is the most common option among families in Michigan. As the grantor, you can manage assets during your lifetime and transfer them to beneficiaries after death. It also avoids the delays and costs of probate.
Irrevocable living trust
By contrast, an irrevocable living trust lets you permanently transfer ownership of assets to a trust. Once created, you generally cannot amend, modify or terminate the trust.
Domestic asset protection trust
You may consider a domestic asset protection trust (DAPT) to help you place assets into a trust for your own benefit while shielding them from future creditors. This can be beneficial if you own a business and plan to shield your personal wealth from professional risks.
However, it is important to note that protection is not absolute. Creditors can challenge transfers within a 2-year limitations period, and protection does not extend to child support or certain marital obligations.
Special needs trust
If you are a parent of children with disabilities, funding a special needs trust is vital. This type of trust allows you to provide for your child’s quality of life without risking disqualification from government benefits, such as Medicaid and Supplemental Security Income (SSI).
Create a trust with legal assistance
After learning about the different types of trusts, you probably have an idea of what you should choose. But before you take action, consider seeking legal advice.
Michigan law is specific about how trusts must be signed and funded. Even minor oversights can lead to significant legal hurdles. To ensure your plan stands up to legal scrutiny, it is wise to sit down with an estate planning attorney.