Guide to Estate Planning Trusts in Michigan
According to survey results, most Americans believe that estate planning is important, but only 57% of people have a will.
Trusts and estate planning are highly important responsibilities to take care of. If left unattended, an intestate death can result in unmanageable costs for family members as well as time-consuming legal complications.
Nobody wants to leave their affairs in a mess, or cause their loved ones to be left in the middle of a legal battle.
Fortunately, estate planning does not need to be difficult. Read on to learn more about estate planning trusts, and the different options available.
Why Trusts and Estate Planning Are Important
Estate planning isn’t just for your Grandpa.
Without estate planning, there is the possibility of an intestate estate. In Michigan, intestate estates are required to go through probate court. Here the court decides who the beneficiaries are and how the estate will be divided.
This process can be expensive, lengthy, and inconvenient. What’s more, the way your assets are divided among the default beneficiaries might not be how you would have envisioned. This can cause further problems such as financial difficulties, family disputes, and estrangement.
The Difference Between Trusts and Wills
A will details how you would like your assets to be distributed upon your passing, and prevents you from dying intestate.
A trust, on the other hand, is a legal entity that consists of a founder (you), a trustee, and beneficiaries. A trust allows you to transfer assets before or upon your death to the trust where they will be taken care of by the trustee or trustees. These assets will be distributed to the specified beneficiaries as per the terms of the trust.
The Advantages of Trusts
Trusts hold a number of advantages. These include:
- Control over how assets are distributed
- Enhanced tax planning
- The ability to circumnavigate the expenses and time required for probate
- Possible protection of your assets from creditors and lawsuits
- Confidentiality surrounding assets held and distributed
- Provision to provide for the weak (such as minors and disabled persons) who might not be able to manage their own finances
- Preservation of assets
These benefits are the reason why many people choose to incorporate the creation of trusts in their estate planning.
The Different Types of Trusts
The advantages that you will reap from the formation of a trust depends on the type of trust that you create.
Some common trust types are:
- Living trusts / revocable trusts: where you can change the terms during your lifetime
- Irrevocable trusts: terms cannot be changed, but assets held are not subject to estate tax
- Family trusts: facilitates assets to be passed to heirs tax-free, while allowing the surviving spouse to be able to tap into the principal in certain instances
- Generation-skipping trusts: Allows for the tax-free transfer of a substantial amount of assets to heirs two generations or more below you
- Qualified personal residence trusts: removes the value of your home from your estate and negates the need for mandatory probate procedure on properties
Do Not Put off Planning Your Estate
To guard against the expense and complications that come with probate court, it is important that you implement estate planning. As none of us can foretell the future, it is best not to put off this important duty.
If you require assistance from experienced attorneys in Michigan with your trust and estate planning, do not hesitate to contact us.