The Leading Trust and Estate Litigation Firm in Michigan

Charitable and non-charitable trusts in Michigan: The basics


There are many types of trusts available in Michigan. One way to break them down is to consider whether they are charitable or noncharitable.

Trusts are legal tools that allow for control over how assets are used. These tools can be used during one’s lifetime to help reduce tax obligations and can also be used to help ensure an inheritance is used wisely. Having a basic understanding of how these instruments work can help you decide if a trust would make a good addition to your estate plan.

Trust types

Trusts can be regulated by both state and federal laws. As a result, the types of trusts available may depend on where you live. Those who reside in Michigan have a number of options. One way to review these options is to consider them in one of two broad categories: charitable and non-charitable.

Charitable trusts in Michigan

Charitable trusts are legal instruments that are generally designed to benefit the public or a particular charity. More specifically, Michigan law states a charitable trust can be created:

[F]or the relief of poverty, the advancement of education or religion, the promotion of health, scientific, literary, benevolent, governmental, or municipal purposes, any purpose described in section 501(c)3 of the internal revenue code, 26 USC 501, or other purposes the achievement of which is beneficial to the community.

In addition to the personal satisfaction that comes with funding a cause that the creator believes in, these trusts can also help reduce an estate’s tax obligations.

Non-charitable trusts in Michigan

Trusts can also be used for non-charitable purposes. Depending on the language used to create the trust, these legal tools can offer the creator a variety of benefits. A few of the many options available include:

  • AB living trust. Also known as the marital or credit shelter trust, this form is designed to help married couples maximize their federal estate tax exemptions. Essentially, this works by having each spouse place their assets into an irrevocable trust upon death. Although the trust is designed for the benefit of named beneficiaries, such as the couple’s children, the language of the trust contains a provision that requires it benefit the surviving spouse.
  • Totten trust. Also known as a “payable on death” account, this trust is set up by a creator in a bank or other financial institution for the benefit of another. These trusts are revocable, meaning the creator can change or cancel the trust at any time.
  • Special needs trust. This form of trust is designed specifically for the benefit of a beneficiary with special needs. When properly structured, these legal tools can provide financial assistance to those with disabilities or other impairments without disqualifying them from receiving benefits from Medicaid or other programs.

These are just a few of the many forms of non-charitable trusts that can be used to supplement an estate plan.

The importance of legal counsel

Whether looking to establish a charitable or non-charitable trust, it is wise to seek the counsel of an experienced trust lawyer. Putting together a proper trust is complex, as the language must reflect both the wishes of the creator while also meeting the requirements of state and federal laws. An experienced trust lawyer will discuss your goals and work to tailor an estate plan that meets your needs, including the use of trusts when appropriate.


Estate Planning Law Blog


Can you challenge a trust in Michigan?

When planning an estate, choosing to create a trust can be a sure way of protecting assets. Planners may choose to draft revocable or irrevocable trusts. In Michigan, there are circumstances that dictate whether a person may challenge a trust. If you are wondering...

How an inventory of assets protects the executor of an estate

One of the earliest steps in the administration of an estate will involve creating an inventory of assets and financial liabilities. You will need this inventory to present to the probate court along with the last will and other important documentation.  The inventory...

Revisiting estate planning goals after the end of a marriage

There are a variety of scenarios in which a change in life circumstances could leave you facing a need to reassess your goals for the future. Should you and your spouse choose to part ways, the end of your marriage could leave you facing a variety of difficult...

Estate planning is a gift

Some of those who have not yet done their estate planning simply have not found a compelling reason to get started. They know that they need a plan someday, but it does not seem all that urgent or important. They resolve themselves to the idea of doing it later. This...

Should you leave your business to your heirs?

Estate planning is, in part, the process of passing assets to your heirs. You need to create a plan to do this effectively. Common assets include the family home, a life insurance policy, your investment portfolio, your bank accounts and the minor assets at your home,...