People in Michigan who are creating an estate plan may want to consider using a trust and a trust protector. The reason to use a trust in the first place is to protect the assets in case of divorce or other problems, such as a lawsuit. As an example, a living trust can be set up for an adult child with the child as the trustee and a sibling appointed as protector. If a problem arises, the child would lose access to the trust, and the protector would be in charge of it.
There are other types of trusts that can be created to protect assets as well. The function is in the name of asset protection trusts, which may be offshore or domestic. These are irrevocable trusts. Spousal lifetime asset trusts offer less protection but more control to couples and can still help protect the estate from taxes. A dynasty trust can be used to build family wealth over generations and avoid gift and estate taxes.
While the current exemption from estate tax for individuals is around $11 million, it is set to drop in 2026 and could go much lower. People may want to talk to a professional about the best way to structure the estate plan to protect assets and avoid estate tax.
Trusts can be used for a number of other purposes. For example, if an adult child is likely to be irresponsible with money, a trustee may be appointed who decides when the child can receive distributions. Trusts can also tie distributions to specific conditions or milestones. A trust can be set up that will provide for a loved one who has special needs without making that person ineligible for government benefits. Trusts can also be created to provide income for beneficiaries as well as charitable giving.