One of the functions of your estate plan is to help provide for your loved ones as much as possible after your death. There are several elements to an estate plan that can do this. Two primary ones include your will and any trusts. When the estate plan goes through probate, the will is part of the record. Trusts move assets to the beneficiary without having to go through the probate court.
Many people opt to use trusts as part of their estate plan. When you do this, you have to determine what type of trusts you are going to establish. There are many to choose from, but each one will be classified as either a revocable or irrevocable trust. Understanding the difference between these two designations can help you make the decisions you feel are best.
Michigan residents and others who are looking to protect their assets may benefit from creating a trust. Assets inside of a trust are generally off-limits to creditors, and beneficiaries may be limited in how they use money or other items distributed from it. A grantor trust is a type of living trust that allows the creator to retain control of assets titled in the document's name. As the assets are still under the grantor's control, income is taxed to that person instead of to the trust.
Making gifts to an irrevocable trust may be an effective way for an individual to reduce the size of his or her taxable estate. However, it also means giving up control of how assets are used, and it also means giving up the ability to change who benefits from those assets. This can be problematic if the beneficiary passes away or no longer needs money or other items that were placed in the trust.
Michigan families that have an estate plan will almost always have a will in place. However, they often want to know whether they need a trust if they already have a will. In many cases, the answer to this question is yes.
Income that is generated by a trust can either be kept in the trust or distributed to beneficiaries. In some cases, a Michigan trustee will have the ability to make distributions as he or she sees fit. However, it is also possible that the trust itself will limit the actions that a trustee is allowed to take. For instance, the document may not allow distributions to be made unless they are for educational purposes.
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.
Trusts may seem like complicated estate planning tools, but, with the right help and a trustworthy legal counselor, a Michigan resident can confidently execute this important testamentary device. There are many different types of trusts that individuals can use to meet their estate planning goals. One popular form of trust is the AB trust, which is often used by married couples.
The estate planning process is designed to create protections for the future. Depending on the needs and wishes of an individual, an estate plan can include various documents.