There are various types of trusts. The most common type of trust is referred to as a "revocable living trust." Revocable living trusts are created for a variety of reasons, including:

  1. The avoidance of probate
  2. The minimization or elimination of estate taxes
  3. The protection of assets for minors or disabled individuals
  4. Planning for second marriages
  5. To provide a means for managing your affairs should you become disabled

Unlike wills, trusts are private, and generally do not require the involvement of a probate court judge unless there is a dispute about its validity or its administration. Trusts are also more flexible than wills in carrying out your ultimate wishes; this is especially true if you have minor children.

With a revocable living trust, you are the trustee during your lifetime or until you become disabled. You may amend the trust at any time. You may add property to the trust or withdraw property from the trust as you wish. During your lifetime, you are treated as the owner of the property in the trust and you are taxed on the property, not the trust.

Upon your death, resignation, or incapacity, the person you have named as your successor trustee becomes the trustee, in charge of carrying out your wishes as expressed in the trust agreement.

Michigan has a trust code which governs the validity and administration of trusts. Most provisions in the trust code can be altered by your personal trust agreement, which is why it is important to consult with an attorney who is familiar with the trust code when preparing a trust. An attorney can also advise you as to whether another type of trust would be beneficial.

If you have a trust, it is important to properly fund the trust both during your lifetime and upon death, meaning transfer the appropriate property to the trust during your lifetime and generally designate the trust as a primary or secondary beneficiary of your IRA, 401(k), life insurance and similar assets. If you don't properly fund your trust, then you will not avoid probate and may not realize the tax benefits associated with a trust; nor will the trust protect your assets should you become disabled. When funding a trust, it is advisable to seek professional advice because improper funding can have unintended income tax consequences for you and/or your estate.

If you wish to learn more about the benefits of a trust, wish to learn more about the other types of trusts that are available, or have questions concerning the funding of a trust, call us for a free consultation (888-526-4489).