Many people in Michigan are interested in learning about trusts – what it is, the different types, and how it all works. Estate planning lawyers use this legal instrument to help you make certain that should disaster occur, your family and estate are protected. Regardless of whether your estate is simple or complex, a trust can be created to meet your specific needs.
A legal trust protects your property, family, and money from costly legal battles that often occur in Probate Court. By planning in advance, your family can avoid the huge expense and extensive time of going through probate upon your passing.
Before we delve deeper into the different types of trusts, it is important to know that not everyone needs one. You should consider a trust if:
You own a business and/or have a business partner. Business owners want to know that should they pass or become incapacitated in some way, the business will not fall into the hands of someone not intended to inherit or take over.
You have remarried or have a blended family. Whether your second or a subsequent marriage, a trust will ensure that your biological children are protected upon your death. When you remarry, your spouse will inherit your assets and estate without a trust in place; this is how the law operates. When the time comes that your spouse passes, any biological children he or she has will inherit the estate. This means your children will be left with nothing. A trust is a must in this situation.
You have children who are minors or disabled. Providing for any minor children should you pass provides you with peace of mind. For children who are mentally, physically, or developmentally disabled, a trust will make it possible for them to inherit your gifts without it interfering with SSI, Medicaid, or other benefits they receive.
You want to avoid probate. Going through the probate courts to sort things out is a costly, long, drawn-out process. Many people prefer to set up a trust so that assets can be distributed according to your wishes without your family having to go through the hassle of probate.
There are two categories that trusts fall into; revocable and irrevocable. Simply put, the terms of a revocable trust can be amended or altered at any time. With an irrevocable trust, once the terms are executed it cannot be altered or amended. Revocable trusts allow for changing beneficiaries and making other small or large amendments, while irrevocable trusts commonly include life insurance, special needs, and asset protection trusts.
While there are countless types of trusts, the most common include revocable living trusts, asset protection trusts, and special needs trusts.
A living trust, also referred to as a revocable living trust or revocable trust, is one of the most commonly used to protect your family from financial catastrophe and to pass assets on upon your passing. This simple trust is one you manage while you are alive, and dictates who will inherit your property/assets or manage your property following your death. A revocable living trust allows your family to avoid probate court and can be used to protect your family and children from bankruptcy issues, creditors, and to avoid disinheritance and protect necessary benefits, among other things.
Asset protection trusts are irrevocable and protect your assets from governmental entities, creditors, and in situations where an individual prefers not to consider a prenuptial agreement with a partner but wants to protect pre-marital assets. Very different from common revocable trusts, asset protection trusts are not the right choice for everyone but they are useful in specific circumstances.
A special needs trust, also referred to as a supplemental needs trust, is an irrevocable trust that holds property or cash for a physically or mentally disabled adult, child, or grandchild with special needs. This type of trust ensures that your loved one’s health care and living needs are provided for upon your passing, or if you prevented from providing financial support for another reason. With a special needs trust your loved one will receive support without it interfering with Medicaid, SSI, and other benefits such as subsidized housing or vocational rehabilitation.
There are many factors to consider in determining if you need a trust and if so, the type of trust best for your unique circumstances. Learn more about estate planning and what is right for you by consulting with a Michigan trust attorney today.
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