Trusts are created to control the distribution of assets, protect assets for minors or persons who are unable to manage assets themselves and to reduce or eliminate taxes and future attorney fees. A significant advantage of a trust is that it is flexible, avoids probate and the information in the trust is not open to the public.
Your estate planning objectives may include the use of a living trust, also known as a revocable living trust or a revocable grantor trust, particularly if you have minor children or a beneficiary that requires special considerations for the disbursement of assets. Given that many parents fear an outright inheritance for a child at the age of 18 may be premature, a revocable living trust allows for more versatility on how trust funds for a child can be distributed.
This type of trust can allow for distribution over time and can postpone the distribution of all the trust assets until the child is likely to be in a better position to make well-reasoned financial decisions. It is important to understand that a revocable living trust is a “living” document that a person can amend or revoke depending on changed circumstances.
Besides the flexibility in planning, avoiding probate at death is one of the most common reasons for forming a revocable living trust. A will must be filed with the probate court and thus becomes a public document. A trust document does not have to be filed with the probate court; therefore, probate is avoided and the terms of a trust remain confidential. Using a revocable living trust to avoid probate may also be desirable to reduce legal fees and probate court expenses, such as the probate court inventory fee.
A Revocable Living Trust also avoids probate court involvement in a person’s affairs before a person’s death. For example, if a person becomes incapacitated because of old age, illness, or other disability, a funded trust should eliminate the need to file a petition for conservatorship or guardianship with the probate court which can be time-consuming and costly. In addition, a funded trust ensures that if the person who has made the trust is disabled, his or her property is managed in the manner and by the person they have chosen.
There are different types of revocable trusts in Michigan other than a standard revocable living trust established by one person. A joint trust is a single revocable living trust established by two persons into which they transfer their assets. This type of trust usually works best for married couples in a long-term marriage, who do not have children from prior relationships and who are in agreement about how their assets, (which are usually jointly held) should be distributed after both of their deaths.
Other types of trusts include a cottage trust or vacation home trust for keeping the family cottage or vacation home in the family, and a pet trust that ensures pets are properly cared for after a person’s death.
Bill Ager is an experienced attorney who can help you determine if you need a trust, and if so, what type of trust will fit your estate planning needs. Bill strives to provide customized services for his clients and their families while reducing estate planning expenses.
Can I make my trust without an attorney and use the “trust kits” that are advertised on the internet and in publications?
There is no legal requirement that you must use the services of an attorney to draft your trust. However, you may wind up with a trust that has little or no effect.
“Trust kits” provide several generic fill-in-the-blank forms that are not tailored to your specific situation and needs. It is also important to understand that once a trust is created it must be “funded” so that one of the essential purposes of the trust, avoiding probate, is achieved. Many times, there are insufficient instructions in the do-it-yourself trust kits for funding the trust or transferring assets owned by the grantor into the name of the trustee.
If this is not done, the assets will have to go through probate at the death of the grantor. Failure to fund the trust properly is one of the biggest reasons trusts fail. It is always a good idea to work with an experienced attorney to make sure your estate planning goals will be realized.
Is a revocable living trust expensive to create?
Usually, the fee for preparation for a revocable grantor trust exceeds the fee for the preparation of a will. This is in part because of the extra time required to draft the trust and related documents, such as a pour-over will and comprehensive transfer documents and assisting with the signing of all documents and funding the trust.
However, the overall cost is still very affordable, especially compared to the expense of probate or litigation over an estate with an unclear or non-existent estate plan. Although attorneys usually bill by the hour, Bill Ager will complete the necessary work for a reasonable flat fee.
Can I just use a trust or will for my estate planning?
Even if you have a trust, you should also have a will, which is called a “pour-over will”. A pour-over will transfer any property solely owned by the grantor/testator at death to the trust. In this way, it "pours" the probate estate over into the trust.
Although the grantor may have transferred all of his or her property to the trust to avoid probate, a pour-over will is needed to act as a safety net, catching any property that was not transferred to the trust before death.
In addition to either a trust with pour-over will, or a simple will, it is highly recommended that everyone should have a power of attorney appointing a person to make health care decisions and financial decisions if a person becomes incapacitated or disabled. A power of attorney will speak for you at a time when you can no longer speak for yourself.