Wills vs. Trusts in Michigan: DIFFERENCES THAT MATTER AND WHY

By: Stuart Williams | Estate Planning Lawyer

The first thought people have about transferring their assets to their children someday is that they need to have a will. But for most people who own a home, have some retirement savings and perhaps some life insurance, there are tremendous advantages to having a trust-based estate plan.

You should still have a will when your choose to utilize a trust, but when you have a trust-based plan, your trust becomes the modern centerpiece of your plan, instead of relying solely on a "will," that can typically do no more for your family than if you had died without a will (and you let the laws of the State of Michigan determine who should inherit your assets).

The main difference between wills and trusts
Wills distribute property "outright" to beneficiaries and a judge will need to be involved to transfer any assets you own at your death. Trusts on the other hand can distribute property outright or in accordance with terms you provide in a "trust agreement" without having to go to court at all, if it has been setup properly.

Directly Inherited Assets are Immediately Vulnerable
When you leave assets directly to your children by way of a will, or by joint ownership, or beneficiary designation, they all become immediately collectible by outsiders who can then lawfully "steal" your child's inheritance. Indeed, when assets are inherited through a "will," or other outright distribution, all that's required of your child's creditors, divorcing spouse, or other law suit plaintiffs, is for them to assert their lawful claim to what your child has inherited from you.

Trusts can protect inherited assets from “Outsiders”

Assets inherited under typical living trust provisions can provide your child(ren) with at least a minimal level of protection. The person you choose to be in charge (like an executor) is called the "successor trustee" of a trust. It is the successor trustee's job to distribute trust assets to your beneficiaries some day when you die, but before making those distributions, even a simple trust based plan should provide a trustee with some discretion to withhold a beneficiaries distribution if it would be better for the beneficiary. For example, if your child were involved in a pending creditor claim or bankruptcy, you would not want a distribution to be made. Another common reason to withhold a distribution would be an adult-child's pending divorce.

There are however, special trusts we use at Family WIlls & Trusts, PLC, that can extend asset protection beyond the limited window of distribution. Instead, more advanced trusts are able to hold the inherited assets safe from outsider's claims for the lifetime of your child(ren), so that what you leave them will never be subject to the claims of "outsiders."

Fortunately, this kind of protective planning is no longer reserved only for the ultra-rich and we have helped many Michigan parents to protect their families in this way. If you own a home and have $250,000 or more in assets (even term life insurance), you may have enough for this kind of trust planning to make sense.

Are you ready to protect your family from outsiders?