One of the most common questions I am asked by a new client in an initial estate interview is "Do I need a trust?" The following are circumstances where a trust might be necessary or helpful to your asset planning:
Tax Planning
To avoid being subject to federal estate tax after your death, you may need to create a trust. Expert trust attorneys use planning tools that can reduce, and even get rid of, this tax liability. On the other hand, in 2019, the federal estate tax exemption (the amount that an individual can leave to heirs before federal estate tax starts being paid), is $11.4 million. $22 million above is exemptible by a wedded pair. Furthermore, Michigan does not levy an inheritance tax as well. You built some wealth, perhaps. Otherwise, if you do not exceed these multi-million-dollar limits, you do not need a trust in the U.S. and in Michigan for tax purposes.
Plan For Minor Children
A sole purpose to set up a trust is if you are married and have kids under the age of 18. According to Michigan’s laws, minors have no legal right to handle their money. The inheritance of a minor will be in a limited conservatorship, if you have a minor child at the time of your death. A Conservatorship is a probate court supervised account exist until the child turns 18. The funds of the minor child are in restrict mode and so, cannot be withdrawn unless the court permits. More significantly, once the minor child reaches the age of 18, he or she can access all of the funds.
By the age of eight, your child may seem a lot more mature to you. Still, that does not mean he or she can deal with millions of dollars by 18.
As A Trust Can Hold Assets, It Can Be Used for Managing and Postponing the Inheritance for Your Children
A trust gives you control as regards how and when your kids will have access to their inheritance. For instance, you may empower your mediator to release trust assets for your kid's education. The child could partake of a fraction of the residue, at various ages stipulated which may, for instance, be 21, 25 and 30. It means, you can also establish conditions upon which your child will receive funds, for example, getting a four-year college degree. In essence, you are free to create a strategy that outlines a distribution pattern of your financial assets to your children as they are minors and when they come of age. The reason for this is that I strongly suggest a trust for clients that have minor children.
Avoid Probate
Maybe the one reason the client will raise the issue of the trust is for him to avoid probate. The probate court filing fees and administration can be an unpleasant situation, which you may find beneficial to delay or even avoid. The probate court will also add probate fees, which are proportional to the value of the probate estate as a whole. However, this could be minimal amount for you, then again you do not like giving any part of your inheritance to the State of Michigan. Does one need a trust to avoid probate? No. Assets which are in joint names or have a designated beneficiary will pass to the named person and will bypass probate. However, if you have only individual own assets that are not jointly held or beneficiary designated, these assets will have to go through the probate process after your death.
Privacy
Probate is a proceeding that is public. The originals of the wills or other documents used to open a probate proceeding, which are stored at court, can be obtained from the court. Should there be other documents that are needs to be filed, those documents shall also be obtainable by a third-party.
If you have plans not to leave your child childless or concerned that a meddlesome relative may not know the value of your estate, then you have every reason to consider a trust. A trust is a private instrument and is not filed in the probate court. Moreover, information about the worth of the trust is also in general private external documents.
Do not hesitate to call one of our expert Estate Planning Attorney in Michigan, or to schedule a free consultation regarding your trust and estate plans.
