An Introduction to Michigan’s New Asset Protection Trust

Bloomfield Township estate planning lawyer

Trusts have always been excellent estate planning tools. Your beneficiaries can enjoy all kinds of protections once you are gone, including protection from remarriages, divorce, or creditors. Even though beneficiaries could enjoy access to the trust’s assets for their needs, their creditors or their divorcing or new spouses couldn’t in many cases.

However, these protections weren’t available to you during your lifetime. While you’re still well and alive, you enjoyed complete access to the assets in your trust and by extension so do any creditors.

The situation has however changed since December 5, 2016 with the introduction of Michigan’s new asset protection trust act known as the Qualified Dispositions in Trusts Act. The Act took effect on February 5, 2017. With the introduction of the act, Michigan has joined 16 other states that already allow Domestic Asset Protection Trusts (DAPTs).

Domestic asset protection trusts are irrevocable trusts that can shield assets from the claims of an individual’s creditors, provided that the individual meets the particular legal requirements. Individuals who are worried about potential creditor exposure, notably physicians, executives, and business owners, need to consider using Domestic Asset Protection Trusts (DAPTs).

Before the introduction of Michigan’s new asset protection trust act, people who wanted to use a DAPT had to first transfer their assets to out-of-state trustees in jurisdictions such as Nevada, Alaska, or Delaware. However, the introduction of the new law means that assets can be transferred to a person that resides in Michigan, such as a Michigan professional, corporate trustee, or a family member.

The transferor can never be the trustee since he or she can only be a beneficiary of the trust. However, the transferor may still retain rights to:

– Veto distributions from the trust

– Replace or remove trustees

– Receive income from the trust

– Receive discretionary distributions of the income or principal

– Direct investment decisions of the trust

– Receive unitrust payments or annuity from charitable remainder trusts

– Receive annuity from the trust not exceeding 5 percent of the initial value of the trust

– Receive unitrust payments or annuity from a grantor retained annuity trust

– Direct the distribution of assets upon the death of the transferor provided that there is no transfer of assets to the creditors of the transferor’s estate, the transferor’s estate, the transferor’s creditors, or the transferor.

If adequately funded and established, the Act protects the assets the transferor has relocated to the trust from the transferor’s creditors upon expiration of a 2-year period starting the date the assets were relocated except particular situations involving fraudulent concealment. A longer statute of limitation may apply in the case of bankruptcy.

Final Thoughts

The introduction of the Qualified Dispositions in Trusts Act is good news for Michigan residents since it offers numerous asset protection benefits. If you have any questions regarding the Act or any other information regarding estate planning, you need to find a qualified and experienced estate planning attorney to help you.

Schedule Your Free Consultation with Our Michigan Experienced Estate Planning Attorney

Einheuser Legal, P.C. is an estate planning law firm in Bingham Farms, Michigan. We help families set up wills and living trusts. Attorney Michael Einheuser is an experienced estate planning lawyer serving residents in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township and Bloomfield Township. Schedule your free consultation today by calling 248-398-4665.

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