There are multiple types of trust. The two being the most known are Revocable vs Irrevocable trust.
An irrevocable trust is when a settlor (the person(s) making the trust), is unable to make changes to the trust. Things are more set-in stone unless all the beneficiaries agree to the change or you seek court approval. You typically do an irrevocable trust when your attempting to shield assets for Medicaid or VA planning, you are doing a type of Special Needs or Supplemental Needs Trust or an ILIT (irrevocable life insurance trust).
A revocable trust is when the settlor can make changes to their trust. Settlors can add and remove property from their trust, change beneficiaries etc. There are different roles within a trust. The settlor, who is the one forming the trust. The trustee, who is the one in charge of the trust.
What is the point of Trusts?
Trusts do a few things, one being it protects your assets (real estate, financials, personal property, vehicles, etc.) from going through probate. Probate is a minimum 4-month process in Michigan and can become costly. Most individuals end up hiring an attorney (cost $1,500 – $10,000 depending on firm), you pay $175 filing fee to the court plus $24 for certified letters of authority, inventory fee to the court, and you pay a fee to a legal newspaper for what’s called notice to creditors.
With a Trust and doing proper funding, you avoid probate and all those fees. Another reason to do Trusts is that it keeps everything private and out of public eye. Your Trust and your estate do not become public record. Trusts are also used to protect your estate from creditors.
Finally, Trusts can provide tax planning opportunities. Assets held in a Revocable Trust remain in your control as Trustee, for your lifetime. Since you are not giving up control, you don’t need to apply for a separate tax id number and the trust is based on your own social security number. Because of this, at death certain assets are eligible for a step-up basis for your beneficiaries.
Preparation and pre planning is the key. Once your deemed incapacitated or have passed away, without any kind of planning, the ordeal becomes that much more difficult for your loved ones. A Trust and Estate Planning Attorney can help you with your estate planning needs, giving you peace of mind that comes from knowing your wishes and your legacy will be honored. At the Law Office of Sean Patrick Cox, PLLC, our attorneys proudly serve West Michigan.
We offer free consultations, Call Today (616) 942-6404