The revocable living trust is an estate-planning tool and the foundation for most estate plans. Sometimes known as a living trust, not only does this form of trust provide privacy, but it can also help to avoid fights between family members. Revocable living trusts hold your assets and will allow you to avoid probate proceedings. They help ensure that money gets into the right hands at the right time.
How Does a Michigan Revocable Living Trust Work?
The person who forms the trust is called the grantor, and they serve as the trustee. In many cases, the person who creates the trust will act as the trustee. Sometimes though, the trustmaker prefers to have an attorney do so.
The revocable living trust is a legal entity that you can place assets or property into. Until the trustmaker transfers ownership of the assets, they will sit. Once the assets are changed into the name of the trustee, the process will be referred to as "funding" the trust.
Revocable vs Irrevocable Trusts
There are two forms of trusts. The first is a revocable trust and the second is an irrevocable trust. In a revocable trust, the trustee still manages those assets. In an irrevocable trust, the trustmaker must appoint someone else as the trustee. Trustmakers may never take property or assets back when they are funded into an irrevocable trust.
In a revocable trust, the trustmaker may undo the trust and reclaim their assets These can then be diverted as income to themselves or another beneficiary. They may also change beneficiaries, sell the assets, or place more assets into the trust. Overall the trustee will eventually obtain final control.
Revocable living trusts do not have taxpayer identification numbers how an irrevocable trust has. Revocable trusts and the trustmaker would share the same Social Security number, and the income of the trust would be reported on that trustmaker’s taxes. This would essentially be the same as holding the assets personally.
What Assets Can be Put into a Revocable Living Trust
- Real estate
- Security accounts
- Stock in a closely held corporation
- Partnership interests
- Limited liability company shares
- Patents and copyrights
- Precious metals
- Valuable art, furniture, antiques, stamps, coins, or other objects
Benefits of Michigan Revocable Living Trusts
When you pass away, if you have a will, then your assets go through a process called probate. This means that your assets will go through a proceeding and will be distributed through how you chose them to. This process can be expensive and can even take up to several months. Especially if you own properties in more than one state, your beneficiaries might need to go through multiple probates. This will cut down the inheritance for your beneficiaries. If you have a revocable living trust then probate is not necessary.
Cover Your Assets Before Death
Living trusts allow you to cover your assets whether you are alive, dead, or incapacitated. This means that if you are unable to speak for yourself, your trustee will be able to do so for you. There will be no court proceedings or appointed conservators. Instead, you will ensure that your wishes are handled.
Overall a living trust will be more expensive to create, but down the line, it will avoid higher costs. Rather than probate costs and other expenses, a living trust will save not only money but also time.
Revocable living trusts will let you make any decisions you want, whenever you want to. This means that if you aren’t sure about your decisions, you can always change your mind. Whether this is regarding who you want to name as your beneficiaries, or simply if things change in your life. This flexibility allows you to begin estate planning at a young age.
After your death, all wills and transactions become public record. If you want this to remain private, then your living trust will keep it that way. No one will be able to search and see where your assets went. This also protects your beneficiaries.
The Federal Deposit Insurance Corporation, known as the FDIC, will protect up to $250,000 in a bank account. If you have a revocable living trust, the money insured can go up to $250,000 per beneficiary. The maximum insured amount you can have is $1,250,000.
Should You Set Up a Revocable Living Trust in Michigan?
Revocable living trusts are an important part of an estate plan. Not only will you be able to have the flexibility that you cannot find from other trusts, but you can start your planning far ahead of time. Especially if you are young and looking to begin planning before you truly know who to name as your beneficiaries.
Although revocable living trusts do require some work up front, it will pay off in the long run. The best way to start is to talk to an estate planning attorney. This will allow you to create the best plan for you to avoid a tax burden. Contact us today to learn more about how to start planning and creating your revocable living trust.