What Are the Basics of Trusts?

When it comes to estate planning, one of the most effective tools you can utilize is a trust. Trusts offer a versatile and reliable way to manage and protect your assets for the benefit of your heirs. At Van Den Heuvel Law Office, we understand that navigating the complexities of estate planning can be daunting. Our experienced attorneys are here to guide you through the process.

What is a Trust?

In simple terms, a trust is a legal arrangement where one party, known as the trustor, transfers assets to another party, the trustee, to hold and manage for the benefit of the beneficiary. This structure allows for greater control over how and when your assets are distributed, often providing certain tax advantages and making it so that your wishes are carried out precisely. 

The Purposes and Advantages of Trusts

Trusts serve multiple purposes in estate planning, including:

• Asset Protection: Trusts can protect your assets from creditors and legal disputes so your wealth is preserved for future generations.
• Tax Efficiency: Certain types of trusts can help minimize estate and inheritance taxes, allowing more of your wealth to be passed on to your beneficiaries.
• Control Over Distribution: Trusts give you the ability to specify exactly how and when your assets are distributed, whether it’s immediately upon your passing, over time, or upon reaching certain milestones.
• Privacy: Unlike wills, which become public record, trusts offer a level of privacy by keeping your estate matters confidential.

Different Types of Trusts in Michigan

Michigan offers a variety of trust options to suit different needs and circumstances. Here are some of the most common types:

Revocable Trusts

A revocable trust, also known as a living trust, allows the trustor to retain control over the trust assets and make changes or terminate the trust at any time. This flexibility makes revocable trusts a popular choice for many individuals. Furthermore, revocable trusts allows individuals and their families to avoid the lengthy probate process. 

Irrevocable Trusts

Unlike revocable trusts, irrevocable trusts cannot be altered or terminated once they are established. This type of trust requires the trustor to relinquish control over the assets, which can provide benefits such as asset protection and tax advantages. Irrevocable trusts are often used for long-term planning and to help safeguard assets from creditors.

Irrevocable Life Insurance Trusts

An irrevocable life insurance trust (ILIT) is specifically designed to hold a life insurance policy outside of the trustor’s estate. This strategy helps to exclude life insurance proceeds from the estate, potentially reducing estate taxes for the beneficiaries.

Special Needs Trusts

A special needs trust is tailored to provide for a loved one with a disability without jeopardizing their eligibility for government benefits. This type of trust allows the beneficiary to receive the financial support they need.

Explore Your Options With An Attorney

Incorporating trusts into your estate plan can offer numerous benefits. At Van Den Heuvel Law Office, we are committed to helping you navigate the complexities of estate planning with confidence and peace of mind. Call today to schedule a consultation and discover how we can help you secure your legacy for future generations.