Many Grand Rapids families that I talk with have never considered anything other than giving their assets to their family outright – it could be immediately when they pass away or at some later age. As a Grand Rapids, Michigan estate planning attorney I consider it my privilege to let them know the downside to that approach and what can be gained by putting some restrictions in their Michigan will or trust.
I came across an excellent example in a recent Michigan Court of Appeals case (read it here). The basics of the case are this: the beneficiary of the trust had been jailed and the State of Michigan was seeking reimbursement for those costs from the trust. Guess what? They couldn’t get to the trust assets! Why? Because it was a “discretionary” trust.
What is a discretionary trust? It is a trust that does not distribute the assets outright, but rather leaves the decisions on what is distributed and when it’s distributed to the discretion of the trustee. You can find the Michigan Trust Code definition here (MCL 700.7103(d)). You see, because the “inheritance” is not given outright to the beneficiary and the beneficiary does not have a right to demand that the trustee give him or her any of the trust assets, the trust assets are not considered the beneficiary’s assets.
The best part – even though the trust assets aren’t considered the beneficiary’s assets, the beneficiary can benefit from the trust in the trustee’s discretion as guided by the trust language itself. Think of it this way . . . by setting up your trust this way you are benefiting your family and at the same time protecting them from creditors, predators, divorce and possibly their own poor spending habits. Now THAT is truly creating a legacy.
Call us at 616-827-7596 to discover how you can provide these incredible benefits to your family!
Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™. This goes beyond merely planning for finances – it’s about who your are and what’s important to you. He focuses on estate and asset protection planning for the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.