Types of Trusts in Michigan: Which One Is Right for You?

Have you ever wondered if there is a simple way to protect your house, life savings, or cherished family keepsakes? We all want to feel secure about the future, and that’s where trust can make a difference.

At Bassett Murray Law Group, we are invested in improving lives. We have worked on estate plans for Michigan families for over 30 years. Our goal is to bring you a feeling of calm, no matter how large or modest your estate might be.

We place you and your priorities front and center, shaping plans that help you rest easy each day. If you’ve been looking for a plain-English guide to some of Michigan’s most common trusts, we’re here to show you the basics and share how each option might fit your own plans.

Common Types of Trusts in Michigan

People often ask why there are so many trust options available. The truth is that each trust has its own perks for different needs, whether you want to spare your loved ones from time in probate court or set up long-term care solutions. Let’s look at a few popular trusts and see what each can accomplish.

Revocable Living Trusts

A revocable living trust is set up while you’re still here and can be changed along the way. You may serve as both the creator (grantor) and the trustee during your lifetime, which lets you adjust things if you wish. Property funded into the trust is not stuck in probate after death, helping your heirs avoid the extra time and fees that can pile up.

For instance, if you own a house, you can place it inside your trust and keep full control. You might later pick a successor trustee to step in if you’re too ill to manage the trust on your own. Because of its flexibility, this trust is among the most common choices in Michigan estate planning.

Irrevocable Trusts

An irrevocable trust usually can’t be changed after you sign on the dotted line. You hand over your control of the assets to the trust, which removes those resources from your personal ownership. It might sound intimidating at first, but people often choose this option for a good reason.

When you hold assets in an irrevocable trust, these are typically not counted toward your personal wealth if you later face expenses like nursing care. That feature can be a plus for Medicaid strategies. In addition, irrevocable trusts can protect your property from claims that might arise. You surrender the power to change those trust terms, but in return, you can get more robust asset protections.

Special Needs Trusts (Supplemental Needs Trusts)

Special needs trusts support individuals who receive government-based assistance because of a disability. This trust preserves extra funds or property for the disabled person without harming their eligibility for public services. Because many benefits have income and asset limits, these trusts can offer ongoing resources like medical items or entertainment, all without interfering with crucial support programs.

The beneficiary of a special needs trust doesn’t own the trust assets directly and can’t freely spend them. Instead, a trustee manages the money and decides on acceptable distributions that line up with benefit rules and the beneficiary’s well-being.

Charitable Trusts

When you want to give back to a cause or group you care about, a charitable trust allows you to meet that goal while potentially avoiding some taxes. You might name a favored group as your trust beneficiary, or you can set up a timeline for the gift to pass on in stages.

Some folks pick a charitable remainder trust, giving a charity whatever is left after a period of payments to you or your family. Others name the charity as the direct receiver of the trust assets from the start. Either route can help you give to a cherished group with added savings in certain estate or gift taxes.

Irrevocable Life Insurance Trusts (ILITs)

ILITs hold your life insurance policy in a trust, so it’s outside of your personal estate. When you die, the policy’s payout goes right to the trust, which can then pass along benefits to your heirs without the funds being included in your taxable estate (if done correctly).

This method can be useful for individuals worried that their estate value might exceed thresholds for estate taxes. By removing the policy’s proceeds from your estate, ILITs give your family coverage for expenses, such as final costs, and might also provide extra protection from potential claimants.

Qualified Personal Residence Trusts (QPRTs)

QPRTs hold your primary home or a second residence in a trust, which lowers its value for estate tax purposes. You basically give away your home to the trust while retaining the right to keep living there for a while. Because you have a reserved right to use the house, the home’s overall taxable value goes down.

After the trust term ends, ownership transfers to your beneficiaries (perhaps your kids), and you can sometimes remain in the home by paying rent. This arrangement also offers potential protection from future creditors.

Marital Trusts

Marital trusts set aside assets for the surviving spouse. They usually kick in when the first spouse passes. In many of these trusts, the surviving spouse will receive the assets or the income for life, while the remainder might go to other family members later.

Spendthrift Trusts

Spendthrift trusts protect heirs who might not do well with immediate, lump-sum inheritances. The trust spells out how often and how much money your beneficiaries get, avoiding quick misuse or creditor grabs. With a spendthrift clause, the assets remain under the trustee’s oversight, removing the beneficiary’s direct control over them.

If you have a family member with money troubles or a history of overspending, a spendthrift trust might prevent what you’ve left from vanishing too quickly.

Testamentary Trusts

This trust is laid out inside your will and is created after your death. You might see testamentary trusts used to leave funds for kids, with a trustee handling the money until they reach a certain age. Because this trust is attached to your will, it does go through probate, yet it still offers supervision over the handed-down assets.

Parents often include testamentary trusts to manage finances for minor children or to set guidelines for distribution to older teenagers and adults.

Totten Trusts

A Totten trust, sometimes known as a payable-on-death account, is simply a bank account or similar investment set up with a named beneficiary who inherits what’s left in that account after your death. You keep total control while you’re alive, and once you pass, the assets transfer without going through probate.

This quick arrangement can simplify the process, especially for smaller sums. It’s not as flexible as a standard trust, but it’s easy to set up at most banks or financial institutions.

Let’s pause a moment and compare these trust types in a quick table. While not exhaustive, this can help you see a few core contrasts at a glance.

Trust Type	Modifiable	Probate Avoidance
Revocable Living	Yes	Yes
Irrevocable	No (usually)	Yes
Special Needs	Varies	Yes
Charitable	No (usually)	Yes
Spendthrift	Varies	Yes
Totten (Payable on Death)	Not applicable	Yes

 

Choosing the right path can be simpler once you see these options side by side. Still, each situation is unique, and your trust choice should reflect your personal goals and your life circumstances.

Michigan Trust Law: Key Legal Requirements

It’s a big help to know that Michigan law says a trust must have a valid purpose, along with clear beneficiaries. If you are the one creating the trust, you must be of sound mind and not under pressure from anyone else. The trust also must be in writing under the Michigan Trust Code (MCL 700.7913).

When you set up a trust, you’ll pick a trustee to carry out your instructions. You also must remember to move any intended assets into the trust. That step is where folks sometimes slip up because they set up the trust but forget to sign over real estate or financial accounts. Putting the right assets in the trust is vital if you want to get the benefits you expect.

Need Help Deciding Which Trust Is Right for You? Contact Us Today

Once you’ve seen how many trust types exist, you might wonder how to pick the one that fits you. At Bassett Murray Law Group, we help Michigan families find the right approaches each day, whether the challenge is leaving a tidy inheritance or preventing potential family disputes down the line.

You can call our Ann Arbor office at 734-930-9200 or Petoskey at 231-427-2292 to talk about your wishes. Or, if you prefer, visit our contact page for more ways to reach out. We’re proud to stand by you and offer direction at every step along the way.

Your future shouldn’t be left to guesswork. A thoughtful trust can help make sure your assets go where you want and reduce burdens for loved ones. Give us a call so we can explore your plans with you. We’re here to make it smoother for you and everyone you care about.