What Happens To The Trust I Created When I Die In Michigan?
One of the main reasons trusts are so popular as estate planning tools is that they can provide for effective management and distribution of property after the trust’s creator passes away. So when you create a trust, you should also know what will happen to it after your death.
At Bassett Murray Law Group, we counsel clients on selecting the types of trust that will best suit their needs. We also ensure that they understand how their trust will operate once they are no longer here. Although the answers depend on the specific terms of your trust, this post will explain in general terms what happens to your trust when you pass away, so as to prepare effectively for the future management of your assets.
How Trusts Function After the Grantor’s Death
A trust is a legal entity that holds assets for the benefit of specific persons or to accomplish specific purposes. The person who creates the trust and transfers property into it is often referred to as the grantor. When you, as the grantor, pass away, the trust may continue to operate according to the terms you established during your lifetime, or it may be set up to transition and terminate. It depends on the way you set the trust up.
With a revocable living trust set up to avoid probate, typically when you pass away, the successor trustee you have appointed will take over the management of the trust. This transition is usually seamless and it avoids the court requirements of the probate process. The trustee will settle final obligations and manage and distribute the assets according to the trust instructions. Depending on the trust’s directives, this could involve distributing assets immediately, or managing them over a period of time.
Understanding these basic operations helps beneficiaries and trustees know what to expect, reducing confusion and ensuring smooth transitions.
Types of Trusts and Their Management
The type of trust you establish and the terms you include in your trust document affect how the trust is managed after your death:
- Revocable Trusts: Often called revocable living trusts, these are created during your lifetime and can be altered or revoked at any time before death. After death, they become irrevocable, and the instructions laid out within the trust document determine whether the assets are distributed to beneficiaries right away or held by the trust for a time before distribution.
- Irrevocable Trusts: Once created, irrevocable trusts cannot generally be altered. They are designed to provide asset protection and potential tax benefits and continue operating according to the original terms after the grantor’s death unless the trust document specifies otherwise.
- Testamentary Trusts: The terms of this type of trust are set forth in a will, and the trust does not take effect until the will is probated. So if you set up a testamentary trust within the body of your will, it only begins to operate after your death and it will continue to operate until the conditions are satisfied that justify closing the trust.
Assets in revocable and irrevocable trusts set up during your lifetime will not become part of a probate estate so they will not need to go through the probate process. Assets set to become part of a testamentary trust first must go through probate.
Administering the Trust in Michigan
Trustees administering a trust in Michigan must keep up with several key responsibilities:
- Asset Management: Trustees must manage the trust assets prudently and in the best interest of the beneficiaries.
- Legal and Tax Compliance: Trustees are responsible for filing any necessary tax returns and ensuring the trust complies with all relevant laws.
- Communicating with Beneficiaries: Trustees must inform beneficiaries about the trust’s administration and any actions affecting their interests.
Trustees should be prepared to execute these duties effectively to manage the trust according to its terms and legal requirements.
Preparing for the Future with Bassett Murray Law Group
Establishing, funding, and managing a trust are significant components of estate planning that ensure your assets are handled according to your wishes after passing. At Bassett Murray Law Group, we create trusts that meet our client’s needs and goals. We’re here to help you understand and ensure effective trust creation and administration in Michigan.
If you are considering setting up a trust or have questions about managing an existing trust, contact Bassett Murray Law Group today. Let our experienced estate planning attorneys in Michigan guide you through every step of the process. Call us at 734-930-9200 in Ann Arbor or 231-427-2292 for our Petoskey office, or contact us online to ensure your legacy is protected and your family is cared for according to your wishes.
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Bassett Murray Law Group, PLLC
2045 Hogback Road
Ann Arbor, MI 48105
Phone: 734-930-9200
Fax: 734-930-9942
Petoskey Office
By Appointment only
3319 Lakeside Dr S
Petoskey, MI 49770
Phone: 231-427-2292
Bassett Murray Law Group, PLLC
2045 Hogback Road
Ann Arbor, MI 48105
Phone: 734-930-9200
Fax: 734-930-9942