You have a lot of options for planning your estate. One of them is to form a living trust. If you live in Michigan and are thinking about creating a living trust, this guide will give you all of the information you need, plus a step-by-step guide to actually making your own living trust. If you’re setting up a living trust or thinking about any other type of financial planning, it might make sense for you to find a financial advisor. SmartAsset offers a free financial advisor matching service that can help you find the right advisor for you in your area.
How to Create a Living Trust in Michigan
There are a number of items you’ll have to check off your list to create a living trust in the Wolverine State. Here’s your step-by-step guide:
- Decide what type of trust you want. For single people, a single trust is the only available choice. If you’re married, you have the choice of a single trust or a joint trust. If you choose a joint trust, you can use it to store property jointly held between you and your spouse, such as cars or homes.
- Next you’ll need to take stock of your property. You’ll want to take inventory of what you own and decide what should go into the living trust. You can put everything from bank accounts and investments to real estate and family heirlooms into a living trust. You’ll also want to go ahead and gather the paperwork for your property. This includes stock certificates, property deeds and car titles.
- Pick a trustee. A trustee will be responsible for managing the trust. The trustee also must ensure that the property is passed on to its beneficiaries per the trust’s instructions. You can name yourself as trustee or someone else. If you pick yourself, you should also select a successor trustee who will take over after your death or in the event you become incapacitated. Now is also a good time to decide who you want to pass your property on to after you die.
- Create the trust document. You can do this by yourself through an internet program or with the help of an attorney.
- Sign the trust document in front of a notary public.
- Fund the trust by placing property into it. You can do this on your own, but the paperwork can be complicated so an attorney’s guidance may be helpful.
What Is a Living Trust?
A living trust is a legal framework, established by a document, in which property can be stored and placed under the ownership of a trustee. A trustee is appointed to oversee the trust and make sure that the assets inside are passed along to the appropriate beneficiaries according to the trust’s instructions. You can name yourself as the trustee or give that job to another person.
There are two types of living trusts: irrevocable and revocable living trusts. Irrevocable living trusts are permanent. Property cannot be taken out of an irrevocable living trust without permission from every person named in the trust. The grantor relinquishes ownership of the assets inside the trust. Thus the trust, not the grantor, pays taxes on the assets in the trust.
Revocable trusts have some flexibility. The grantor can remove property from the trust and modify the trust at his or her discretion. The grantor still owns the property in the trust and remains responsible for paying taxes on it.
How Much Does It Cost to Create a Living Trust in Michigan?
The cost of forming a living trust in Michigan will depend on how you go about creating it. One option is to make it yourself using an online service. You could pay less than $100 or as much as $300 if you opt for this method.
The other option is to draw up the trust document with the help an attorney. This will be more costly, but you’ll also have professional guidance as you navigate the complexities of trusts. If you opt to hire an attorney, your total cost will depend on the attorney’s rates and the complexity of your estate. You could end up paying from $2,000 to $8,000 to create a trust. If you do use an attorney, make sure you fully understand his or her fee schedule beforehand. It’s also wise to find an attorney who specializes specifically in trusts.
Why Get a Living Trust in Michigan?
One of the main reasons to get a living trust is to make life easier for your family once you’ve died. Property stored inside a living trust doesn’t have to go through probate court, so your heirs will avoid the time-consuming process. In Michigan, however, this might not be as big of an upside as it is in other states. That’s because the state uses the Uniform Probate Code, which significantly streamlines the probate process. Additionally, Michigan offers a simplified probate process for estates valued at $25,000 or less.
There are other reasons to get a living trust, though. For instance, a living trust may be especially useful if you want to leave property to a child. You can store that property in the trust, under the ownership of the trustee, until the child comes of age. A living trust can also help a person avoid conservatorship if they become incapacitated, as they’ll already have named a trustee or a successor trustee in the living trust.
Who Should Get a Living Trust in Michigan?
Living trusts are not reserved for the wealthy, but those with especially large or complex estates are more likely to be well served by creating a living trust. Because the Uniform Probate Code is in effect in the state of Michigan, small and simple estates are less likely to benefit from a living trust, as the probate process will already be more streamlined. Aside from the size of your estate and the probate process, another consideration when deciding whether or not to get a living trust is whether you have any dependents.
While living trusts boast a number of benefits, there are downsides. Living trusts tend to be more expensive and more difficult to set up than wills. They also give families more time than wills to contest an estate in court, potentially causing some headaches.
Living Trusts vs. Wills
Even if you decide to create a living trust, it’s still a good idea to make a will. The trust cannot control any property that you have not placed inside of it. Thus, it’s a good idea to create a will to deal with any remaining property.
There are also further capabilities that wills have that living trusts do not, including:
- Naming an executor
- Establishing guardianship for children
- Leaving instructions for paying taxes and debts
- Naming managers for children’s property
Neither of these things should be confused with a living will, which deals with if you become incapacitated. Have more questions about the similarities and differences between living trusts and wills? The below table provides a summary of the capabilities of living trusts versus wills.
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Michigan
A living trust likely won’t impact your taxes. Still, if you’re planning an estate you should know about the Michigan estate tax and the Michigan inheritance tax. Estate tax is levied on the estate of the deceased before assets are passed on to heirs. Inheritance tax, on the other hand, is a tax that a person’s heirs must pay after they’ve received their inheritance.
Luckily for residents of the Wolverine State, there is no estate tax or inheritance tax. There is a federal estate tax though, which in 2022 applies to estates that are worth more than $12.06 million for a single person or $24.12 million for couples.
The Bottom Line
It isn’t difficult to create a living trust in Michigan. However, it does require some planning and research. You can set up a living trust your own, but unless you’re very confident in your financial abilities you might want to hire a lawyer.
If you have an especially complicated or large estate it might make sense to get a living trust. The fact that Michigan uses the Uniform Probate Code means that for most people who have smaller or simpler estates, a living trust won’t be necessary. Still, if you have dependents or want more control over the distribution of your assets, you should give living trusts some consideration.
Estate Planning Tips
- Planning your estate isn’t easy. There are a lot of options, and it can be challenging to determine which is right for your situation. No matter whether you’re in Michigan, Texas or California, you might consider hiring a financial advisor to help you figure out what’s best for you and your family. To find an advisor who is a good fit for you, use SmartAsset’s financial advisor matching service. You’ll answer a few questions and our platform will then match you with up to three advisors who serve your area. We have fully vetted all of the advisors on our platform and ensured they’ don’t have any disclosures. You can then interview the advisors and read their profiles to determine who suits your needs. If you’re ready, get started now.
- Don’t make the estate planning mistake of thinking you’re too young to start planning your estate. Even if you hope you have many years left in your life, planning ahead can provide you and your family some peace of mind.
- One aspect of planning your estate is figuring out how much you expect to have saved by the time you reach retirement. That includes your Social Security benefits, which you can estimate using SmartAsset’s free Social Security calculator.
Photo credit: ©iStock.com/Wiltser, ©iStock.com/Pgiam