A revocable living trust allows an individual to retain complete control over his or her assets while maintaining the ability to amend or revoke the trust at any time. However, the assets in the trust remain available to creditors. Therefore, while this type of trust is not for everyone, it may be beneficial to certain individuals for the following reasons.
Control over distributions to beneficiaries
A revocable living trust gives the trust creator (trustor) control over the way in which assets are distributed to beneficiaries. This is particularly useful to parents who have concerns that their children may waste the trust assets they receive. A revocable living trust allows trustors to impose conditions and limitations on how trust money is distributed. For example, if a trustor has young children and also has a large life insurance policy, the children would receive all of the life insurance money at age 18 absent limitations set by a revocable living trust. By naming the trust as the beneficiary of the life insurance policy, the trustor can put conditions on when and how his or her beneficiaries will receive the money.
The avoidance of probate
A revocable living trust is a great way to avoid the probate process. For certain types of assets, however, a revocable living trust may not be required, as these types of assets automatically pass outside probate court under Michigan law. For example, the following types of assets in Michigan automatically pass outside probate court:
- Vehicles valued under $60,000 that will pass to a spouse or children
- Any assets that are jointly owned
- Any asset with a named beneficiary attached to it
- Up to $24,000 in personal property or cash
- Any real estate with a remainder beneficiary named in the deed
- Any business that has a transfer on death beneficiary designation
Tax concerns
Finally, a small percentage of high-income individuals may benefit from the tax advantages of a revocable living trust. However, one must have $20 million dollars in assets before federal estate tax becomes a concern. Therefore, most individuals don't have to worry about the tax implications of passing estate assets along to beneficiaries. But for certain high-income individuals, this type of trust is a great way to avoid taxation.
Contact our Michigan estate planning attorney today
Given the multiple advantages of including a revocable living trust in your estate plan, we recommend that you discuss this option with an experienced Michigan estate planning attorney as soon as possible to determine the ways in which it may be beneficial to you. In addition, a Michigan estate planning attorney can assist you with all aspects of estate planning, including drafting a will, choosing an executor, or simply beginning the estate planning process. If you’d like to begin planning for your future, please contact one of our experienced Michigan attorneys for a consultation.