You want to leave your assets to a family member or friend in trust, but frankly you do not trust they have the maturity to manage a large lump sum disbursed to them responsibly. You may be worried they will spend it recklessly on frivolous things, leaving them without the ability to care for themselves and their loved ones as the trust intended. When that situation arises, you may be advised to establish a spendthrift trust – but what is a spendthrift trust, and is it legal in Michigan?
Michigan legislature essentially defines a spendthrift trust as a limiter on the beneficiary, and yes, it is entirely legal. A spendthrift provision in an established trust lets you instruct the trustee on how to administer and disburse the trust to the beneficiary, based on established conditions. For example, you may instruct the assets in trust to be delivered as a monthly stipend intended to cover living expenses, or as an annual lump sum. You may even specify that the funds can only be used for specific purposes, such as education or home ownership.
While it may not endear your beloved beneficiary to you, a spendthrift trust is a way of ensuring that your hard-earned assets do not go to waste even after you have passed on. You may even set a time limit on the trust, so that after a specified period or after accomplishing a certain goal the beneficiary may receive the remaining lump sum in full.
This post has been provided as an informational reference only, and does not constitute actionable legal advice.