During the estate planning process in Michigan, there are many different kinds of trusts that you can create. Though your circumstances may inform what type of trust will work well for you, revocable trusts, sometimes called living trusts, are increasingly popular. However, they have limitations and may not be right for every situation.
According to FEDweek, a revocable trust offers you several significant advantages. It allows your loved ones to avoid the probate process while still affording you control over your property while you are alive. Initially, you are both the beneficiary and the trustee of a revocable trust. However, you name a successor trustee to take over in the event of your death or incapacitation. Unlike an irrevocable trust, you can cancel a living trust or make changes to it whenever you wish, up to and including its cancellation.
However, there are also potential drawbacks to a revocable trust. Since the assets are still in your name, you still have to pay income taxes on them. The act of transferring assets to the trust takes some effort on your part. It involves retitling all the assets. Transferring some assets into the trust, such as retirement accounts, can have adverse consequences on you. As with any other trust, creating a revocable trust involves some expense. Compared to creating a will, a revocable trust costs more upfront.
Trusts are not just for wealthy individuals despite the association in the public mind. Regardless of your economic background, you may be able to benefit from creating a revocable trust.
The information in this article is not intended as legal advice but provided for educational purposes only.