Estate plans allow individuals to provide for a transfer of wealth to their families, charities or other beneficiaries. Estate planning frequently includes basic documents such as a will, durable power of attorney and health care power of attorney or directive. Trusts are often major aspects of estate planning as they can help with such issues as:
- Reducing tax implications after a settlor’s death
- Avoiding probate
- Providing for children with special needs
- Managing assets for long term use by beneficiaries
- Business succession
There are many types of trusts that may be tailored to address particular wishes of the settlor — the person setting up the trust. In an effort to provide for the needs of future generations, a settlor must determine which type of trust will best serve his or her situation. In certain circumstances, a settlor may decide to set up an irrevocable living trust — a trust which may not be altered after it is established.
Trust decanting in Michigan
Unfortunately, sometimes an irrevocable trust needs to be changed, a judicial process that can be very costly and time consuming for the trustee and the beneficiaries. Trust decanting is a process that allows the assets of an irrevocable trust to be moved into a newly created and more flexible trust. Numerous states have adopted trust decanting laws and Michigan adopted such a law in 2012.
Opponents of Michigan’s trust decanting bill argued that irrevocable trusts are created for specific reasons and should not be changed after the creators’ deaths. However, it may be important to restructure a trust that no longer fulfills its intended purpose. A trustee may wish to decant a trust for any number of reasons, including such issues as:
- Intended wealth transfer goals are unattainable according to outdated trust provisions
- A beneficiary suffering from mental illness or addiction issues has too much access to trust assets and risks depleting the funds which were meant to sustain him or her for a lifetime
- Trust provisions — or lack thereof — jeopardize entitlements to certain types of government benefits for beneficiaries with special needs
- Investment restrictions impede changes necessary for sustaining growth or viability of the trust
- Tax or real property law changes thwart the purpose of the trust
Rather than resort to a lengthy trust contest in court, a trustee may wish to consider trust decanting as an option.
Legal assistance is available
If you have estate planning questions, either as a settlor, trustee or beneficiary, consult an experienced wills and trusts lawyer. An attorney knowledgeable about estate, tax and probate issues can help.