If you are a real estate investor, physician or other entrepreneur who was interested in protecting your assets and limiting your risk to potential lawsuits, as a Michigan resident, your only option was to look to other states such as Delaware or Alaska for such planning options. This was a legally questionable strategy if you did not reside in one of those states. Now, Michigan residents will no longer need to look elsewhere. On December 8, 2016, Governor Snyder signed a new law called the “Qualified Dispositions in Trust Act” which permits Michigan asset protection trusts. On March 8, 2017 – the effective date of the law – Michigan became one of only 17 states that permit these types of trusts.
The new law is a game changer in this state for asset protection planning. Not only can a Michigan resident now legally create his or her own trust to shield assets from creditors, but he or she can also maintain a beneficial interest in the trust property. Here are just a few advantages of the new law:
- You can maintain control over the investment decisions of the trust.
- You can maintain the right to veto a distribution from the trust.
- You can receive income from the trust.
- You can receive principal from the trust subject to the discretion of the trustee.
- You can remove a trustee and appoint a new trustee.
The law does however have some drawbacks and this type of trust certainly is not for everyone. For example, the trust must be irrevocable and the person creating the trust cannot also serve as trustee or direct that the trust assets be returned.
Attorneys who specialize in estate planning are excited about this new law since it provides an important planning option for clients. Because we live in a litigious society, a person with high liability exposure was often left to hope that he or she had sufficient liability insurance in the event of a lawsuit. Now those persons with sufficient assets at risk can create an asset protection trust to shield their assets from creditors. If you think an asset protection trust may be right for you, be sure to consult with an experienced estate planning attorney to discuss your options.