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The Role of DAPTS

Similar to irrevocable trusts, DAPTS offer increased flexibility regarding estate planning for clients. Michigan is just one of 17 states that have laws that allow the creation of DAPTs. For individuals who do not live in these states, a trust can still be created in one of the 17 states using a trustee. Once assets are placed into a DAPT, the trust creator permanently gives up those assets. Because a trust creator can name him or herself as a beneficiary, though, there is a possibility that he or she might retain some management rights regarding the trusts assets.

The Advantage of DAPTs

The primary advantage of DAPTs is that they offer asset protection. As a result, a person is able to place assets into a trust to be dispersed so that they can be used post-retirement. DAPTs also offer tax advantages. New tax laws have temporarily doubled estate tax exemptions from $5 to $11 million. While a person might not have this amount currently, an estate that grows to this amount by 2026 will place an individual above the exemptions limits.

How to Structure a DAPT

There are several methods used to structure a DAPT, which include:

• A client signs a solvency affidavit, which confirms that he or she will have the assets necessary after the transfer to pay for all future expenses. Some clients decide to support this statement with a current balance sheet and financial forecast, which help to provide a more fleshed-out picture about the clients finances.
• The client is not listed as a current beneficiary of the trust. Instead, someone is appointed in a non-fiduciary capacity to name descendants. If the client ends up needing any of the assets placed in the DAPT in the future, the client can be added as a descendant. The client will be unable to receive funds unless he or she is added.
• Someone else received the power to direct the trustee to make distributions to the client.

Speak with an Experienced Michigan Estate Planning Lawyer

No matter if you use them for asset protection or estate tax planning, DAPTs can be a particularly powerful tool because they present a way to secure assets while still leaving those assets accessible. If you are interested in creating a DAPT, you should not hesitate to contact an experienced estate planning lawyer. Contact Resnick Law today to schedule a free initial consultation, during which time we will discuss how to best resolve your case.

(image courtesy of Kody Gautier)

One major consideration when setting up a trust is whom to appoint as the trustee of the trust, responsible for managing the trust assets. Some people choose to appoint family members or friends as trustees, while others prefer to use professional trustees. There is no right or wrong choice when it comes to making the decision, but there are some issues to be considered before making the decision.

When choosing a family member or friend, it is important to choose a trusted person who is also good at managing money. As a trustee, the person is expected to manage trust assets as a reasonable person would. However, a friend or family member who serves as a trustee may not always keep clear records of how trust funds are kept or may not follow other steps to ensure that the accounting of the trust is up to date.

A family member or friend may also lack the time to properly manage the trust as is required. A lot goes into the proper management of a trust, and although an inexperienced trustee may have the best intentions to commit time to managing the trust, the trustee can get overwhelmed with his other responsibilities and eventually the trust management may suffer. A trustee who needs assistance understanding this new role can seek professional advice.

The advantage of picking a professional trustee is mainly in the professional level of investment knowledge. If the trust assets are worth a substantial amount of money, or the trust is set up for the benefit of a beneficiary who needs assets long into the future, a professional trustee is probably a better choice. The professional trustee can provide continuity and stability for a longer period of time in addition to institutional investment knowledge.

The professional trustee is also solely focused on trust management. Even while handling multiple accounts, the professional trustee generally has a staff that can assist with the management of individual trust accounts.

A professional trustee charges fees that could be taken from the trust, while a family member may agree to serve as a trustee without charging a similar fee. This may be an important consideration if the trust does not have a lot of assets or the assets in the trust are not of a high monetary value.

In some instances, a trust creator can appoint both a professional trustee and a family member or friend as co-trustees. This can be a way for the trust to benefit from the advantages of using either trustee alone and ensure that the trustees keep each other accountable.

Contact an Experienced Estate Planning Attorney

If you are considering setting up a trust and you are unsure about how to select the right trustee, you need to schedule an appointment with an experienced estate planning attorney. For more information on the use of trusts, selecting a trustee to manage the trust, and to learn more about how you can put together an estate plan that addresses your individual needs and wishes, contact Resnick Law, P.C., to consult the experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Chris Liverani)

People are often advised to write wills as part of their estate planning. Wills are important because they allow a person writing the will the opportunity to decide who gets property from his or her estate. Using a will in conjunction with other estate planning tools can help avoid probate and ensure that family and friends are well taken care of after your death. When a person fails to plan by using a will or another estate planning tool, the distribution of assets defaults to state law.

When a person dies without a will, he or she dies intestate and any property that would have passed by will is divided per the state’s intestate succession laws. Any property that is not in the deceased’s name at the time of death is not subject to intestate succession. Therefore, if the deceased was able to create a trust and transfer property to the trust before his or her death, the trust property would not be subject to intestate transfer. Property such as insurance proceeds and retirement accounts are transferred to designated beneficiaries.

Under Michigan law, when a person dies intestate, his or her property is first required to be distributed to a spouse if the deceased did not have any children. If the deceased did not have any children but was married, the entire estate is inherited by the spouse. If the deceased is survived by both the spouse and children, the estate is divided between the spouse and the children. However, in this case, the spouse first gets a set dollar amount from the estate; the amount is calculated based on the increases in cost of living.

Children who are born to the deceased and a person who is not his or her spouse are also able to inherit from the deceased. The marriage status of the parents does not affect the children’s ability to inherit.

If the deceased has a spouse and no descendants, the spouse gets a large share of the estate and the rest of the estate is transferred to the decedent’s parents. If the deceased did not have a spouse or children, his or her property is distributed to the parents and siblings. Half siblings are also eligible to inherit from their half siblings.

If these close relatives are not alive, the property is passed on to the next available group of relatives, for example, grandchildren and cousins. While the state may eventually get the deceased’s property, it is only if there is no relative, even a remote one, who can inherit it. A qualifying relative can inherit from the deceased even if the relative does not live in Michigan or even in the United States, and whether or not the relative is a United States citizen.

Let Us Help You Plan

A will is an important part of an estate plan and can be used with other documents to ensure that a person’s wishes for the distribution of his or her estate are carried out. If you want to make changes to a prior will, write a new will, or discuss other estate planning options, contact Resnick Law, P.C., to consult the experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

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When a person creates a trust to distribute his or her assets upon his death, that person may sometimes name someone and grant him or her power of appointment. Power of appointment in the context of an estate trust refers to a power granted to a person to distribute the trust assets as he or she pleases. Granting a person power of appointment can be a good way to ensure that a trust beneficiary has flexibility to transfer trust assets to his or her heirs upon death. In some situations, however, it can defeat the intent of the original grantor.

Generally, when trusts are created, the grantor leaves specific people as beneficiaries under the trust. However, a grantor may want a particular person to have the power to make appropriate changes to the trust to name new beneficiaries. A beneficiary, a trustee of the trust, or another person not otherwise connected to the trust may be granted the power of appointment. A person who holds power of appointment can make significant changes to a trust after the grantor’s death, and depending on the nature of the power of appointment, may be able to grant him or herself the trust assets.  

Powers of appointment can be used to exclude people that the grantor would have wanted to receive part of the assets. For example, if one child holds power of appointment, he or she can exercise it to exclude siblings from receiving the trust assets. Similarly, the grantor’s spouse can exercise powers of appointment to exclude the grantor’s children from a previous marriage in favor of her own children. In this way, powers of appointment can be used to defeat a grantor’s true intent if the grantor would have preferred to leave assets to the excluded group.

A grantor may limit the power of appointment to help protect trust assets from creditors. Under a limited power of appointment, the person who is granted the power is allowed to transfer the assets to a wide range of people, but is restricted from making transfers to creditors.

A person who holds a power of appointment can exercise it during his or her lifetime or at death by including appropriate terms in a will. If there are specific instructions in the trust document on how the power should be exercised, then these instructions must be followed in order to make the exercise valid. It is also important that the person actually exercises the power of appointment because an intent to do so is not sufficient. If the power of appointment is not exercised, the assets are distributed as per the terms of the trust or state law, whichever is applicable.

Contact an Experienced Estate Attorney

It is important to ensure that you understand the implications of making certain elections in your estate planning documents. You should speak to an estate planning attorney before granting anyone power of appointment in order to ensure you understand how that will affect your beneficiaries. If you are looking for legal assistance in setting up a trust or otherwise planning your estate, you should contact Resnick Law, P.C., to speak to the experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

Once a person has decided to establish a trust as part of his or her estate plan, another important decision needs to be made in order to complete the trust formation process – choosing a trustee. Choosing a trustee is important because the person or organization the trust settlor selects to serve as trustee bears the responsibility of working for the best interests of the trust beneficiaries and protecting the trust interests.  

If the trustee is an individual, one of the most important things to consider is whether you, as settlor, can trust the trustee to properly manage the trust. This is not a legal requirement, but it is an important consideration. In choosing family and friends to serve as trustees, the settlor usually attempts to pick a person he or she believes will truly act in the best interest of the trust beneficiaries.

In addition, it is important to consider if the person you select as a trustee has a poor financial history. The trustee will be required to make decisions that will affect the value of the trust assets. The law requires the trustee to act like a prudent investor would, unless there are restrictions on the kinds of investments the trustee can make. Selecting a trustee with poor financial judgment could mean the beneficiaries will receive less than the settlor intended.

If you name one family member to serve as trustee, you should consider whether that decision will cause a strain in the relationships between the trustee and the other family members. This may be the case if one sibling is chosen to serve as the trustee from a group of siblings.

Not everyone who is selected to serve as a trustee accepts the role. It is advisable to name several options for trustees, or use language when setting up the trust that allows you to changes trustees when necessary. Changing trustees after the trust is formed may not be possible in some cases.

Another option for the choice of trustee is the use of a company that offers trust administration services. Using a trust company can be advantageous because the company has experience in trust administration and is likely to make investment decisions without becoming emotional. Unfortunately, trust administration companies can also charge fees to administer the trust, and this can cause some people to opt not to use them. The fee is something that needs to be considered in light of all the other pros and cons of using an institutional trustee instead of an individual.

In some cases, it is possible to name a team or group of people to serve as trustee. This team of people would generally only make trust decisions based on their agreement on the issues unless otherwise stated in the trust documents.

Contact an Experienced Attorney

If you are thinking about setting up a trust as part of your estate, you need to talk to an experienced estate planning attorney who can assist you in deciding what kind of trustee you should appoint. Contact Resnick Law, P.C., to consult our experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan. Our estate planning attorneys are also experienced in trust administration and can explain how we can serve as an institutional trustee for your trust.

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Pets are considered family members by many pet owners. The owners therefore worry about what will happen to their beloved pets after they die and can no longer look after them. Pet owners in this situation may want to ensure that their pets are taken care of by establishing a pet trust with the pet as the beneficiary. The money in the trust could be used to provide shelter, food, and medical care for the pet, in addition to some other comforts.

Some people may plan to name a person in their wills who will care for the pet, even leaving the person some money to do so. Unfortunately, there is no guarantee that the chosen person will actually care for the pet in the way the deceased owner intended. Similarly, a pet owner’s reliance on a promise from someone to care for a pet is not a guarantee that the person will do so after the pet owner passes away. This is why it is better to leave funds in a pet trust to ensure that the pet has all the needed resources after the owner’s death.

Michigan law allows people to set up pet trusts. Pet trusts can be for one or more animal beneficiaries, and can exist until the last animal named as a beneficiary dies. When setting up the trust, a trustee is selected who will administer the trust and ensure that the animals are provided for according to the terms of the trust. Unless a person allows the trustee of the trust to use the funds for other purposes, the law only allows a trustee to use the trust funds for the benefit of the animal.

It is best to leave a reasonable amount in the pet trust so as to avoid challenges from potential heirs. The amount to be put in the trust depends on various factors including the pet owner’s assets, the age of the pet, and the life expectancy of the pet. If there are multiple pets to benefit from the pet trust, the pet owner may be able to reasonably leave more in the trust than for a single pet.

If there are any funds left over after the last animal covered under the trust dies, the trust funds can be transferred to an individual, a charity, or another organization as instructed under the trust documents. In deciding who should get the money after a pet dies, it is important to consider whether the pet will outlive the proposed recipient. In some cases, it may be wise to have more than one residual beneficiary named.

Contact an Experienced Attorney

If you are a pet owner who wants to ensure that your beloved animal companion will be well cared for after your death, you should consider using a pet trust. To find out more information and decide if this is an option that would work best for you in light of your other beneficiaries and your overall estate plan, contact Resnick Law, P.C., to consult an experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Marek Szturc)

There are many different tax issues that a person wishing to pass on his or her estate must consider. One of these considerations is the tax burden of the estate on future beneficiaries. One way that a person can reduce the tax burden is by passing assets or using income from a trust for charitable purposes. In Michigan, this can be done by using charitable remainder trusts and charitable lead trusts.

These trusts are different in the way they operate, although both kinds of trust benefit charitable organizations as well as other beneficiaries. A charitable remainder trust is a trust in which a person designates a person or several people as trust beneficiaries to receive the income of the trust for a specified period of time. When this period is over, or after the beneficiary passes away, the remainder of trust assets are passed on to a charity named in the trust.

In the case of a charitable lead trust, a charity is designated to receive the income from a trust for a period of time, after which the remainder of the trust assets are distributed to named beneficiaries. The person creating the trust can set it up in such a way that a charitable trust receives the income from a trust while he or she is alive, and then the remainder goes to beneficiaries after his or her death.

Choosing a charitable remainder trust over a charitable lead trust depends on the goal of the estate owner. Both forms of charitable trusts allow the estate of the trust creator to receive a tax deduction for the amount given to charity. In addition, the chosen charity receives the benefit of a generous gift to help its charitable causes. There are some requirements to register a charitable trust in some situations.

Charitable remainder trusts and charitable lead trusts are generally established as irrevocable trusts. This means that once the trust is established, the terms of the trust cannot be changed. It is important to conduct extensive research before settling on a charity to benefit from the trust. The trust can have alternate or contingent charitable beneficiaries in the event that a charity is not in existence at the time the charitable gift is supposed to be received.

There are other ways in which a person can diminish the impact that taxes may have on a person’s estate. Instead of setting up charitable trusts, a person can simply make charitable donations during his or her lifetime or by leaving property to a charity in a will. There may be more delays in terms of getting assets to a charity if the property is left to a charity in a will because the will has to go through probate. It is not possible to generalize which plan would work best for an estate without looking at the particular needs of that estate.

Contact an Experienced Estate Attorney

For more information on the use of trusts, and to learn more about how you can put together an estate plan that addresses your individual needs and wishes, contact Resnick Law, P.C., to consult the experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

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A domestic asset protection trust is a kind of irrevocable self-settled trust that a person can set up with an independent trustee to administer it. Because the trust is irrevocable, it means that once it is set up, the person creating the trust cannot voluntarily choose to terminate or end the trust. The person setting up the trust cannot be the named the trust’s trustee, although he or she can be a beneficiary and can control some aspects of the trust, such as directing the investment of trust assets.

In this way, the trustee does not have direct control of the assets in the trust, and legally the trust assets do not belong to him or her. Therefore, any increased value in assets that may be subject to division in a divorce as marital assets are protected. Unlike prenuptial agreements, the placing of assets into the trust does not require the other spouse’s consent if the trust is set up at least 30 days before the wedding.

Other than that, the trust acts very much like a prenuptial agreement in that trust assets are not generally divided as part of a divorce. However, it is important for trust settlors to remember that the domestic asset protection trust does not protect the trust property from claims made as part of a requirement to pay child support.

While a person is free to set up a domestic asset protection trust without the permission of a spouse, the person setting up the trust is required to sign an affidavit attesting to certain facts. The person setting up the trust has to attest to the fact that he or she holds full title to the assets being transferred into the trust. A false attestation that allows a person to transfer marital property into a trust without the consent of the other spouse is not likely to support the validity of the trust later on.

A domestic asset protection trust can also be beneficial in other situations, such as protecting assets from creditors. A creditor will nevertheless be able to reach the trust assets if the trust was only set up in anticipation of the creditor’s claim, or while the claim was pending. The creditor can file a fraudulent transfer claim against the trust settlor to void the protections of the trust.

Contact Us for More Information

For more information on Michigan’s laws on domestic asset protection trusts and how you can protect your assets from creditors and from division in a divorce, contact an experienced asset protection attorney at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan. Our experienced attorneys can discuss the legal issues that will arise in forming an asset protection trust, and how these issues may affect you.

(image courtesy of Anne Edgar)

Totten trusts, which are recognized under Michigan law, are bank accounts which are payable to a named beneficiary upon the death of the account owner. Totten trusts are sometimes called payable on death accounts, or revocable bank account trusts. To form a Totten trust, the account owner has to complete some paperwork and deliver it to the bank in which the bank account is held. After the account owner dies, the beneficiary has to present a copy of the account owner’s death certificate in order for the funds in the account to be distributed.

The person who opens the account owns it as a trustee, but has the right to use the account as though it was a personal account because the formation of the trust does not create any immediate rights for the beneficiary. This means that the person can use all the money in the account for his or her own use, transfer the funds, or even close the account, without having to ask for the beneficiary’s approval.

The beneficiary cannot sue the account holder to force the account holder to stop spending the money in the trust. In most cases, the beneficiary does not know that he or she is a named beneficiary until the account owner’s death. The account holder can also change beneficiaries at any time.

The beneficiary gets rights to the account after the death of the account owner. This usually happens without any court orders or other legal intervention. If the Totten trust is properly set up, the bank should have signed paperwork designating the beneficiary and instructing the bank to make distributions upon the death of the account owner.

Although they are not formed like other trusts, Totten trusts can be held to have revoked an earlier express trust that sought to distribute the contents of the same bank account. Therefore, even if the contents of a bank account were previously included in property covered under an express trust, and the testator then creates a Totten trust over the accounts, the Totten trust will be honored. This will be the case even if the beneficiary under the express trust is different from the beneficiary under the Totten trust.

Contact Us for Legal Assistance

For more information on how you can plan to distribute assets to beneficiaries without using a will, you should contact an experienced estate planning attorney. To put together an estate plan that addresses your individual needs and wishes, contact Resnick Law, P.C., to consult experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

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With both a revocable and an irrevocable trust, the person setting up the trust, who is known as grantor or settlor, executes a legal document creating a trust and then transfers assets to the trust. How much access the settlor retains to the assets transferred to the trust determines how the trust is characterized.

In a revocable trust, once the trust is set up, the settlor still has the ability to terminate the trust or revoke it. That means that the settlor still has control over the assets in the trust because if the settlor wants to take the property from the trust, he or she can do so, and simply revoke the trust thereafter. Inter vivos trusts, or living trusts, are trusts created during the settlor’s life. These kinds of trusts can either be revocable or irrevocable.

Irrevocable trusts operate in the opposite way. Once the settlor creates an irrevocable trust and transfers assets to the trust, he cannot access the assets again or terminate the trust. The assets in the trust belong to the trust, and can be distributed to the beneficiaries of the trust according to the trust document. Trusts that are created through a person’s will are known as testamentary trusts, and are always irrevocable because the settlor is deceased by the time the trusts comes into existence.

In some cases, a settlor can create a revocable trust, with a provision in the trust documents to convert the trust into an irrevocable trust if the settlor becomes incapacitated. This can help keep the settlor’s wishes regarding the trust and its assets in place even when the settlor can no longer express those wishes.

A settlor can name him or herself as the beneficiary under either a revocable or an irrevocable trust. Trusts that are sometimes used to hold a settlor’s assets in order for the settlor to qualify for some government assistance, such as Medicaid, are usually required to be irrevocable in nature. If a settlor wishes to create a trust in order to avoid estate taxes, then the trust generally has to be an irrevocable trust. If the trust is created as a revocable trust, the settlor never quite loses control of the assets in the trust and those assets are still able to be considered a part of the person’s assets for tax purposes.

Contact an Experienced Estate Planning Attorney

There are many reasons to use a trust, including as part of your estate plan. If you need to use a trust, it is important to discuss the various trusts that may be most advantageous in your situation. To put together an estate plan that includes the use of trusts, and addresses your individual needs and wishes, contact Resnick Law, P.C., to consult the experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

(image courtesy fo Aidan Bartos)