For Michigan residents who have worked to develop substantial assets, certain life changes may cause them to rethink earlier estate planning decisions. In most cases, trusts are excellent estate planning options that allow for higher levels of flexibility and privacy, especially for people with significant wealth. Most trusts are revocable, which means that they can later be changed or canceled. However, irrevocable trusts are created with the idea that they are permanent and not subject to amendment.
In some cases, this may lead to conflict down the line. For example, family members might develop conflicts after the creation of a trust. More seriously, a trust may not contain important special needs provisions to protect disabled beneficiaries. Many people create irrevocable trusts that do reflect their precise goals and plans. However, by the end of 2018, 25 states had passed “decanting” statutes that allowed one irrevocable trust to be transformed into another trust, a procedure sometimes called a “do-over trust.”
In many cases, these laws are highly restrictive; although, some states are less so. Many trusts can be moved, and it may be better to relocate the trust to a more favorable state before attempting the process. There are a number of reasons why an estate owner may want to change a trust. For example, one may want to extend the trust term over multiple generations, make distributions discretionary in order to avoid creditors, correct errors or allow the trust to hold shares in certain companies.
When thinking about the future, trusts and other estate instruments can provide flexible options to ease the road ahead for generations to come. An estate planning lawyer can help to address issues with existing trusts or plan new trusts that reflect a client’s goals for their assets.