How to Create a Living Trust in Michigan

A living trust in Michigan can be a valuable estate planning tool that gives you control over your assets, offers privacy, and helps your estate avoid the probate process. If you create a revocable living trust, also called an inter vivos trust, you can use your assets while they are in trust during your lifetime. 

Learn if creating a living trust in Michigan fits into your estate plan. This step-by-step guide outlines how to establish a trust that meets your current and future needs. 

What is a living trust? 

A living trust is a legal document that serves two main purposes. First, it outlines who will manage your assets after your death. Second, it provides instructions on which beneficiaries receive those assets. 

There are two main kinds of trusts—a revocable and irrevocable trust.

• Revocable trusts do the above but also allow you to freely use your assets while you’re alive and healthy (when you list yourself as the trustee). Revocable living trusts can be changed at any time you wish. Forming a revocable living trust is often the preferred choice for someone who simply wants their assets to avoid probate court. 
• Irrevocable living trusts are often the preferred choice for someone who wants greater tax benefits and to protect their trust property from creditors. Unlike revocable trusts, irrevocable trusts can’t be changed after they’re created, except under very limited circumstances.

Do I need a living trust in Michigan? 

Setting up a living trust in Michigan can help make asset distribution a swift and smooth process. It can also reduce stress and confusion for your loved ones. How? Michigan laws mandate that assets and valuables passed on to beneficiaries through a will undergo the probate process. This can be lengthy and expensive, especially if you enlist the help of a probate attorney. 

With that said, Michigan has adopted the Uniform Probate Code (UPC), a process that streamlines how probate is conducted in the state. Michigan also offers simplified probate for smaller estates. For instance, your beneficiaries can use an affidavit to access assets if your estate's value is less than $50,000 and doesn’t include real estate (Mich. Comp. Laws § 700.3982).  

How to create a living trust in Michigan in 7 steps

Establishing a Michigan living trust requires planning and preparation. Use the following steps to set it up.

Step 1: Choose between individual or joint trust

The first decision to make is choosing the type of trust:  joint vs. individual and revocable vs. irrevocable. If you are a couple, you can set up a joint trust. If not, you can set up an individual one.

Step 2: Decide what property to include in the trust

Consider the following as you decide what to include in your living trust—what you own, who you want to benefit, and what type of trust you wish to form. 

A Michigan living trust can include all assets such as your home, jewelry, bank accounts, stocks, bonds, mutual funds, cryptocurrency, business interest, and investment properties. 

Certain assets, such as retirement accounts, health savings accounts (HSA), and assets owned in foreign countries, can’t be placed in living trusts. A licensed estate attorney can suggest ways to safely and securely transfer these assets to intended beneficiaries. 

Step 3: Choose a trustee

A trustee has an important job. It’s best to pick someone reliable, organized, and capable of managing finances (especially if you have complex assets). As outlined in the Estates and Protected Individuals Code (EPIC) [PDF], a trustee has a fiduciary duty to prioritize the grantor's best interests. The grantor is the person who creates the living trust.

Almost anyone can be your trustee, but it is most common to name yourself. If you decide to name yourself as the trustee so you can retain control over assets during your lifetime, remember to appoint a successor trustee. After your death, the successor trustee will continue to manage the assets and disburse them only as you have specified.

Step 4: Decide who will be the trust’s beneficiaries

Deciding who should receive your trust's assets can feel like a lot of pressure. To ease the decision-making process, think about who depends on you financially before you make beneficiary designations.

While there are no hard and fast rules for naming beneficiaries, picking the right one can ensure your loved ones are looked after. 

Step 5: Create a living trust document

The living trust document is essential to your estate plan. While you can create this legal document yourself or use an online template, you may get some extra peace of mind using an online legal service or getting professional legal help from an attorney.  An attorney can help ensure your trust document is thorough and aligned with your wishes. They can even assist you with other crucial estate documents like power of attorney, healthcare directive, and pour-over will. 

Step 6: Sign the trust document in front of a notary public

In Michigan, your living trust should be notarized. By validating the identity of the person creating and signing the trust agreement, a notary helps ensure the document is legal and enforceable.

Step 7: Transfer assets to the trust 

The final stage is transferring property into the trust. This process involves gathering all titles and deeds. For real estate, the grantor typically has to file a deed to transfer the property into the trust. 

You can retitle bank accounts, business ownership interest, and investment accounts into the name of the trust. Stocks and bond certificates need to be reissued under the trust’s name. 

Advantages of setting up a living trust in Michigan

While deciding if a living trust is right for you, you should weigh all the benefits and limitations. Here are some of the advantages of establishing a living trust in Michigan. 

Provides privacy 

A Michigan living trust provides privacy in a way that a will cannot. A will is probated and made part of the public record. A trust remains a private document and does not need court approval. 

Avoids the probate court process

For a will to become effective, it must be probated, or approved by a court. The heirs do not receive their inheritance until after probate is concluded. Michigan probate can be a lengthy and expensive procedure. 

When assets are put in a Michigan living trust, they avoid probate. Here’s how it works. With a living revocable or irrevocable trust, you can transfer all your assets into the trust. Therefore, upon your death, there’s nothing for the courts to probate. 

Avoids the need for a conservatorship 

With a living trust, you, “the grantor,” can pick a trustee of your choice. This trustee will take over control in case you become physically or mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust, and a conservatorship (sometimes known as a guardianship) proceeding is likely unnecessary for you to have your financial life managed for your benefit.

Flexibility in distributing assets 

The greatest flexibility with revocable living trusts is that you can change or cancel them at any time. Living trusts offer more flexibility to distribute and manage assets as per your needs.  

For instance, you can choose to slowly distribute your assets over time or at chosen dates, such as the beneficiaries’ milestone birthdays. So, if you want to give your children money when they turn 18 and again when they turn 40, you can easily make this arrangement with a living trust. You can also include a spendthrift clause in your trust if you're worried about leaving money to someone who might splurge through the funds. 

Disadvantages of setting up a living trust 

There are some drawbacks to setting up a living trust. 

Significant time and effort to manage a living trust

The time and effort it takes to set up and manage a living trust is significantly more than it takes to make a will. For instance, for you to be able to make use of your assets in the trust, all the asset paperwork must list the trust as the owner. 

Also, a living trust isn’t a once-and-done thing. It requires constant monitoring to ensure that it’s updated and aligns with your latest wishes. Changes in law, relationships, and assets should be reflected in the trust documents. 

Cost of creating a living trust 

The process of creating a living trustt, which is significantly more expensive than creating a will,  requires you to transfer your assets into the living trust. Transfer of property titles may require additional processing charges, retitling fees, and taxes that can easily make it an expensive affair. The recording fee for a quitclaim deed in Oakland County is $30. 

Living trusts and estate taxes in Michigan

There is no estate tax in Michigan, but federal estate tax applies to estates valued at over $13.61 million. 

It is possible to avoid or lower the estate tax with a carefully constructed trust (also known as an AB or marital trust), which passes assets from a spouse to the surviving spouse. Setting up an irrevocable living trust or gifting assets over your lifetime are other effective strategies to reduce your estate tax burden. An experienced estate planning attorney can help you take proactive measures to minimize estate taxes. 

Other estate planning considerations

Although living trusts are an effective way to ensure the well-being of your close ones, there are other ways to strengthen your trust and estate plan. 

Strengthen your trust with a last will 

If you forget to retitle your assets in the name of the trust, those assets will need to go through probate. To account for this possibility, it is important to create a backup will, also known as a pourover will, to make sure that all of these probated assets are distributed to the same beneficiaries you have named in your trust. You can appoint an estate executor who will carry out the will and settle the estate’s finances as per your wishes. 

A LegalZoom Living Trust comes with a pourover will to help ensure all assets or
or “what-if” scenarios are well-planned for. 

Living trust maintenance and updates

Neglecting or failing to update your living trust and estate planning documents can result in unintended consequences or outdated provisions being enforced during estate distribution (like assets going to an ex-spouse). By keeping these documents current, your wishes can be accurately represented even as life progresses. 

Life changes that warrant an update to your living trust include: 

• Marriage or divorce
• Addition of children (birth or adopted)
• Movement to another state as trust should comply with the new state’s laws
• Change in financial status 
• Death of trustee or listed beneficiary(s)
• New laws that impact living trust (like a new Michigan tax law)

FAQs

How much does it cost to create a living trust in Michigan? 

The amount depends on the trust you want to create, how many assets you wish to transfer into it, and whether you get legal help. Additional fees like notarization, recording fees for transferring property, and asset appraisal costs can bump up the total cost. LegalZoom’s trust plans start at $399. 

Does a living trust avoid probate court in Michigan? 

Yes, property in a Michigan living trust avoids probate court. 

Is it better to have a will or a trust in Michigan? 

It comes down to personal choice. Both a will and trust transfer assets after your death, but they operate differently, and each has its benefits and shortcomings. 

Can I create my own living trust in Michigan? 

No state law in Michigan prevents you from drafting your own living trust document. But, the document must meet the state’s requirements to be legally enforceable. 

Don’t fall for “one-size-fits-all” trust templates. They are often not created or reviewed by legal professionals and come with hidden fees. You may find more peace of mind by using an attorney or an online service, like LegalZoom, which offers access to attorney consultations and document reviews. You can also find a licensed Michigan-based estate planning lawyer to help you with your trust documents. 

Brette Sember, J.D. contributed to this article.