Do you own your own business? Do you work in a field where you are at a high risk of being sued (ex. doctors, nurses, lawyers)? Do you worry about protecting your assets from potential creditors? Michigan passed a law in early December that can help, and it will take effect in March 2017. The Qualified Dispositions in Trust Act (Public Act 330) permits the creation of an irrevocable trust where the person funding the trust can also be the beneficiary, can have some say in how trust distributions are made, and can shield the trust assets from the person’s creditors.
While you can create this trust to shield some of your assets from liability, you cannot have a huge outstanding debt (like child support in arrears), establish this trust, and then transfer all your assets to it – that would be fraud (and there is actually a two year lookback period). If you are in the midst of the law suit, sorry but you’re out of luck on this one. What you can do is set this trust up while everything is going along smoothly and put assets into it as a protective measure. As mentioned above, this will be most useful to those of you that are business owners who fear piercing the corporate veil, doctors (who, congratulations, are sued most often), and others that live/work in areas where they are at high risk of being sued.
Some other facts:
– If you establish this trust for yourself, you cannot be the trustee – it has to be someone else, or a corporate trustee (yes, Legacy Trust can serve in this role);
– As the creator and beneficiary of the trust, you still have the following power: to direct investment decisions; to veto a distribution from the trust; to appointment what happens to the assets in the trust after you die; to receive income; and to remove a trustee and appoint another. These are just some of the powers that can be retained.
While this may all sound great, you need to consider that this is an irrevocable trust. That means you can’t change it, at least not without petitioning the court and having a legally qualifying reason to do so . . . needless to say, you do not want to put all of your eggs in one basket. However, this is may be a good option depending on your unique situation.
To determine if this type of trust is right for you, and how much you would want to fund your trust with, you should speak with your advisors – your attorney and your CPA at a minimum!