While each state has its own set of laws that govern wills and trusts within the state, the general principles are quite similar across the entire country. In fact, sixteen states, including Michigan, have adopted the Uniform Probate Code (UPC) in an effort to standardize the state laws that govern wills and trusts. Therefore, in order to examine the the key differences between a will and a trust in Michigan we must look to the language of the UPC. However, it is important to note that drafting a valid will or trust can be tricky and therefore it is always a good idea to consult with an experienced estate planning attorney who can help assess both your short-term and long-term financial goals.

What’s A Will?

A validly executed ‘will’ is an estate-planning instrument that goes into effect when you die and dictates how you want your assets to be distributed to your named beneficiaries. Under the Uniform Probate Code, and therefore in Michigan, there are several requirements that must be fulfilled in order for a will to be valid including:

  • The testator (aka the person that the will belongs to) must be at least 18 years old;
  • The will must be signed by at least two competent witnesses; and
  • The will must be written (aka can not be oral).

What’s A Trust?

A ‘trust’ is an estate-planning instrument that allows the settlor, aka the person with the assets, to nominate a trustee who will hold the assets for the beneficiaries of the trust. A trust allows the settlor to dictator how and when the the assets will be invested, distributed to the beneficiaries, etc. These instructions can dictate that the trust will take effect during the settlor’s lifetime, if the settlor becomes incapacitated, or when the settlor dies. There are several different types of trusts (for example express trusts, private trusts, or charitable trusts) that can each be used to achieve various estate-planning objectives.

Key Differences Between A Will And A Trust

While both wills and trusts are useful estate-planning tools, there are several key difference to keep in mind. One difference between a will and a trust is the fact that a will can only go into effect upon your death, while a trust can either be used to manage property during your life or after your death. Another important difference is that a person can only have one valid will at a time while a trust can be used to either replace or supplement a will.

Benefits And Downsides

The key benefits and downsides associated with wills and trusts in Michigan really depend on what your estate-planning goals are. For example, if you are looking for a way to distribute your assets while you are still alive then you will want to execute as trust opposed to a will. While keeping your goals in mind, consider some of the commonly noted benefits and downsides associated with wills and trusts that are listed below:

  • Avoiding Probate: One main benefit associated with trusts is that they can be used to avoid probate, which can save your beneficiaries time and money. Conversely, one downside of wills is that they pass through probate.
  • Privacy: If you would like for your affairs to remain private it is key to note that a will becomes a public document when you die while trust instruments do not.
  • Naming a Guardian: If you have minor children you can use a will to name a guardian for your kids, however, a trust can not be used to appoint a guardian.

If you are wondering, “why should I do estate planning?”, or you have other questions about how to protect your assets, contact the Law Offices of David L. Carrier. David Carrier has years of experience drafting wills and setting up trusts and would be happy to discuss your options with you. Start by attending one of our Free LifePlan™ workshops, where you can learn valuable techniques that will help you plan for your family.

Trusts are a great estate-planning tool that can be used to manage how your assets will be distributed to your beneficiaries. The basic concept is that you put assets into a trust and name a trustee who is in charge of holding and managing those assets for the benefit of the trust’s beneficiaries. While this premise sounds simple enough, trusts must be created in a particular way in Michigan in order to be valid and unfortunately mistakes are often made. This article briefly goes over how a valid trust is created and then outlines a few common mistakes with trusts in Michigan that should be avoided as they can cause your trust to fail.

Elements Needed To Create A Valid Trust

In order to create a valid trust there are certain requirements that must be satisfied. The following elements must be present or else your trust will not be valid in Michigan:

Settlor Must Intend To Create A Trust

The settlor of the trust must intend to create a trust at the time when the trust is created. This intent can be manifested via the settlor’s words and actions. It is not enough if the settlor intends for the trust to be created at a later date; in order to be valid he or she must have the present intent to create a trust.

A Trustee Must Be Established

A qualified trustee must be appointed to hold the trust property.

Assets Must Be Put Into The Trust

The trustee must be given some assets to manage on behalf of the beneficiaries.

The Trust Must Have Named Beneficiaries

The trust must have a named beneficiary or beneficiaries. This group must be ascertainable (it must be certain and definite).

The Trust Must Have a Legal Purpose

The trust must have a legal purpose that is not against public policy in order to be valid.

It is important to be aware of these trust creation requirements as many common mistakes that cause trusts to fail in Michigan have drastic consequences simply because they invalidate one of the requirements listed above.

Common Mistakes That Can Cause A Trust To Fail

While there are many mistakes that can potentially invalidate a trust, a few of the commonly committed errors in Michigan are briefly outlined below:

The Settlor Fails To Show The Required Intent To Create A Trust

As noted above, a trust can only be valid if the settlor intended to convey their property into the trust for the benefit of the trust’s beneficiaries. This mistake is often made by using ambiguous wording in the trust instrument.

Neglecting To Put Assets In The Trust

In order for a trust to be valid the settlor must actually transfer assets into the trust. This is done by both listing the assets on the schedules attached to the trust and by taking physical steps to change the title of those assets. If the trust is not funded then it will fail.

Failing To Use Effective Trust Language

A valid trust must contain language that indicates that a legally binding agreement has been entered into. A trust can fail for using ‘precatory language’, aka language that expresses a future wish rather than a present intent.

Failing To Name Ascertainable Beneficiaries

The trust instrument must specifically identify who is to benefit from the trust. In other words, the trust’s beneficiaries must be ascertainable. If a trust does not have ascertainable beneficiaries then it will fail.

Need Legal Advice?

Creating a trust is complicated and mistakes are easy to make. Working with an experienced estate planning lawyer like David L. Carrier helps ensure that your trust is valid and functions how you want it to. To set up a meeting with David Carrier, contact our office today.