Wills vs. Trusts in Michigan: Estate Planning to keep inherited assets in your Family
The first thought that people have about transferring their assets to their children someday is that they need a will. But there are distinct advantages to trust based planning if you own assets you wish to protect for your children when they inherit them someday.
The main difference between wills and trustsWills distribute property "outright" to beneficiaries, and trusts distribute property in accordance with the terms you may provide in a "trust agreement" (the document your attorney will use to create your trust).
Directly inherited assets are immediately vulnerableBecause wills result in direct ownership of the inherited assets they covey, the inherited assets are immediately collectible by outsiders who may lawfully "steal" you child's inheritance. When assets are inherited through a "will," all that's required of your child's creditors, divorcing spouse, or other law suit plaintiffs would be to assert their lawful claim.
Trusts may protect inherited assets from outsidersAssets inherited and managed under typical living trust provisions, afford your child some level of protection by giving the successor trustee who's job it is to distribute trust assets, the discretion to withhold distributions if a creditor or lawsuit claim is brewing. Once assets are distributed out of the trust, assets become collectible.
There are however, special trusts that can extend asset protection beyond a trustee's mere discretion of whether to distribute trust assets and instead hold the assets safely for the lifetime of the beneficiary. If you have a large estate or have real (present) asset protection concerns, these special trusts that hold assets for the lifetime of your child could be just what you were looking for.
Trusts are the better estate planning vehicle to protect a child's inheritance.When it comes to protecting assets for the exclusive use and enjoyment for beneficiaries and future generations, the choice is clear.