Recently, the Michigan Legislature passed a new law that permits the creation of an asset-protection trust. The Act (Public Act 30 of 2016) was signed on December 8, 2016 and has an effective date of March 8, 2017. These provisions allow an individual to create his or her own irrevocable trust, which can distribute to the trust maker, but can be insulated from creditors if the provisions are followed. A few other states offer this protection, but they require the Michigan resident to use a trustee in another state, and often required the assets be located in the other state, too. Business owners, celebrities, physicians, dentists, builders and developers and others in risky professions can utilize this new type of trust while keeping their assets close to home.
In order to benefit from the Michigan asset-protection trust, the creator will have to jump through a few hoops, including using an independent third-party trustee, signing disclosures and affidavits about creditors, and making representations about solvency. There’s also a two-year waiting period before the protection begins. The new law indicates that someone with actual intent to hinder or delay a creditor or those creating trusts under fraudulent circumstances will not obtain the benefit of the protection.
While the trust maker cannot be the trustee, he or she can retain the right to make investment decisions and can remove and replace the trustee. The new Qualified Dispositions in Trust Act gives people and their lawyers a new tool to protect assets. If you have any interest in learning more about the Michigan asset-protection trusts, please contact Jeffrey Moss of Dawda Mann, or your other Dawda Mann attorney.