Common Mistakes Made With Trusts in Michigan
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.