In Michigan, a Will has two primary forms: the typed form with two witnesses or the handwritten form with only the testator’s signature and dated. This varying construction allows for a person to easily craft their own Will without consulting an attorney. Often, they get something wrong that either invalidates the Will, gives gifts to unintended recipients, or has unforeseen tax consequences.
The Will is the only legal document that allows for a person to choose who would look after their children that are under 18. In addition to guardianships, the Will allows for conservators to be appointed over the children’s financial decisions.
The public can access the Will (as opposed to a Trust) after it has been filed in Probate. If your estate only has a Will, the public can see who you left as your beneficiaries. This comes into play if you know one of your beneficiaries has trouble with creditors, who can search the public record and see if that beneficiary is having money come their way.
The Will cannot create gifts that are structured. Such as, John Smith gets 1/3 when he turns 30, 1/3 when he turns 40, and 1/3 when he turns 50. All Wills can do is give lump sums, which is fine is some cases, but if one has young children, the money would sit in an account controlled by their conservator until they turn 18, at which point they get the entire lump sum.
Having a Trust can solve some of the aforementioned problems; however, they have shortfalls of their own. A significant limitation is that you cannot use it to designate who can be a guardian or conservator for your minor children.
A Trust can help protect you and those you love. It can designate who can make your financial and medical decisions if you to become incapacitated, something the Will cannot do. There are Trusts for children with special needs, which are used to insure that the child will be taken care of. There are Pet Trusts or Honorary Trusts, which allow for an animal or inanimate object to be taken care of for their lifespan or 21 years, respectively. Finally, there are National Firearms Act Trusts, which allow for civilians to create trusts to own weapons that they are normally incapable of owning.
Although you can create gifts that are structured, the Trust’s biggest hole is that it is not automatically encompassing. For something to be in the Trust, it must be put there, either by transferring title or by other documentation. This is how Wills come into play. A Will can pour-over any or all of your estate into your Trust. The Will should not be the sole way of putting things into your Trust for the simple fact that it can easily be contested and overturned by a beneficiary. If that happens, then all of the items that should be going into the Trust stay out to be probated by the Court.
Unless the Trust is contested, there is no real way to get a hold of the contents of the Trust. This means that creditors are unable to anticipate when an indebted beneficiary may receive their inheritance. Additionally, Michigan recognizes a Spendthrift provision that can be put into a Trust, which prevents creditors from attacking proceeds of the Trust.
The differences between a Will and a Trust are significant. Make sure that your estate is properly protected today.