Asset Protection Trusts
Who should consider a Domestic Asset Protection Trust?
Michigan Law now allows a person to create a trust that is protected from creditors. If you have 1) potential creditor exposure 2) assets that you are willing to give away and give up control over and 3) you have assets that are potentially subject to creditors’ claim, you may be a good candidate for a domestic asset protection trust. When we meet, the first determination that will need to be made is whether there are other ways to protect against potential liability (LLC, Corporation, insurance, etc.). Domestic Asset Protection Trusts are not for everyone.
Michigan Law does permit a person to retain some interests/powers over the trust, however the person setting up the trust does not have the right to get the assets back. Additionally, the person setting up the trust is not allowed to be the trustee (the person managing the assets in the trust). If you desire to set up a Domestic Asset Protection Trust, you will have to give up significant control over the asset. Do not be fooled by claims by those marketing asset protection trusts or “Medicaid protection” trusts that you can protect your assets and still keep “control over the assets”. This is contrary to the Michigan Statute and Medicaid nursing home assistance policy.
The following is a list of the categories of individuals that might consider a Domestic Asset Protection Trust:
Business owners (particularly owners who have guaranteed corporate debt);
Watercraft owners; and
Real estate developers.
If you have significant assets and are contemplating marriage, I recommend that you have me prepare a prenuptial for you and your fiancé to sign before the marriage. You may want to also consider establishing a Domestic Asset Protection Trust as a backup to a prenuptial agreement. A qualified disposition created and funded more than 30 days before the marriage is not subject to division upon divorce.