In 2017, Michigan passed a bill that allows individuals to create an asset protection trust that shelters money from future creditors. This is a major change. There are states that have been doing this for some time including, Alaska, South Dakota, and Delaware. One of the intentions of this law is to keep money and assets in Michigan to be managed in Michigan. Is a domestic asset protection trust something that can help you? It will depend on your specific situation, so (1) what is a DAPT; (2) What are some of the requirements that may dissuade you from creating one; and (3) Who should consider it?
A DAPT is a way to prevent creditors to reach certain assets. A creditor is someone who is looking to get paid for your debts, which could be a medical provider, bankruptcy court, or even a spouse in divorce. To be eligible for these benefits, the transfer must be “qualified” as defined by the act and not made when the transferor is insolvent or committing fraud with the transfer. Additionally, the document will name an advisor and qualified trustee. These have specific requirements and care should be taken in determining the proper individuals to name for these positions. If you meet all the requirements of the statute, a creditor has a very high mountain to climb to get access to trust assets.
So, why might you not think about using this strategy? The most important reason is that you release control over the asset. Second, it’s irrevocable. In other words, you are giving up control forever over the asset. While these may be enough to make you consider another avenue, it should at the least persuade you that any strategy utilizing a DAPT should be with an limited amount of your total assets.
The spring issue of the Michigan Probate & Estate Planning Journal included this in its conclusion, the new law “is a significant development for estate planning that can help attorneys assist their clients with protecting their assets. . . These clients include business owners, executives, doctors, real estate developers, and anyone considering marriage.” (Michigan Prob & Est Plan J, Spring 2017, at 3) In that sense, the authors clearly see the DAPT as way to insulate individuals who work in areas where litigation is considerable. There are other applications, but this is a tool that requires the consideration of many factors and should not be entered into lightly. At Dafoe Law, PLLC we have the knowledge and the ability to analyze your situation and determine whether it is one where a DAPT may help.
Dafoe Law, PLLC is a Life Care Planning law firm serving the Estate Planning, long-term care, probate, and trust administration needs of clients in Saginaw, Bay, Genesee, Huron and Tuscola Counties. Dafoe Law serves Frankenmuth, Bridgeport, Birch Run, Reese, Millington, Clio, Vassar, Saginaw, Saginaw Township, Freeland, Thomas Township, Spaulding Township, Burt, Bay City, Essexville, Munger, Kochville Township, Caro, Cass City, Sebewaing, Unionville, Pigeon, Bad Axe. Travis I. Dafoe is a member of the National Academy of Elder Law Attorney and WealthCounsel. Dafoe Law, PLLC is also a member of the Life Care Planning Law Firm Association. Start estate plan