Establishing a Trust: What Does It Mean?

What does establishing a trust mean? A trust is a powerful estate planning tool that many families use to protect their assets, prepare for the possibility of incapacity, and ensure their loved ones are provided for. When you establish a trust, you are creating a distinct legal entity, separate from yourself.

If your goal is for the trust to own certain assets, it’s essential to take several follow-up steps once the trust is created. Simply setting up a trust is not enough—it must be properly funded to be effective. This means transferring ownership of assets into the name of the trust, ideally around the time the trust is created, to ensure the trust is recognized as valid within your estate.

A trust is not a one-time solution. To make sure your trust continues to reflect your intentions, you’ll need to review your assets annually and confirm that any property intended to be owned by the trust has in fact been transferred into it. Keeping the trust up to date ensures that, if something happens to you, your loved ones or designated beneficiaries can benefit from the protections it offers.

One of the most common oversights in trust planning is failing to properly fund the trust. This is especially important for assets like real estate, which must be retitled in the name of the trust, and retirement accounts, which often involve unique considerations. Because of this, it is crucial to work with an experienced Michigan estate planning attorney to confirm that your trust is set up and funded correctly.

If you are serving as the trustee of your living trust, you maintain control of the assets and can manage them as you would if they were in your own name—including the ability to sell or mortgage property. In the event of incapacity or death, a named successor trustee takes over, ensuring the assets in the trust are managed and distributed according to your wishes.

We recommend setting up a meeting with your estate planning attorney to review your options and determine your next steps. We are here to assist with all aspects of your asset protection strategy and to help you develop a personalized plan that aligns with your goals.