Michigan is newly positioned to become a major player in the asset protection arena. With the adoption of the Qualified Dispositions in Trusts Act (the “Act”) last month, Michigan joined 16 other states that permit the creation of domestic asset protection trusts (“DAPTs”). DAPTs empower an individual to create an irrevocable trust that protects assets from future creditors while enabling that individual to continue to receive benefits from and maintain limited control (such as investment decisions) over assets transferred to that trust.
Previously, Michiganders desiring to create a DAPT had to do it under the laws of another state and move assets to a trustee in that state. Michigan residents can now enjoy the benefits of a DAPT while keeping their assets here, and they even have the option of naming an individual, as opposed to an entity, to serve as trustee – provided that individual is not related or subordinate to them.
Michigan’s Act is designed to be particularly attractive to DAPT creators both inside and outside the state, but even a Michigan DAPT will not protect all assets from all creditors. For instance, the Act will not protect assets from creditors if:
As with all DAPTs, Michigan DAPTs have some additional limitations. Most importantly, once you transfer assets to a DAPT, you can’t get them back. Also, you must retain a third party to serve as trustee, and that can be expensive. Nonetheless, DAPTs can be a highly beneficial tool for individuals with surplus assets who want to protect against a significant future financial setback.
If you want to learn more about DAPTs, please contact Wright Beamer at (248) 477-6300 or visit our website at https://www.wrightbeamer.com.