“Sophisticated asset protection planning is coming to Michigan.”
Michigan will be the 17th and latest state to permit the wealthy to set up domestic asset protection trusts that can shield assets from creditors. The trusts—first used in Alaska and Delaware in 1997—are becoming more common, but they’re still controversial.
Michigan’s new domestic asset protection trusts law becomes effective on March 8, 2017.
Forbes’ recent article, “Michigan Debuts The Latest State Asset Protection Trust,” says the use of a domestic asset protection trust is a common strategy for anyone needing sophisticated estate planning.
Many people set them up with 10 or 20% of their total assets, thinking of it as a rainy-day fund for added peace of mind. But in addition to asset protection, trusts can also help save on estate taxes and move wealth from one generation to the next.
When you transfer assets into a trust for the benefit of others (like your children) and yourself, if there’s a judgment against you, the trust’s independent trustee won’t use trust assets to pay your debt. In Michigan, creditors have two years to go after DAPT assets, which is the same as in Nevada and South Dakota. However, in Delaware and Alaska, creditors have four years. Michigan lets a divorcing spouse access assets that are transferred to the trust less than 30 days before marriage—similar to Alaska. Nevada, on the other hand, doesn’t give ex-spouses owed alimony, property settlements or child support beyond its two-year statute of limitations. Michigan has an exception for child support, like most states.
Michigan residents will no longer have to go out of state to obtain a domestic asset protection trust, and the destination states of Alaska, Delaware, Nevada, and South Dakota will continue to be popular for residents of non-DAPT states.
Reference: Forbes (February 10, 2017) “Michigan Debuts The Latest State Asset Protection Trust”